The dispute began at the end of 2021 and has become a test of Panama's ability to remain attractive to business. The government seeks to reduce inequality by reviewing long-term deals that may seem too generous to businesses. The mine, the only metal mine operating in Panama, is considered vital to the country's economic development.
First Quantum's CEO Tristan Pascall flew to Panama over the Christmas holiday to hold talks with government officials, but an agreement still needs to be reached. This has led both sides to escalate the dispute to protect their interests in the mine.
At the center of the dispute is Panama's demand that First Quantum pay at least $375 million in annual taxes. During last week's talks, First Quantum raised several points that it wanted including in its contract after a December 14th deadline to reach an agreement passed, according to a source linked to the government. These points included exclusive rights to explore other minerals, an expansion of its concession area, a $1 billion tax credit for its investment, and a demand that no laws enacted after the new contract affect its operations.
The failure to reach a deal could discourage foreign investors when Panama is trying to develop three other copper deposits that could bring in investments similar to those of the Cobre Panama mine. The mine is also important for employment in Panama, representing around 40,000 direct and indirect jobs and interacting with about 1,800 suppliers. It is the country's biggest private investment.
Both parties have said that they want to agree, but their inability to do so before the latest government deadline expired has led Panama to halt the mine's operations and First Quantum to start arbitration proceedings. The mine is a lucrative asset for First Quantum, as it represented more than half of the company's earnings before interest, tax, depreciation, and amortization (EBITDA) in 2021. It also accounts for about 3.5% of Panama's gross domestic product.
First Quantum's Contract Negotiations with Panama Government Continue
First Quantum Minerals (OTC: FQVLF) and the government of Panama continue to negotiate the terms of the company's contract for the Cobre Panama copper mine, the only major copper mine in operation in Panama. The two sides have disputed the amount of tax First Quantum should pay on its concession for the mine, which is a key asset for both parties.
First Quantum's CEO Tristan Pascall met with government officials over the Christmas holiday in an attempt to resolve this, but no agreement was reached. This has led both sides to escalate the dispute to protect their interests in the mine.
The main issue in the dispute is Panama's demand that First Quantum pay at least $375 million in annual taxes. During negotiations, First Quantum raised several points that it wanted including in its contract after a December 14th deadline to reach an agreement passed, according to a source linked to the government.