First Quantum Minerals Ltd. announced that its Panamanian subsidiary, Minera Panamá, S.A. (“MPSA”), has agreed and finalized the draft of a concession contract with the Government of Panamá for the Cobre Panamá mine.
The Proposed Concession Contract meets the objectives outlined by the Government in January 2022 related to government revenues, environmental protections and labour standards. It also provides legal protections necessary to both parties to ensure durability and stability. The Proposed Concession Contract is subject to a 30-day public consultation process and approvals by the Panamanian Cabinet, Comptroller General of the Republic and the National Assembly. The Proposed Concession Contract will have an initial 20-year term, with a 20-year extension option and additional extensions for the life of mine.
Additionally, the Panamá Maritime Authority has confirmed that it will issue a resolution today for MPSA to resume concentrate loading operations at the Punta Rincón port. Ore processing is expected to resume and restore the mine to full production levels over the next several days.
Tristan Pascall, Chief Executive Officer, said, “After a lengthy and arduous negotiation process, the finalized Proposed Concession Contract outlines the basis for the future of Cobre Panamá for all stakeholders, including the Government, our investors and the country of Panamá. I am pleased that we now have a pathway to continuing our ongoing substantial investments in the country. I wish to thank our Panamanian and international employees and their families and our suppliers for their patience and resilience during this time. We now await formal approval of the Proposed Concession Contract and look forward to a long and constructive partnership with the Government of Panamá for many years to come.”
The Proposed Concession Contract will include the following principal economic terms once it takes effect:
- Payment by MPSA of $375 million plus an additional $20 million to cover taxes and royalties up to the year end 2022
- Payment by MPSA starting in 2023 of an annual minimum contribution of $375 million in Government income, comprised of corporate taxes, withholding taxes and a profit-based mineral royalty of 12 to 16 percent, with downside protections
- Downside protections to the annual minimum contribution under the following conditions:
- Until the end of 2025, copper price below $3.25 per pound
- From 2026 and beyond, a total tax contribution for that year of less than $300 million
- Applicable royalty rate at various operating margins as shown below:
|Operating Margin||Effective Royalty Rate|
|0% – 20%||12%|
|>20% – 30%||13%|
|>30% – 40%||14%|
|>40% – 50%||15%|
- Application of the general regime of income tax, including deductions for depletion, and withholding taxes in Panamá.