Cecilia Jamasmie | January 10, 2023 |
Cobre Panama mine, the company’s largest copper operation. (Image: First Quantum Minerals.)
Canada’s First Quantum Minerals (TSX: FM) said on Tuesday it planned to appeal an order by Panama’s government to halt its giant copper mine in the country as the two sides remain in talks over a new contract that would increase royalties paid by the miner.
The Central American country’s government decided in December to create a plan to halt operations at Cobre Panama copper mine. The move, unusual among Latin American countries, came after the Vancouver-based miner missed a deadline to ink a new contract due to disagreements on royalties and tax payments.
Panama has demanded First Quantum to pay a corporate tax of at least $375 million a year, along with a profit-based mineral royalty of 12% to 16%, which represents a steep rise on the $61 million the company paid in 2021.
First Quantum said on Tuesday it was prepared to agree with, and in part exceed, the objectives that the government outlined in a pre-agreement reached in January 2022 regarding revenues, environmental protections and labour standards.
“I don’t think we’re very far away,” chief executive officer Tristan Pascall said in a Tuesday call with analysts to provide an update on the negotiations. “There has been progress and movements since December 14 and these final items do need to be resolved, but they do need to be resolved fairly for us to close this out.”
First Quantum noted the minimum payment structure proposed is both unique and unprecedented in the mining industry.
“Under the newly proposed profit-based royalty, the government would receive revenue that is multiple times higher than under both the existing contract and the current Panamá Mining Code,” First Quantum said in the statement. “The proposed royalty rates would be amongst the highest, if not the highest, paid by copper miners in the Americas,” it noted.
The company noted that it has already given a number of concessions to the government, including elimination of $250 million in tax credits and a limit to the ones that can be used in any one year going forward.
It also said it was ready to place Cobre Panama, responsible for 1.4% of global copper supply, into “care and maintenance” if the country did not offer certain legal protections.
First Quantum has demanded assurances that the current revised mining code will be in place beyond the current administration, as Panama is gearing up for a general election, expected in May this year.
Operations continue as normal, the miner said, with no disruption to production for now.
The miner also noted it had notified the country about two arbitration proceedings, days after the order to halt operations.
Panama weighs mine options
The Panamanian government is reportedly working with a financial advisor to identify new potential partners for Cobre Panama, which raises concerns about the country nationalizing the asset or removing First Quantum’s license to operate, experts at BMO say.
“Our base-case expectation is that the government’s position is part of a broader negotiation; however, the recent escalation does raise uncertainty about First Quantum’s ability to operate in the country long term, and the risk that investors will see in Panama going forward,” BMO Metals and Mining analyst, Jackie Przybylowski, wrote.
From a copper market perspective, any sustained outage at the mine would further tighten global supplies, contributing to an expected annual deficit of 4.7 million tonnes by 2030.
“The government is prepared to face all potential legal scenarios that may arise and will continue to ensure that workers’ labor rights are maintained and protected,” the Commerce and Industry Ministry said earlier this month.
Cobre Panama is the biggest foreign investment in the Central American nation, supporting 40,000 jobs. (Image courtesy of Minera Panama.)
The local unit of First Quantum, Minera Panamá, said that suspending jobs to reduce expenditure would be “a last resort”.
Still, the company would need to cut “the various programs and projects that we undertake in the communities and beyond which benefit so many Panamanians.”
Cobre Panama achieved commercial production in September 2019. The asset is estimated to hold 3.1 billion tonnes in proven and probable reserves and at full capacity can produce more than 300,000 tonnes of copper per year, or about 1.5% of global production of the metal.
The company says it has invested around $10 billion in Cobre Panama, the largest private investment ever in the country, and was contemplating expanding the processing capacity of the mine from 85 million tonnes per year to 100 million tpy in 2023. This would have allowed it to boost production to nearly 360,000 tonnes of copper by the end of this year and to 350,000-380,000 tonnes in 2023.
First Quantum is one of the world’s top copper miners and Canada’s largest producer of the metal. It produced 816,000 tonnes of copper in 2021, its highest ever, thanks mainly to record output at Cobre Panama.
The Cobre Panama mine complex, located about 120 km west of Panama City and 20 km from the Atlantic coast, contributes 3.5% of the Central American country’s gross domestic product, according to government figures.
Fairly uncommon move
Panama’s decision is a major blow to chief executive Tristan Pascall, who succeeded his father, Phillip, in May.
Latin America is the region where risks of asset seizures and taxes hikes have increased the most in the past two years, risk consultancy Verisk Maplecroft estimates.
The practice, however, has been rare in Latin America’s recent past. One of the last major expropriations was in 2012, when then-Argentina President Cristina Fernandez de Kirchner’s government seized a 51% stake in the country’s largest oil and gas producer, YPF SA, from Repsol SA.
Almost ten years later, in April 2022, Mexican President Andres Manuel Lopez Obrador declared lithium a “strategic mineral” whose exploration, exploitation, and use are the exclusive right of the country, through a new state-run company called Litio para Mexico, or Lithium for Mexico.
The local unit of First Quantum, Minera Panamá, said that suspending jobs to reduce expenditure would be “a last resort”.
Still, the company would need to cut “the various programs and projects that we undertake in the communities and beyond which benefit so many Panamanians.”
Cobre Panama achieved commercial production in September 2019. The asset is estimated to hold 3.1 billion tonnes in proven and probable reserves and at full capacity can produce more than 300,000 tonnes of copper per year, or about 1.5% of global production of the metal.
The company says it has invested around $10 billion in Cobre Panama, the largest private investment ever in the country, and was contemplating expanding the processing capacity of the mine from 85 million tonnes per year to 100 million tpy in 2023. This would have allowed it to boost production to nearly 360,000 tonnes of copper by the end of this year and to 350,000-380,000 tonnes in 2023.
First Quantum is one of the world’s top copper miners and Canada’s largest producer of the metal. It produced 816,000 tonnes of copper in 2021, its highest ever, thanks mainly to record output at Cobre Panama.
The Cobre Panama mine complex, located about 120 km west of Panama City and 20 km from the Atlantic coast, contributes 3.5% of the Central American country’s gross domestic product, according to government figures.
Fairly uncommon move
Panama’s decision is a major blow to chief executive Tristan Pascall, who succeeded his father, Phillip, in May.
Latin America is the region where risks of asset seizures and taxes hikes have increased the most in the past two years, risk consultancy Verisk Maplecroft estimates.
The practice, however, has been rare in Latin America’s recent past. One of the last major expropriations was in 2012, when then-Argentina President Cristina Fernandez de Kirchner’s government seized a 51% stake in the country’s largest oil and gas producer, YPF SA, from Repsol SA.
Almost ten years later, in April 2022, Mexican President Andres Manuel Lopez Obrador declared lithium a “strategic mineral” whose exploration, exploitation, and use are the exclusive right of the country, through a new state-run company called Litio para Mexico, or Lithium for Mexico.
Copper shipments from Cobre Panama. (Image courtesy of Cobre Panama.)
First Quantum aims to appeal Panama order to halt copper mine
Bloomberg News | January 9, 2023 |
Cobre Panama. (Image courtesy of Minera Panama).
First Quantum Minerals Ltd. plans to appeal an order by Panama’s government to halt production at a massive copper mine in the Central American country as the two sides try to reach a tax agreement for the project.
Panama’s Ministry of Commerce and Industries issued a resolution Dec. 20 that gave First Quantum 10 business days to submit a plan for putting the Cobre Panama mine on care and maintenance, a status that would halt commercial operations. The ministry has already rejected a request by First Quantum to reconsider the decision.
“Our next step will be to submit an appeal,” the Vancouver-based miner said in an internal memo seen by Bloomberg News.
First Quantum and Panama have been negotiating new tax terms for more than a year on a mine that accounts for about 1.5% of global copper output. The talks failed to produce an accord by a Dec. 14 deadline set by the government, putting the two sides at an impasse when the threat of a global copper shortfall looms large.
In the meantime, First Quantum said it is drawing up the maintenance plan for the mine to submit to government. The metals producer would be forced to suspend “a significant amount” of workers if the mine goes into maintenance mode, according to the Jan. 6 memo.
“This is a drastic and, in our view, unnecessary step, which will potentially have a huge impact on our employees, our suppliers and the community around us,” First Quantum said in the letter. “This is not an action that should be taken lightly, but we will regrettably be compelled to follow the government’s directive if the final outstanding terms cannot be resolved on a reasonable basis.”
If the order is approved by authorities, First Quantum would have two days to comply.
First Quantum and the Panamanian government resumed negotiations in late December, but an agreement remains elusive. One of the sticking points appears to have been over a minimum $375 million contribution, with First Quantum pushing for an exception in the case of much lower metal prices and profit.
“We are prepared to agree with, and even exceed, the objectives that the government outlined to us in January 2022 related to revenues, environmental protections, and labor standards, including a minimum revenue agreement that is unique and unprecedented in the mining industry,” the Jan. 6 memo said. “This includes a minimum $375 million in government income per year, with downside protections aligned with the government’s position.”
(By Yvonne Yue Li)
First Quantum could suspend Panama jobs due to gov’t order to halt operations
Reuters | January 8, 2023 |
First Quantum Minerals personnel and representatives from the Panamanian government in 2021. (Reference image by First Quantum Minerals, Facebook.)
Canada-based miner First Quantum would suspend a “significant amount” of jobs at its operations in Panama if the Central American government forces it to halt operations during a contract dispute, the company said in a letter.
“If we have to reduce operations to care and maintenance mode, the company will need to take steps to reduce expenditure across the business. We could be forced to suspend a significant amount of our valued workforce,” the letter sent to employees and seen by Reuters said.
The company’s Cobre Panama mine generates about 40,000 direct and indirect jobs and interacts with some 1,800 suppliers, according to a consultant.
First Quantum was notified on Dec. 21 of a government order for it to create a plan to halt operations within 10 working days, after it missed a deadline for a new contract due to disagreements centered on royalties and tax payments.
“This is a drastic and, in our view, unnecessary step, which will potentially have a huge impact on employees, our suppliers and the community around us,” said the letter, signed by General Manager Alan Delaney.
First Quantum is working on the plan, but expects to reach a deal with the government before the order is enacted, the letter said, adding that its next step will be issuing an appeal.
A spokesperson for the government did not reply to a request for comment on the timetable for the order. The Canada-based miner did not immediately reply to a request for comment.
The two parties have been at odds for more than a year over payments to the government, contract stability and the area of the company’s operations. The government has pushed to raise annual royalties to $375 million.
First Quantum is prepared to meet and even exceed $375 million in royalties per year with downside protections, the letter said, though it did not outline the remaining hurdles preventing the two parties from reaching a contract.
(By Valentine Hilaire; Editing by Bill Berkrot)
Bloomberg News | January 9, 2023 |
Cobre Panama. (Image courtesy of Minera Panama).
First Quantum Minerals Ltd. plans to appeal an order by Panama’s government to halt production at a massive copper mine in the Central American country as the two sides try to reach a tax agreement for the project.
Panama’s Ministry of Commerce and Industries issued a resolution Dec. 20 that gave First Quantum 10 business days to submit a plan for putting the Cobre Panama mine on care and maintenance, a status that would halt commercial operations. The ministry has already rejected a request by First Quantum to reconsider the decision.
“Our next step will be to submit an appeal,” the Vancouver-based miner said in an internal memo seen by Bloomberg News.
First Quantum and Panama have been negotiating new tax terms for more than a year on a mine that accounts for about 1.5% of global copper output. The talks failed to produce an accord by a Dec. 14 deadline set by the government, putting the two sides at an impasse when the threat of a global copper shortfall looms large.
In the meantime, First Quantum said it is drawing up the maintenance plan for the mine to submit to government. The metals producer would be forced to suspend “a significant amount” of workers if the mine goes into maintenance mode, according to the Jan. 6 memo.
“This is a drastic and, in our view, unnecessary step, which will potentially have a huge impact on our employees, our suppliers and the community around us,” First Quantum said in the letter. “This is not an action that should be taken lightly, but we will regrettably be compelled to follow the government’s directive if the final outstanding terms cannot be resolved on a reasonable basis.”
If the order is approved by authorities, First Quantum would have two days to comply.
First Quantum and the Panamanian government resumed negotiations in late December, but an agreement remains elusive. One of the sticking points appears to have been over a minimum $375 million contribution, with First Quantum pushing for an exception in the case of much lower metal prices and profit.
“We are prepared to agree with, and even exceed, the objectives that the government outlined to us in January 2022 related to revenues, environmental protections, and labor standards, including a minimum revenue agreement that is unique and unprecedented in the mining industry,” the Jan. 6 memo said. “This includes a minimum $375 million in government income per year, with downside protections aligned with the government’s position.”
(By Yvonne Yue Li)
First Quantum could suspend Panama jobs due to gov’t order to halt operations
Reuters | January 8, 2023 |
First Quantum Minerals personnel and representatives from the Panamanian government in 2021. (Reference image by First Quantum Minerals, Facebook.)
Canada-based miner First Quantum would suspend a “significant amount” of jobs at its operations in Panama if the Central American government forces it to halt operations during a contract dispute, the company said in a letter.
“If we have to reduce operations to care and maintenance mode, the company will need to take steps to reduce expenditure across the business. We could be forced to suspend a significant amount of our valued workforce,” the letter sent to employees and seen by Reuters said.
The company’s Cobre Panama mine generates about 40,000 direct and indirect jobs and interacts with some 1,800 suppliers, according to a consultant.
First Quantum was notified on Dec. 21 of a government order for it to create a plan to halt operations within 10 working days, after it missed a deadline for a new contract due to disagreements centered on royalties and tax payments.
“This is a drastic and, in our view, unnecessary step, which will potentially have a huge impact on employees, our suppliers and the community around us,” said the letter, signed by General Manager Alan Delaney.
First Quantum is working on the plan, but expects to reach a deal with the government before the order is enacted, the letter said, adding that its next step will be issuing an appeal.
A spokesperson for the government did not reply to a request for comment on the timetable for the order. The Canada-based miner did not immediately reply to a request for comment.
The two parties have been at odds for more than a year over payments to the government, contract stability and the area of the company’s operations. The government has pushed to raise annual royalties to $375 million.
First Quantum is prepared to meet and even exceed $375 million in royalties per year with downside protections, the letter said, though it did not outline the remaining hurdles preventing the two parties from reaching a contract.
(By Valentine Hilaire; Editing by Bill Berkrot)
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