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The open pit copper mine Cobre Panama, run by Panamanian Mining company Minera Panama, a subsidiary of Canada's First Quantum Minerals Ltd., in Donoso, Panama, Dec. 6, 2022.Abraham Teran/The Associated Press

First Quantum Minerals Ltd. FM-T has made further concessions to Panama, as the big Canadian copper miner attempts to finalize a new tax agreement that would allow it to continue to operate in the country.

Last month, Panamanian President Laurentino Cortizo ordered the giant Cobre Panama mine to shut down, after the Central American country failed to reach an agreement with First Quantum around taxes and royalties.

The mine hasn’t closed yet, but the company is preparing for the scenario that would put thousands of Panamanians out of work.

The Globe and Mail on Monday reported the details of a tentative agreement in which the Canadian miner would pay drastically more taxes in Panama than it has in the past. While both parties are in broad agreement over the fiscal regime for the next few years, Panama is concerned about the framework after 2026. First Quantum has agreed to pay Panama at least US$375-million in taxes from 2026 onward, if copper trades above US$2.75 a pound and production exceeds 250,000 tonnes. However, the government is worried that substantial tax credits First Quantum can avail itself of could reduce the tab well below the US$375-million level, The Globe reported.

First Quantum chief executive officer Tristan Pascall, in a Tuesday call with analysts, said that in its recent talks with Panama, the company conceded more than US$250-million in credits related to infrastructure, and an unspecified amount related to ore depletion, as well as agreeing to limit the value of credits it uses per year.

Mr. Pascall added that some nuances still needed to be resolved before a final agreement is reached, including fine-tuning the details concerning the tax credits, as well as firming up legal rights that would protect First Quantum against early termination of the agreement and expropriation of the mine.

“I don’t think we’re very far away,” Mr. Pascall said of the overall tenor and status of the talks with Panama.

If the two can reach an agreement, First Quantum’s tax bill will escalate dramatically in Panama.

For 2021, First Quantum paid US$455-million in taxes across all of its operations, which include its Panamanian properties and mines in Zambia, Finland, Turkey, Spain, Australia and Mauritania.

The Globe on Monday reported that First Quantum has agreed to pay Panama US$375-million for the 2022 tax year. From 2023 to 2025, First Quantum will pay at least US$375-million if copper trades above US$3.25 a pound and if its production is more than 250,000 tonnes.

Copper is trading at about US$4 a pound. First Quantum’s guidance for Cobre Panama last year was 345,000 tonnes of copper.

For the time being, Cobre Panama is operating as normal, but First Quantum is also planning on closing the mine per the government’s order. In the interim, the company has filed an appeal in an attempt to reverse the decision.

Cobre Panama is a major engine of the Panamanian economy with roughly 40,000 people working there and the operation responsible for approximately 5 per cent of the country’s GDP. First Quantum spent US$6.8-billion building the mine. Cobre Panama started production in 2019, and is expected to remain in operation for about three decades.

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