The Government of Panama and Minera Panama agreed on Wednesday the final text of the concession contract that will govern the long-term operations of the copper mine located in Donoso, province of Colón.

The agreement was reached after almost a year and a half: 15 months of negotiation and two months of the process of drafting the new contract that replaces the 1977 one, declared unconstitutional by the Supreme Court

The most important thing is that this contract is beneficial for Panama and Panamanians, while creating the necessary conditions for Minera Panama to continue its operations under a fair and equitable investment environment,” said the Minister of Commerce and Industries, Federico Alfaro Boyd, who led the negotiations.

The duration of the new contract is for 20 years extendable for the same period, the government reported in a statement issued in conjunction with First Quantum Minerals Ltd, the parent company of Minera Panama.

With this new agreement it is expected to achieve a minimum income for the State of $375 million in each year of the term of the contract, that is, ten times more than what the State received

After a long and arduous process of talks, the proposed concession contract outlines the basis for the future of Copper Panama. We expect a long and constructive partnership with Panama in the years to come,” said the CEO of First Quantum, Tristan Pascall. quoted in the statement

Among the most outstanding aspects of the contract are: greater labor and environmental protections, anti-corruption provisions, extensive obligations of transparency and to provide information by Minera Panama; obligations for Minera Panama to make a transition to cleaner energy sources; broad supervisory powers for the State; and the right of the State to adopt measures against tax evasion, internationally recognized.

The contract guarantees an equitable distribution of royalties and taxes by the natural resources of Panama in line with other countries in the region,” says the statement,

The concession contract will be submitted to the Cabinet Council, then it must be endorsed by the Office of the Comptroller General of the Republic and presented in the National Assembly for approval, and finally it must be sanctioned by the Executive.

The thread

of 2022, Cortizo announced the conclusion of the previous agreement with the mining company. From then on, the conversations continued exclusively for the drafting and signing of the contract, respecting the conditions already agreed.

But it was in the writing process that all the problems arose. The mining company assumed a position in which it demanded tax benefits and contradicted what the president had announced.

It was known that the process of discussing the text of the new contract developed “slowly” and “little by little, topic by topic.”

In the original contract (of 1997), the Mineral Resources Code had a 2% royalty, then it was modified and increased to 5%, but the contract at that time remained with 2% royalties. The amount of royalties was one of the high points in the negotiations.

Another important issue discussed was the rest of the fiscal and economic conditions of the contract, among which are the taxes that the mining company should or should not pay, which according to the original contract had been exempted from a series of tax obligations.

All this was discussed at each meeting, in a titanic struggle between the position of The mining company considered that she should have the right to the same prerogatives that the 1997 contract had given her, and the government considered that those prerogatives in matters of tax or tax exemptions were not justified.

In view of the fact that the contract had been declared unconstitutional, the whole process went to light of trying to equate the new contract to the conditions maintained by the industry in

of the Court’s ruling, while the mining company alleged that its operations were covered by an administrative contract.

At the end of 2022, First Quantum and Minera Panama notified Panama of their intention to submit to investment arbitration, claims under the free trade agreement (FTA) between Canada and Panama. It was a commercial arbitration against Panama under the 1997 contract and an investment arbitration under the FTA.

The Government of Canada and the Government of the Republic of Panama also maintain an agreement for the promotion and protection of investments.

On February 23, the mining company paralyzed mineral processing operations and cargo operations in port, after the Panamanian Government’s requirement of compliance with technical aspects established by the Panama Maritime

Reactions

Attorney Guillermo Cochez reacted to the announcement by the government and the mining company that they had reached an agreement on the final text of the new concession contract.

He indicated that what was announced between the government and Minera Panama requires a public consultation, the terms of which have not been announced. “That will delay the implementation of new contractual conditions,” he said.

Cochez considered that this announcement of termination of the talks and signing of settlement “no” contains some basic issues that have been ignored.

The lawyer listed that, for example, “the constitutional mandate that prohibits state companies from other States from having access to the ownership or exploitation of State territories is ignored. It is public that China, South Korea and Singapore have a significant percentage of the owner of the First Quantum Minerals mine.”

On the other hand, “the 7,500-hectare land that Minera Panamá requested for its expansion is not included anywhere and was denied by Anati (National Land Administration Authority), but Minera Panamá uses it for its tailings tub without paying a penny, a fact denounced by me in December 2021 and ignored to date by the MEF (Ministry of Economy and Finance)”.

Another aspect he mentioned is that “no additional payment is considered for the time elapsed since President Cortizo announced that they had reached an agreement, January 2022, to date. The citizen consultation process that we all hope, is not like the one that MiAmbiente (Ministry of Environment) has approved for the projects of Mayor Fábrega, who will throw many more questions about this contract.”

Industry study

Economist Felipe Chapman recalled that in mid-January, the company specializing in economic research and analysis, Indesa, presented an economic impact study in the country in relation to the Panama Copper mine. The analysis showed that in 2021 alone the mining company achieved a contribution of 4.8% to the gross domestic product (GDP), while the associated employees (direct, indirect and induced) amount to 40,793, which is equivalent to 2.3% of the country’s total occupation, and also represents an upward adjustment of the impact that had been previously estimated with provisional data: a contribution of 3.5% of The multiplier impact on the production of Copper Panama in the same period was $4,683 million (4.8% of the total), while the multiplier effect on income (remuneration) was $447 million (2.6% of the national total). Approximately 2 out of every 100 jobs that exist in the country are associated with the production of the copper mine directly, indirectly or induced by consumption by workers.

The government statement states that 50% of the annual income from copper extraction will be for the Disability, Old Age and Death (IVM) program of the Social Security Fund, and 20% so that no retiree or pensioner receives less than $

Colón and areas adjacent to the project. Of such income, a minimum of 95% will be for investment projects and only up to 5% for operation.

For the management of these funds, the “Atlantic Conquest Trust” will be established. “The identification of investment projects will be followed by a master plan formulated by the Ministry of Economy and Finance (MEF) with participatory planning of local governments, with their respective organized communities, to generate solutions that comprehensively improve the lives of the inhabitants of the impacted communities.”

The Technological University of Panama, together with the respective institutions of the national Government, will prepare the technical specifications of the corresponding projects.

In addition, the UTP will advise and supervise the works with a team of experts in project management.

Of this 25% of income, a fund will be established for scholarships abroad, the University of Panama and the Technological University of Panama. This includes resources for technical training for work. 5% of the minimum annual income will go to the creation and operation of the Institute of Studies for the Improvement and Welfare of Teachers, in order to update theory and practice of teaching with the best levels in the region.

Minister Alfaro gave a report of the negotiations before the Cabinet Council that was held last night. “Today we mark a revolutionary process for the country, with a before and after, because far beyond the end of the stage of a contract, it is also the possibility of having these income that the State did not have before,” said a statement from the Presidency that quotes the minister.

President Cortizo, accompanied by Minister Alfaro, held a meeting with the directors of the mining company.