Panama Seeks ‘Balanced’ Contract with First Quantum over Cobre Panamá Mine

The government is in talks with the Canadian miner for a new contract and says it wants the company to honor its commitment to pay a minimum $375 million annually

The company is seeking downside protections if the price of copper falls, while Panama says the country should benefit if the price of copper rises and the mine increases production.
By Michael McDonald
January 12, 2023 | 10:07 AM

Bloomberg — Panama’s government said it wants to reach a balanced deal with Canada’s First Quantum Minerals Ltd. that would allow the company’s copper mine to operate in the Central American nation.

The government is still in talks with the company for a new contract and says it wants the company to honor its commitment to pay a minimum $375 million annually as agreed between the two sides in January 2021, Minister of Commerce and Industry Federico Alfaro Boyd said in a phone interview.

The company is seeking downside protections if the price of copper falls, and Alfaro Boyd said that the government should benefit if the price of copper rises and the mine increases production.

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“We want to reach a deal to finalize a contract because we consider a balanced and fair contract is good for the company and good for the country,” Alfaro Boyd said. “We want to be reasonable.”

Alfaro Boyd said that the Panama government’s overall revenue take from the mining industry including royalties and taxes is relatively low compared to Latin American peers such as Chile, Peru, Argentina and Colombia. He said the government won’t seek to raise revenues to the level of peers, but “we do want to be protected and be sure we are receiving what’s fair.”

“What we want is that when the company is doing well, the country is doing well,” he said. “Under no circumstances are we trying to financially asphyxiate the company.”

First Quantum has filed for arbitration against Panama, and Alfaro Boyd said both sides are in a 90-day “cooling down period.” He said the government is still in talks with the company and he hopes both sides can reach a deal to sign a new contract.

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He said the government has hired local and international law firms to advise Panama on next steps and is seeking to avoid more drastic measures such as finding a new company to take over the mine should no deal be reached with First Quantum.

“We hope for the best but prepare for the worst,” he said.

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