Bordering both the Caribbean Sea and the North Pacific Ocean, between Colombia and Costa Rica lays Panama, a country of less than 4 million people inhabiting a territory roughly the size of South Carolina. While these statistics may not conjure the image of a mining giant, Panama’s future impact on the global mining scene should disprove this theory.
Panama is in fact home to one of the largest undeveloped copper deposit worldwide in terms of recoverable reserves. The project will be the largest initiative in the country since the construction of the Panama Canal and the open pit mine is expected to become the largest ever-developed in Central America.
Although mining still only accounts for approximately 1.5% of GDP it is one of the fastest growing sectors and with the entering into production of the Molejón mine in 2010, gold now became the country’s top export, accounting for 13.2% of total exports in 2011.
The entering into production of Petaquilla Minerals Ltd. Molejón gold mine in the province of Colon contributed to making of 2010 a special year. Molejon was in fact the first metallic mine to achieve commercial production status in Panama since the country’s independence.
In the fiscal year of 2012, the open pit mine produced 68,002 oz of gold, marking a 22% increase compared to the fiscal year of 2011. Cash operating costs were $574, down 8% year-on-year. As part of the company’s strategy to increase gold production, at the end of 2012, a fourth ball mill was installed, along with two additional LIX tanks, two additional carbon-in-pulp-tanks and a second electro-winning circuit. “The entering into production of the Molejón gold mine is a historical milestone for the company and the local mining industry,” said João Manuel chief executive officer at Petaquilla Minerals Ltd. “Molejón is a project that is growing and we are pleased to have expanded the resource base and its production capacity,” he said.
The Future waits on copper
Once operational, the Cobre Panamá mine will make of Panama a major exporter of copper. In addition the Cobre Panamá will lay the foundations for a responsible form of mining contributing to the sustainable development of the communities that live around the project. Following completion of the acquisition of Inmet Mining Corporation in April 2013, First Quantum Minerals Ltd. now assumed a 80% interest in Minera Panamá, a Panamanian entity that operates the Cobre Panamá concession. “Minera Panamá has set a goal of being in full production in the next four years, serving as a model for modern mining operations that can be emulated elsewhere, not only in terms of costs of production but also in terms of local community participation and environmental protection […],” said Steven Botts, president and CEO at Minera Panamá.
The picture that emerged from the interviews held is that the success of the Cobre Panamá project should set the stage for the future development of the mining industry in the country. Estimated annual production as described in the basic engineering study released by Inmet is between 266,000 mt/y of copper, 87,000 oz/y of gold, and 1,545,000 oz/y of silver over a 30 year mine life. In December 2012, Inmet also announced an increase to proven and probable mineral reserves that increased total estimated contained copper by 27% to approximately 26 billion pounds and increased the estimated contained gold by 41% to approximately 7.3 million ounces. “The additional mineral reserves were integrated into a revised mine plan that extended the estimated mine life from 31 to 40 years. In addition to these known reserves and resources, there exists significant exploration potential given the large size of the concession (approximately 13,000 ha.),” said Botts.
Support and Service Sector
Panama’s growing mining industry can count on an impressive service industry that flourished on the back of the Panama Canal’s expansion project. From drilling contractors with different degrees of expertise, to explosives suppliers and heavy equipment providers, the growing mining industry can already be considered as well served.
The recent expansion in the mining industry has also attracted some of the world’s leading engineering and construction firms. SNC Lavalin for instance is well established. “We commenced by assisting on environmental matters but as the Cobre de Panama project develops we are now also focusing on construction and general mine development,” said Eduardo A. Linares, managing partner at SNC Lavalin.
Within the explosives suppliers industry instead, Orica Mining Services provides rock on ground services, which is a complete service where Orica undertakes a totally integrated blasting service to deliver blasted ground to a specification that has been agreed with the customer. “Our rock and ground services include also the management of the drilling process and Orica can count on specific software to deal with the simulation of the fragmentation aimed at ensuring that our customer’s are achieving optimum results,” said Roberto L. Prates de Noronha, business manager at Orica Mining Services. “For instance, included in our contracts is a system called rock to specification (R2S) which is aimed at delivering significant advanced fragmentation benefits according to our customers’ needs and draws on Orica’s expertise in novel design of blast parameters, leading edge visioning systems and database management systems.”
Orica in Panama can also count on a local emulsion plant and is ideally positioned for interacting with the rest of the Central American and Caribbean region. “Orica plans to improve our existing bulk emulsion production facility to meet the rising demand from the local market and ideally begin to export,” said Prates de Noronha.
The presence of international explosives suppliers ensures the quality of the products on offer. Competitive advantage is therefore often based on the additional services a given company is able to offer. “We work in partnership with our customers during the planning and execution phases of mining projects. Our people are related to the customer or involved in the project from different angles and we consider ourselves as part of a project, rather than just a supplier,” said Mario Julio Alcedo, regional manager, at Austin Powder Panama.
Austin Powder in Panama also utilizes applications that are aimed at optimizing the downstream process of mining companies. “From the construction phase of a mine, to controlled blasts, to wall control for stabilization and specialized blasts for the construction part and the tailing ponds, Austin Powder can assist significantly on any mining operation,” said Alcedo. “During the actual exploitation of a mineral reserve, Austin Powder offers a full range of high-tech products, ranging from non-electric detonators to electronic detonators and computer-assisted design to help optimize production and minimize mineral dilution,” he said.
With important projects such as the Cobre Panama now in stage of development, a government that understands the importance of international investments and a service sector ready to provide the services needed, the future of Panama’s mining industry looks promising indeed.
However, challenges undoubtedly remain. In 2011, for instance, the government passed an amendment to the Code of Mineral Resources that later had to be repealed due to opposition by native groups who feared that mining exploitation necessarily entailed the loss of their ancestral lands. Apart from the public negative perception, other challenges include the lack of culture in mining, the need for a more modern set of regulations and the usual suspect, a lack of qualified human resources. “One of the main challenge to operating in Panama consists in finding qualified personnel and projects like the Cobre Panama will now increase competition for local talent,” said Prates de Noronha. Industry players remain nonetheless optimistic. “We anticipate steady growth,” said Alcedo. “Welcome to Panama. Panama is a growing country and a melting pot. It is a good place to conduct business and a good hub to work out of.”