Talks with First Quantum making headway, Panama says

Panama’s government said negotiations with First Quantum Minerals (TSX: FM) about agreeing on a contract for the company’s Cobre Panama copper complex have shown signs of progress this week.

Comments from Minister of Commerce and Industry Federico Alfaro, reported by BNamericas, are the latest development in a long-drawn-out dispute over control of one of the world’s largest new copper mines.

“We have advanced,” Alfaro said after an event to inaugurate the new board of the Panamanian exporters association (APEX) in Panama City.

It also marks a slight, but certain change of tone in the way Panama has addressed the issue since December last year, when President Laurentino Cortizo ordered the halt of operations at Cobre Panama following the parties’ failure to agree on the terms for a new contract.

The minister noted the parties will continue negotiating within the framework of a free trade agreement between Canada and Panama and international arbitration rules.

“I prefer to see the glass half full (…) I believe that there’s an opportunity to agree on some legal discrepancies that still remain regarding the wording of the contract. I hope the company understands that the government’s position isn’t just a whim,” Alfaro told reporters.

The main bone of contention centres on taxes and royalties the Canadian miner should pay on its concession to the government of the Central America country.

First Quantum said on Monday that Panama’s maritime authority had taken “several actions to obstruct operations” at the company’s Punta Rincon shipping terminal. These measures included, according to the Vancouver-based miner, “conducting extraordinary and unusual” inspections and instructing maritime pilots “not to provide service to vessels.”

Copper shipments from Cobre Panama. (Image courtesy of Cobre Panama.)

What seems to concern the company the most is an order that forces it to stop the loading of copper concentrates until it produces a third-party assessment confirming its scales have been properly balanced.

The miner, which said it submitted the proof on Feb. 3, warned it would have to shut down the massive operation by mid-February because of limited storage capacity.

Top copper mine 

Cobre Panama remains in operations, though First Quantum is expected to submit a plan to put the mine under care and maintenance.

Alfaro says the company has been running the mine without a contract since 2017, when the country’s Supreme Court ruled the accord governing the copper mine was unconstitutional and annulled it.

First Quantum chief executive officer, Tristan Pascall, has repeatedly said the Panamanian government had previously assured the company that the contract remained valid despite the court’s decision.

First Quantum is one of the world’s top copper miners and Canada’s largest producer of the metal. It churned out 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.

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.