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Panama's Mining Law: Significant Changes

1-   Law 11 of 2012 establishes a special regime of social interest over mineral, hydro and environmental resources located within the Ngabe Bugle indigenous reservation and adjacent areas (the “reservation”).

This law forbids any exploration, exploitation or extraction concessions of metallic or non-metallic minerals within the reservation, and it further orders the immediate cancellation of all existing concessions granted to national or foreign entities.

Any future applications for hydroelectric projects located within the reservation shall require the previous approval of the general, regional or local congress of the reservation, in accordance with the circumstances of the project. 

Other provisions of the Law deal with benefits, the creation of a development fund, compensation, penalties and tourism projects.

It is worth noting that important mining projects such as Cerro Colorado (one of 10th largest unexploited copper deposits in the world) and Cerro Chorcha are located within the reservation.

 

2.      Law 13 of 2012 re-establishes the entry into force and modifies multiple sections of the Code of Mineral Resources and other provisions. The most relevant are:

 

2.1             Prohibitions regarding Mining Concessions

None of the persons mentioned below can obtain, exercise or enjoy mining concessions:

A)        Foreign governments or states, or any entity or official or semi-official institutions. 

B)        Government officers or employees up to one year after leaving office. These provisions extend to family relatives.

C)        Persons in arrears with the National Tax Office.

 

It is worth mentioning that that in A) foreign owned corporations controlled directly or indirectly by a foreign state are permitted to obtain mining concessions or invest in mining concessions. Such was the case with Inmet Mining $6.2 billion copper project in Panama, where both Korean and Singaporean companies indirectly owned by their governments invested in said project. 

 

2.2              Land Rental Fee during Exploration

The land rental fee by hectare applicable to exploration concessions will be –

 

Years of Concession                          Rental by Hectare

      1 to 2 years                                              $1

      3 to 4 years                                              $2

      5 year forward                                         $3

           

2.3              Land Rental and Royalty Fee during Extraction

The land rental fee by hectare as well as the royalty applicable to extraction concessions will be –

Class

First 5 years

From 6 to 10 years

After 10 years 

Royalties

I

1.50

3.50

4.50

 

II

2.00

4.00

6.00

5%

III

2.00

4.00

6.00

8%

IV

2.00

5.00

7.00

4%

V

1.50

3.00

4.00

4%

VI

3.00

6.00

8.00

6%

 

Other provisions of this Law deal with penalties, bonds, percentages allocated to municipalities and procedural matters as well as non-metallic concessions.

 

Dr. Juan Francisco Pardini

pardini@padela.com

 

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