The Cobre Panama copper mine in Donoso, Panama.Abraham Teran/The Associated Press
Panama says it has no intention of seizing the Cobre Panama mine from First Quantum Minerals Ltd., FM-T despite excoriating the Canadian copper company for allegedly misrepresenting the tenor of their talks.
Vancouver-based First Quantum and Panama have toiled for more than a year to try to come up with a new tax and royalties contract for the mine. Talks broke down last month, at which point Panamanian President Laurentino Cortizo ordered the mine to cease operations.
Other Canadian miners have seen their assets expropriated after clashing with foreign governments, including Centerra Gold Inc. in 2021. Its flagship Kumtor mine was nationalized by the Kyrgyz Republic.
But there appears to be almost no chance of that happening in this case.
“At no point has the government considered, or will it consider, expropriating any mine,” Federico Alfaro, Panama’s Minister of Commerce and Industries, said in an interview with The Globe and Mail.
“Panama is committed to getting a contract done and executed with [First Quantum] as quickly as possible.”
Talks between the two sides resumed a few weeks ago. First Quantum chief executive Tristan Pascall gave the impression in a conference call earlier this week that an agreement was within reach, and he said that significant progress had been made.
But Mr. Alfaro blasted back at Mr. Pascall, saying in a statement the two are nowhere near an agreement, and were further apart than ever before.
“There is still an important and significant gap between the Panamanian government and [First Quantum] on certain important and fundamental aspects of the contract,” he said in the interview.
Panama is particularly concerned that even though First Quantum has agreed to pay significantly higher taxes from now on, various credits the company can use may end up reducing its final tab to levels far below what the country deems fair and equitable.
First Quantum’s Mr. Pascall on Tuesday said the company has recently conceded more than US$250-million in tax credits, and agreed to limit the value of credits it would use per year from now on.
He said that details around the tax credits still needed to be worked out, as well as firming up legal rights that would protect First Quantum against early termination of the agreement and expropriation of the mine.
The Globe on Monday reported the details of the tentative agreement that maps out how much First Quantum will pay in taxes over the next 20 years.
For 2022, it has agreed to pay the government US$375-million. From 2023 to 2025, First Quantum agrees to pay at least US$375-million a year if copper trades above US$3.25 a pound and the mine’s annual production is more than 250,000 tonnes. From 2026 onward, the miner will pay at least US$375-million a year in taxes, if copper trades above US$2.75 a pound and annual production exceeds 250,000 tonnes.
For 2021, First Quantum paid US$455-million in taxes across all its operations, which also include mines in Zambia, Finland, Turkey, Spain, Australia and Mauritania.
The copper miner spent US$6.8-billion building Cobre Panama. The mine started production in 2019, and is expected to remain in operation for about three decades.
Cobre Panama is First Quantum’s biggest mine, and a major engine of the Panamanian economy, with about 40,000 people working there and the operation responsible for approximately 5 per cent of the country’s GDP.
For the time being, First Quantum is preparing to shut the mine down to comply with government’s order, but it has also filed an appeal in an attempt to reverse the decision.
Many of Canada’s largest mining companies are already paying significantly higher royalties than in previous years. Over the past five years, as base and precious metals prices have soared to record levels, countries such as Tanzania and Papua New Guinea have successfully squeezed miners to get a bigger share of the spoils.