Panama Dispute Lowers First Quantum's First-Quarter Copper Output

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--First Quantum Minerals Limited (Vancouver, Canada) reported copper production of 139,000 tons during first-quarter 2023, about 23% below the same period last year and 33% less than in the fourth quarter of 2022. The drop in output was the result of lower production from the Cobre Panama mine in Panama, one of the region's largest copper mines. The lower production caused the company's gross profits to drop 69% from US$908 million in first-quarter 2022 to US$280 million in the just-ended quarter.

Cobre Panama produced 65,000 tons of copper in the first quarter, which was 13,000 tons less than the amount produced a year earlier, and 24,000 tons less than the amount reported in fourth-quarter 2022. The shutdown of a port due to a contractual dispute between the Panamanian government and First Quantum caused the sharp drop in copper output.

On February 23, First Quantum had to shut down the Punta Rincon port, the mine's loading export terminal, following a request by the maritime authorities to certify the port's scales. As a result, copper storage was maxed-out, thus causing a 15-day interruption of the mine's output. Operations restarted at Cobre Panama on March 8, when the government and the mining company signed a new deal.

In its financial reports, nevertheless, First Quantum highlighted that operations at Cobre Panama delivered a strong production during the last three weeks of March after "a successful ramp-up back to full production levels." Operations returned to full output levels two days after restarting production and five shipments of copper were shipped during the remaining of the month.

On March 8, First Quantum and the government of Panama agreed on new concessions for Cobre Panama with an initial 20-year term and the possibility of another 20-year extension.

Additionally, the Canadian miner agreed to pay US$375 million plus an extra US$20 million to cover taxes and royalties up to the end of 2022. Starting this year, however, First Quantum would also contribute US$375 million in government income, comprised of corporate taxes, withholding taxes, and a profit-based mineral royalty of 12% to 16% with downside protections.

During the company's earnings conference call, Tristan Pascall, First Quantum's chief executive officer, said: "The first quarter was difficult with production impacted at our three largest operations. At Cobre Panamá, production was interrupted by a temporary suspension of exports but returned to full production rates once the suspension was lifted. Our Zambian operations experienced a seasonal impact. However, the rainy season is nearing an end. We are focused on improving operational performance and expect production to recover over the course of the year, and, as such, we remain committed to our guidance for 2023."

Despite the production setbacks, this year's production guidance for Cobre Panama remains unchanged at between 350,000 tons and 380,000 tons of copper.

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