The Canadian miner’s subsidiary, Minera Panama, said it considered the $375 million a year figure the country asked for “reasonable”. In return, the company asked authorities to guarantee the continuity of operations during the mine’s productive life.
The Vancouver-based miner had been in talks with Panama since September of last year, a period during which copper prices traded at record levels.
The minister of commerce and industries, Ramón Martínez, said in a press conference last week he also wanted to end a “tax holiday” that allowed First Quantum to put off taxes until the capital costs of building the mine were recouped.
The official stressed that the proposed agreement would place Panama in a similar position than other Latin American copper producers such as Chile and Peru, which charge royalties on gross profits on top of taxes.
A “shocker”
Jefferies analyst Christopher LaFemina said the magnitude of the proposed royalty hike was a “shocker”, adding that the consultancy had estimated the miner would end up paying 5% of revenues in royalties.
Cobre Panama, which began operations in 2019, is estimated to hold 3.1 billion tonnes in proven and probable reserves. It has generated some $6.7 billion in private investment, and includes two open pits, a processing facility, two power plants and a port.
The mine complex, located about 120 km west of Panama City and 20 km from the Atlantic coast, contributes 3.5% of the Central American country’s gross domestic product, according to government figures. It can produce more than 300,000 tonnes of copper per year at full capacity.
Minera Panama’s concession was approved in 1997 and initially granted to Canada’s Inmet Mining Corporation, which was acquired by First Quantum in 2013.
Record production
First Quantum announced in a separate statement it produced 816,000 tonnes of copper last year, a 5% increase from 2020, mainly due to record production at Cobre Panama.
The mine churned out 331,000 tonnes in 2021, 125,000 tonnes more than in the previous year. Despite facing covid-19 restrictions for over three quarters of the year, the company noted that Cobre Panama’s performance exceeded initial 2021 guidance.
The company, which is the world’s sixth largest copper miner and Canada’s largest producer of the metal, said during its virtual Capital Markets Day on Tuesday, that it plans to build a molybdenum plant on site next year, which is expected to generate annual concentrate production of 3-4 ktpa.
First Quantum said Cobre Panama will be mined in five phases, starting in the Botija pit and ending in the Balboa pit in 2054. The company is currently developing the Colina pit, with mining slated to begin in 2023.