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Panama and First Quantum Minerals, a Canadian company, announced an agreement to reopen the largest mine in Central America, whose operations had been paralyzed for almost three months due to disputes over taxes and royalties.
“The national government of Panama and Minera Panama SA, a local affiliate of First Quantum Minerals Ltd, are pleased to announce that they have agreed on the final text of the [nuevo] concession contract that will govern the long-term operations of the Panama Copper Project” on the Caribbean coast, the parties said in a joint statement.
The new contract, for 20 years of renewable concession for a similar period, contemplates annual “minimum income” of 375 million dollars for the Panamanian State, 10 times the previous amount, the statement said.
The cessation of activities of the mine and the neighboring port of Punta Rincón threatened to put some 8,000 direct employees and contractors out of work, which had generated worker protests in front of government buildings in the Panamanian capital.
With a deposit discovered in 1968, the gigantic open-pit copper mine, located in the midst of the exuberant vegetation of the Caribbean coast 240 km from the capital, is considered the largest private investment in the history of Panama: it contributes more than 4 % of national GDP and 75% of export earnings.
This mine is “the largest in Central America,” say First Quantum executives, and produces 300,000 tons of copper concentrate per year that are exported from the port of Punta Rincón.
“Under this contract, Panama expects to receive approximately 10 times what it received under the [anterior] contract-law of 1997. At the same time, the concession contract guarantees that Minera Panama will receive a commercial return for its investment,” the statement said.
“Constructive Partnership”
The government order to suspend operations of the mine on December 15 and the closure of its adjacent port on February 3 were part of a long-running dispute between First Quantum and the center-left government of President Laurentino Cortizo.
For a year both parties had been carrying out negotiations for a new contract, but they had stalled on the issue of income for the Panamanian State. Cortizo demanded that royalties be multiplied by 10.
“The proposed concession contract outlines the foundation for the future of Cobre Panamá. We look forward to a long and constructive association with Panama in the years to come,” First Quantum CEO Tristan Pascall was quoted as saying in the joint statement.
“The most important thing is that this contract is beneficial for Panama and Panamanians, while creating the conditions for Minera Panama to continue its operations under a fair and equitable investment environment,” said the Minister of Commerce and Industries, Federico Alfaro Boyd, who led the negotiations for the government.
The new agreement must now be ratified by the Panamanian Congress, in addition to other formalities such as being submitted to a period of citizen consultation and receiving the endorsement of the Cortizo Cabinet, which is taken for granted.
infrastructure resources
If both parties did not reach an agreement, the Canadian company had to definitively cease its operations in Panama after having invested more than 10,000 million dollars in earthworks, construction of buildings to house its thousands of employees, purchase of heavy machinery, a electricity, a deep-water port, as well as access roads, reforestation plans and community aid programs, according to data from the firm.
The company built the Punta Rincón maritime terminal due to the lack of roads to take the copper to the port of Colón, 40 km away, since the Panamanian State never built roads on the Caribbean coast, only on the Pacific coast.
With the new contributions from the mine, Panama “will dedicate additional resources to the construction of public infrastructures,” the statement said, without giving details.
As a copper producer, Panama is an exception in Central America, a region that lacks a mining tradition: in Costa Rica and El Salvador mining is prohibited by law.
