A dispute between Panama and Canada’s First Quantum Minerals that began when Panama’s government began to push for a larger share of royalties from the copper mine has continued for a year and a half.STRINGER/Reuters
Panama’s government says it has presented a final contract to Canadian miner First Quantum Minerals Ltd. FM-T as part of negotiations to resolve a tax dispute that threatens to shut down the Cobre Panama mine.
Panamanian President Laurentino Cortizo made the announcement Monday as part of a speech to the country’s national assembly, just a week after the government and company had returned to the negotiating table.
The dispute began a year and a half ago when Panama’s government began to push for a larger share of royalties from the copper mine. Talks dragged for months and broke down three weeks ago, which led to the government ordering an end to commercial operations at the mine and First Quantum pursuing arbitration under the Canada-Panama Free Trade Agreement.
Mr. Cortizo did not provide details of the contract, but said it would establish a fair relationship between both parties and require a minimum of US$375-million in annual tax payments from First Quantum, among other conditions.
He said it would abide by Panama’s constitution and cited a passage that said exploitations of the “soil and subsoil” should be done for the benefit of social welfare and public interest.
Canada ‘keen’ on resolution for First Quantum in Panama
Crispiano Adames, president of Panama’s national assembly, said during a separate speech that he had proposed a new mining code to put the needs of Panamanians on more equal footing with multinational companies.
Vancouver-based First Quantum said last month it would be open to an annual minimum payment of US$375-million, as long as there were conditions to cover certain unprofitable scenarios such as a sudden crash in copper prices.
The company did not respond to a request for comment Monday.
Cobre Panama is First Quantum’s largest mine and generated about 41 per cent of the company’s revenue, according to its third-quarter financial report. The mine, which opened in 2019 at a cost of US$6.3-billion, is operated by a subsidiary called Minera Panama SA, and also produces gold, molybdenum and silver.
It is also one of the most significant private investments in Panama, accounting for about 3.5 per cent of the country’s gross domestic product.
When negotiations blew past a government-imposed deadline last month, Panama’s Ministry of Commerce and Industries ordered the company to draw up a “care and maintenance” plan that would wind down operations with an option to resume in the future. First Quantum was required to submit a plan within 10 working days of Dec. 21; as of last week, the company said it was still working on the “complex” task.
First Quantum also responded by launching a legal challenge through the Panamanian courts and by seeking arbitration under the existing contract.
Panama’s industry ministry said Friday it rejected the company’s legal challenges and continued to negotiate in good faith with First Quantum chief executive officer Tristan Pascall, who flew down to Panama last week.
The ministry said in a statement it was prepared to face all possible legal scenarios in a bid to uphold the labour rights of local workers.
Morgan Stanley analyst Ioannis Masvoulas said in a note to clients last week that the resumption of talks was positive, but that the high level of uncertainties – including the possibility that the mine may still shut down – weighed on First Quantum’s stock and he expected it to underperform. The company’s stock closed Friday at $28.29 on the Toronto Stock Exchange.
With a report from Reuters