First Quantum Minerals’ (TSX: FM) subsidiary Minera Panamá issued a communiqué over the weekend stating that it has not yet met with Panamanian authorities to discuss the renewal of the concession of its Cobre Panamá mine.
In the statement, the company said management is prepared to start the process as soon as local authorities are ready to engage. It also emphasized that its operations are under the scrutiny of close to 20 government institutions on a regular basis, in particular of the Ministry of Industry and Commerce, which oversees and regulates the country’s mining sector.
“This constant oversight and communication is fundamental to the proper development of the industry and has nothing to do with the renegotiation process, for which the company is responsibly ready and which we will attend as soon as the authorities ask us to do so,” the release reads.
Minera Panamá’s concession was approved in 1997 and initially granted to Canada’s Inmet Mining Corporation, which was acquired by First Quantum in 2013.
As the time has come to renegotiate the concession, Minera Panamá is studying the possibility of exploiting three additional pits, Balboa, Botija Abajo and Río Medio and extending Cobre Panamá’s mine life from 40 to 70 years. Such an expansion would translate into exports of approximately 400,000 tonnes of copper concentrate per year.
But redefining the terms of the contract seems to be stirring things up within the Panamanian government.
According to Marcel Salamín, a former member of the high-level team created by the state to renegotiate the concession, there seems to be a pre-made proposal that is being discussed by some people in the government but that wasn’t tabled before the commission he was part of.
After announcing his resignation on the news program Mesa de Periodistas, Salamín said that such a proposal contemplates raising the royalties charged to Minera Panamá from 2% to 5% and making a public recognition that copper does not belong to the Panamanian nation but to those who extract it.
In his view, the Panamanian government should shift its paradigm, stop being a tax and royalty collector and become an equal-part player in the country’s mineral riches. In the case of Minera Panamá, he said that he presented a proposal in which the country would be entitled to 49% of the income generated by the mine.
At present, the mining industry is responsible for 3.5% of Panama’s GDP.