Canada’s First Quantum Suspends Copper Ore Processing In Panama Over Royalties Spat

Panama is seeking more revenues from the extraction of the red metal, for which it currently only receives 2% of the company’s profits

In 2021, the complex produced 331,000 tons of copper, 141,637 ounces of gold and 2,521,235 ounces of silver, according to the company.
February 23, 2023 | 03:50 PM

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Panama City — Canadian mining company First Quantum Mineras Ltd.’ local subsidiary Minera Panamá suspended copper ore processing at the Cobre Panamá mine due to a port closure that has left it without sufficient storage space for the mineral.

“This interruption to operations is the result of the Panamá Maritime Authority’s (AMP) refusal to permit copper concentrate loading operations at the mine’s port, Punta Rincón, in accordance with its Resolution No. 007-2023),” the company said in a statement.

“The company believes that all of AMP’s requirements under the resolution have been duly met and exceeded, however, the AMP has continued to block MPSA’s export operations.

MPSA will begin a partial demobilization of its workforce of over 8,000 employees and contractors, of which the impact is expected to increase significantly in the coming weeks if concentrate shipments do not resume. In addition to workforce reductions, the mine has ceased purchasing supplies and services that are equivalent to $20 million in weekly revenues to more than 2,000 Panamanian companies,” the company’s statement reads.

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“Cobre Panamá contributes to approximately 5% of Panamá's GDP, makes up 75% of the country’s export of goods and has created at least 40,000 jobs, directly and indirectly, that supports an estimated 100,000 or more Panamanians.”

The company statement continues: “MPSA is taking a systematic approach to reducing operations to ensure the safety of its workforce, prevent damage and degradation of equipment, and preserve the integrity of the mine. In the short term, certain planned maintenance work will be scheduled earlier where possible along with commissioning work on the CP100 Expansion and waste stripping in the mine. Essential safety and environmental work will continue, including care of the tailings management facility. Excess power generated by the power plant will be offered for dispatch to the national grid”.

“The company and MPSA note that the above actions may vary in magnitude depending on the duration that the operation will be halted. Should permission from the AMP allow it, MPSA could begin shipping concentrate and resume operations at the mine within hours.”

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The company is in negotiations with the Panamanian government, and the company said it “remains committed to achieving an outcome that will be to the benefit of all stakeholders and support the long-term operations of the Cobre Panamá mine. The Company considers that the suspension of ore processing operations as a consequence of the Government of Panamá's actions is unnecessary given ongoing progress in this regard”.

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The Panamanian government’s lawyer engaged to negotiate with First Quantum, Ebrahim Asvat, alleged in a tweet on Wednesday that Minera Panamá is using its workers and suppliers as a means of applying pressure on the Panamanian government.

The mining company and the Panamanian government have been in a standoff since December 2022 regaridng differences over the signing of a contract under which the state seeks to receive greater profitability for the extraction of its mineral resources, for which it currently receives only 2% of Minera Panamá’s profits.

Panama aspires to receive at least $375 million annually.

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So far, the mining company has filed at least 10 appeals for reconsideration against the government order given last December to cease the extraction and export of the mineral, and for the maintenance of the mine’s equipment and assets, while the conflict is being resolved, according to Federico Alfaro, Panama’s Minister of Commerce and Industries.

In late 2022, President Laurentino Cortizo instructed Environment Minister Milciades Concepción to adopt measures to supervise, control and oversee compliance with environmental provisions at the mining project.

Likewise, he ordered Labor Minister Doris Zapata to supervise, oversee and verify compliance with the provisions applicable to the labor relationship between the mining company and its workers in order to maintain the source of employment and the protection of labor benefits.

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In the midst of these differences, the mining company’s supplier companies raised their voice before the Panamanian authorities, demanding the government reconsider the order to suspend the company’s operations and to resume dialogue to finalize the signing of a new agreement.

“The mere fact that the situation is being prolonged has placed us under suspicion before third parties and especially before the banks, which have blocked the lines of financing for the acquisition of the equipment with which we provide services and are generating difficulties in our treasury”, the suppliers state.

In a statement of support to the mining company, the suppliers maintain that in 10 years they have been providing a continuous service, always under “strict and rigorous” supervision, urging that the production chain be maintained.

For its part, the Ministry of Commerce and Industries stated that in recent months it has communicated to Minera Panamá the importance of finalizing the agreement previously agreed on January 17, 2022 to guarantee the operation of the Cobre Panamá mine.

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“The national government urges MPSA to comply with the regulations and processes necessary for the safe operation of the mine “and to refrain from creating unrest and uncertainty about the stability of the thousands of workers and suppliers who depend on the mining activity”, the ministry’s statement reads.

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“Using pressure does not contribute to improving the levels of understanding that both the state and MPSA require for a fair, balanced and satisfactory relationship of both national and foreign investment interests,” it adds.

The note states that Panama has continually demonstrated its commitment to holding talks based on good faith and legitimate trust, however, Minera Panamá has demonstrated the opposite, as the company has not honored its word and refuses to sign the agreement with the previously accepted terms.

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“Incurring in delaying tactics that have lengthened the process for more than a year, trying to change the agreement where the Panamanian State will not receive the fair compensation it deserves for its natural resources, acting against the interests of the Panamanian people and the workers of the Cobre Panamá mine,” the statement reads.

First Quantum said in its press release on Thursday that it will provide more information once it is available.

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