First Quantum (TSX: FM) this morning revealed that it has been unable to load concentrate at the Cobre Panama port since January 26, following a resolution issued by the Panama Maritime Authority. The resolution is the latest in an ongoing dispute between the Cobre Panama mine as the Panamanian government works to extract higher royalties from the operation.
The latest debacle is related to the certification of the calibration of scales at the port, which Panama alleges needed to be conducted by an accredited company. First Quantum, for its part, indicated that historically the operating subsidiary of the mine, Minera Panama, has provided internationally accepted certifications for the scales. Loading operations are now suspended while it waits for its proof of certification to be verified by the authority, with the latest certifications said to be issued and provided to the authority on February 3.
Minera Panama has indicated that it may be required to shutter the mine should concentrate not resume shipping by mid-February, a function of low storage capacity existing on site.
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Panama’s efforts to halt the mine
The resolution related to the weigh scales at the port is the latest effort by the government to halt the mine as it looks to squeeze higher royalties out of Minera Panamas. The government on December 19 attempted to force the mine into care and maintenance via an executive resolution, which Minera has challenged in court.
That executive resolution followed a 2018 ruling that stated the original law under which permits for the mine were issued, Law 9, was unconstitutional. The government at the time however permitted the operation to remain open, stating publicly that Minera’s concession contract remained valid “given the nature and effects of the unconstitutionality rulings.”
READ: What’s Going On With First Quantum’s Cobre Panamá Mine?
Despite public statements, the firm began working with the government in 2021 to negotiate a new contract for the mine. Months later, President Laurentino Cortizo indicated he wanted the mine to pay “at least” $375 million to Panama yearly – ten times what it is presently paying. The changes would also see the existing revenue royalty change to a gross profit royalty. The $375 million figure amounts to roughly 5.2% of the mines revenue in 2021.
However, Panama needs to tread somewhat carefully on the matter despite its public strong arm stance. The Cobre Panama mine accounts for roughly 3.5% of the countries GDP, and employment for over 6,000 individuals.
First Quantum last traded at $27.90 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
