Gwanghae Mining Corp. Ends Dispute Over Cash Cow 'Panama Mine'... Agrees to Royalty Increase

The Korea Mine Reclamation Corporation and the Panamanian government have reached a settlement in the royalty dispute over the Cobre Panama copper mine. They agreed to the Panamanian government's demand for a double-digit percentage increase in mining royalties and will pay at least $375 million annually going forward. Although the Corporation's royalty burden has increased, it can maintain stable mineral procurement.

According to a comprehensive report by Asia Economy on the 26th, the Korea Mine Reclamation Corporation and the Cobre Panama mine operator MPSA agreed last month with the Panamanian government to raise mining royalties by up to 16%. Specifically, royalties will be paid at 12-16% of gross sales profit depending on the mine's operating profit margin. Additionally, starting this year, they must pay the Panamanian government at least $375 million annually, including taxes and royalties. However, there is a clause that if the copper price is below $3.25 per pound until 2025, only the combined amount of taxes and royalties will be paid as an exception.

The Cobre Panama mine is one of the world's top 10 copper mines, with reserves reaching 3.147 billion tons. The Korea Mine Reclamation Corporation acquired a 10% stake in the Cobre Panama mine in 2009, and production began in 2019, with 684,000 tons of copper mined over the past three years. As of 2021, the Corporation recorded a net profit of $750 million, making it a highly profitable business.

The dispute over the Cobre Panama mine began last year when the Panamanian government demanded a significant increase in royalties. Previously, MPSA had paid 2% of the mine's sales revenue as royalties to the Panamanian government, but last year, the government demanded that MPSA increase the royalty rate to 12-16% of gross sales profit based on operating profit margin and pay a minimum annual amount of $375 million. MPSA and the Korea Mine Reclamation Corporation rejected the demand, escalating the dispute. The Corporation also considered filing an investor-state dispute settlement (ISD) against the Panamanian government but ultimately reached an agreement by accepting the government's demands.

The background to the agreement between the Corporation, MPSA, and the Panamanian government is that the royalties had been significantly lower compared to other mines in South America. The Corporation explained that the current royalty increase of around 10% is a reasonable level in line with fairness to other regions in South America. However, the agreement must ultimately be approved by the Panamanian National Assembly. A Corporation official stated, "Although it is true that the royalty payments have increased with this agreement, we have agreed on the best solution to ensure stable copper procurement and will continue to seek common ground with the Panamanian government."

This content was produced with the assistance of AI translation services.