Panama’s Chamber of Commerce worried about government negotiations with First Quantum Minerals

Marcela Galindo De Obarrio, president of Panama’s Chamber of Commerce. (Image by CCIAP.)

Three days prior to the December 14 deadline for Canada’s First Quantum Minerals (TSX: FM) to ink a contract with the Panamanian government that would allow the company to keep running its Cobre Panamá copper mine, the country’s Chamber of Commerce issued a statement criticizing the way authorities have handled the deal.

In the communiqué, the Chamber’s president Marcela Galindo De Obarrio expressed concern about the “erratic turn” the negotiations have taken. 

According to Galindo De Obarrio, the government’s latest actions and requests have elicited more questions than answers regarding the future of the project. In her view, if no agreement is reached before the deadline, Panama will face severe economic and reputational consequences.

“We urgently call on the parties to redirect the negotiation, focusing on win-win formulae, through which a fair balance is achieved. Such a balance should take into account what the State deserves to get, and what the company is entitled to receive considering the conditions and risks associated with the activity it carries out,” the release reads. “Doing otherwise puts us at risk of annihilating an activity that represents 3.5% of Panama’s GDP.”

Last Friday, Panama’s executive power issued a statement saying that the negotiations with Minera Panamá, First Quantum’s subsidiary, had stagnated and that if the company did not sign a deal by December 14, authorities would study alternate measures for the mine to continue operating. 

The official communiqué also said the government is committed to honouring the terms that were discussed back in January and to working together with the miner to reach a solution that benefits Panama and its people.

Long time in the making

Vancouver-based First Quantum and the Ministry of Commerce and Industries of Panama began negotiations to renew the contract for Cobre Panamá in September 2021. An agreement was reached in January when the company agreed to up its royalty payments for the copper mine to $375 million a year.

As part of that deal, the miner also accepted to give the government between 12% and 16% of its gross profit, which would replace the previous 2% revenue royalty.

First Quantum agreed as well to start paying 25% corporation tax, from which it was previously exempted until its investments at the mine were recovered.

Multiple drafts have been exchanged throughout the year, including the latest version dated September 7, 2022.

The new contract also includes environmental protection measures, a closure plan and labour provisions based on current legislation. It also specifies the state must receive income greater than $400 million, considering current copper prices.

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