Cobre Panama

Panama renegotiates Cobre concession with First Quantum.

In early May 2021, the Government of Panama announced a number of measures as part of a new strategy to increase investment and state revenues in the mining industry in the country after GDP dropped 17.9% in 2020 due to the COVID-19 pandemic.

One of the pillars of this strategy is the renegotiation of the USD 6.5 billion Cobre Panama concession operated by Minera Panama, a subsidiary of the Canada-based First Quantum Minerals. Talks between the government and the company are underway with the government aiming to increase the mining royalties to 2%. The company was compelled to negotiate after a 2018 Supreme Court ruling cast doubts over the 1997 mining concessions law which awarded the Cobre Panama concession to the company.

A senior official at the Mining Chamber of Panama tries to put a positive spin on things, “We expect a new contract to be a win-win for both parties. Fairer economic benefits for the country, better legal protections for both parties and an improved image of the sector.”

“We expect a new contract to be a win-win for both parties. Fairer economic benefits for the country, better legal protections for both parties and an improved image of the sector.”

Official, Mining Chamber of Panama

The Panamanian government benefited from the assistance of CONNEX, an initiative launched by the G7 countries to support governments in complex negotiations with international mining companies. In addition, the government has also engaged the US law firm Hogan Lovells in the framework of the International Senior Lawyers Projects (ISPL), a not-for-profit entity formed by the most prestigious law firms in the US.

A representative of the Environmental Coalition of Panama is unsure about the level of CONNEX involvement, “The Minister of Commerce commented that CONNEX is supporting ‘fair’ negotiations, but ‘fair’ has yet to be defined.” An official at the Mining Chamber was able to give a little more detail, “CONNEX is collaborating with the Panamanian government on economic negotiations through subject specialists.”

“The Minister of Commerce commented that CONNEX is supporting ‘fair’ negotiations, but ‘fair’ has yet to be defined.”

Representative, Environmental Coalition of Panama

Although Panamanian President Laurentino Cortizo promised to revise each clause of the contract, it is very unlikely that this will result in the concession being awarded to another company. President Cortizo affirmed that it should not take long to reach an agreement as the country risked endangering its position as a friendly investment jurisdiction in the region.

The official at the Mining Chamber reassured, “Good practice will decrease resistance from the communities, opening the door for greater investments in exploration and exploitation. In the past few years Cobre Panama has been a mainstay of the economy and is a decisive factor for our post-pandemic economic recovery.”

The representative from the Environmental Coalition of Panama has a different view, “We don’t yet know the details but the public feel that the economic benefits do not outweigh the environmental and social costs. There is social fatigue with the political class and mining is felt to be an unguarded and high-impact activity.”

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