BASE METALS

Panama to hike Cobre Panama royalty to 16%

The government of Panama has reportedly given First Quantum Minerals an ultimatum to agree to pay more taxes under a new contract or lose its right to extract copper from the Cobre Panama mine.

 First Quantum Minerals' Cobre Panama in Panama

First Quantum Minerals' Cobre Panama in Panama

The government is demanding the company increase royalty payments on gross profits from copper extracted in Panama from 2% to 16%, as well as demanding it pay income tax, while also eliminating other tax benefits agreed in the previous contract. The government hopes to generate of more than US$400 million a year via these measures.

"We still don't have an agreement... we've told the company that we must have a response by Monday at the latest," said Ramon Martinez, the minister for commerce and industries reported AFP.

First Quantum confirmed the minister made the comments but would not comment on where the negotiations will end up. "These are live discussions. Both parties remain committed to resolving this matter," it told Mining Journal.

In a research note, Canaccord Genuity said that if true, the changes demanded by the government would reduce its valuation of Cobre Panama by 18% and the overall net asset value of First Quantum by 13%.

"If true, it would obviously be significantly detrimental to our valuation for Cobre Panama. We currently model an increase in the royalty rate to 5% for base metals and 4% for precious metals, along with a three-year tax holiday," it said.

In 2021, Panama's Supreme Court ratified a lower court's ruling that the concession of mining rights for Cobre Panama until 2037 was unconstitutional.

Speaking to Mining Journal in December, incoming CEO Tristan Pascall said the mine produced more than 300,000 tonnes of copper in 2021 with a throughput rate of about 85 million tonnes per year, and with eyes on expansion to 100Mtpy in 2023.

Shares in First Quantum were down 6.4% at 10am Toronto time on Friday.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.