Panama’s growing mining economy
Michael Schwartz discusses the fastest growing sector of Panama’s economy.
It is fair to describe Panama as a latecomer to mining. A review of the 2019 US Geological Survey of global mineral trends showed that Panama scarcely registers among mineral producers. And yet, there are a few companies that welcome the opportunity to reverse the situation, two of which are First Quantum Minerals Ltd and Orla Mining Ltd.
Mining is becoming the fastest growing sector in the Panamanian economy – its geology allows experts to discover commercially viable deposits in the subsoil, such as gold and copper. In turn, the Panamanian government expects urban growth to develop in the vicinity of new mining projects.
‘Panama recently had its elections. The new party in office since 1 July 2019 views mining as an important pillar in the economy for job creation and helping [Panama] rebound from its current recession,’ Orla Mining President and CEO, Jason Simpson, said. ‘The government looks to be very open and positive for new mining investment in the near future. As a company, we have been in constant communication with them regarding our development plans and needs.’
Panama is set to benefit greatly from increased mineral resources. Perhaps the most significant resource is Quantum Cobre Panama, an open-pit development 120km west of Panama City and 20km from the Caribbean Sea. Four zones make up a 13,600ha copper porphyry concession – the main deposits comprise Balboa, Botija, Colina and Valle Grande, as well as smaller zones, of which the most significant are Brazo and Botija Abajo.
Ownership of Cobre Panama has gradually been acquired by Toronto-listed First Quantum Minerals Ltd. The firm took more than 80% of the equity interest in Minera Panamá SA (MPSA), which was established in 1997 to hold the Cobre concession. Just over two years ago, First Quantum increased its ownership of MPSA to 90% by acquiring a holding from LS-Nikko. In March 2019, First Quantum filed an updated technical report for Cobre Panama, covering the end of 2018. The project had expanded from 85 million tonnes per year (Mt/y) to 100Mt/y, due to enhanced confidence in its geology.
The latter figure involved development of an adjacent pit, the addition of a ninth mill, more mining equipment and conveyors and other infrastructure.
The total cost of the 100Mt/y expansion is estimated at US$327mln.
‘The project includes approximately US$4bln of highly specialised and large-scale mining and processing equipment. Total capital expenditure on the project is US$6.7bln,’ First Quantum President, Clive Newall, said, breaking down the overall expenses of Cobre Panama.
Mineral reserves at Cobre Panama
The December 2018 technical report stated total measured and indicated resources of 3,587 million tonnes (Mt), including 0.37% copper, 0.006% molybdenum, 0.07g/t gold and 1.33g/t silver. Inferred resource stood at 1,050Mt total, with 0.26% copper, 0.005% molybdenum, 0.04g/t gold and 1.08g/t silver.
The actual cut-off grade for the estimate varies due to variable processing recovery, but otherwise reflects several longer-term consensus prices – copper US$3/lb, molybdenum US$13.50/lb, gold US$1,200/oz and for silver, US$16/oz. This will apply over a project life of 36 years and include a section of ore mined during pre-stripping and stockpiling for future processing.
Newall told Materials World the purity of the copper and gold at Cobre Panama was very low-grade, ‘with average grades of approximately 0.4% copper and 0.07g/t gold’.
While for First Quantum, ‘the geology is simple but the geography is difficult with steep, rugged terrain and high rainfall’.
Access and transportation
Access to the project area is via the Pan-American Highway system from Panama City to Penonome, surfaced all-weather roads to Llano Grande, and gravel roads via the town of Coclecito. The topography in the concession area is low elevation – less than 300m – but rugged with considerable local relief covered by dense rainforest. Some roads and a port facility were built by First Quantum.
Climatic conditions are tropical with high precipitation levels, high humidity and relatively high temperatures of 25°C–30°C year-round. Newall explained that, now construction is complete, his concerns were only for good road maintenance in the wet climate. He also confirmed that the vast majority of his staff were Panamanian and that, ‘very large numbers of local staff have been trained in mining, processing and related skills’.
At the end of June 2019, First Quantum announced that the first shipment of copper concentrate from Cobre Panama had left port, described by the company as a ‘significant milestone of the ongoing ramp-up.’
The Panamanian-flagged Missy Enterprise left Punta Rincon port with 31,377 wet metric tonnes of copper concentrate. A second vessel, Clarke Quay, loaded 44,000 wet metric tonnes, and vessels were due to be departing every two or three weeks under the process.
At time of writing, Cobre Panama was on course to produce 140,000–175,000t of copper by the end of 2019. Over the next years, that sum will increase to 300,000t.
Cerro Quema project
Headquartered in Vancouver, Toronto-listed Orla Mining Ltd is sole owner of Panama’s Cerro Quema project. Lying in the extreme south of Panama, Cerro Quema is an open-pit heap leach operation with proven and probable gold reserves totalling 14t – measured and inferred 20t. To achieve this, a daily throughput of 10,000t to generate 2.3t of gold annually is envisaged.
‘The oxide gold reserves are 19.71Mt at 0.77g/t gold, resulting in 488,000oz (14t) gold. We have not published a resource for the copper/gold discovery yet. Drill-hole intercepts generally grade 1% copper, 0.5g/t gold,’ Simpson said, regarding the purity of the copper/gold at Cerro Quema.
More specifically, the project area is located on the Azuero Peninsula within the Los Santos Province of south-western Panama, some 45km south-west of the city of Chitre and roughly 190km south-west of Panama City by air. Orla Mining stressed that the project has excellent access and is near high-voltage power lines. A fully functional exploration camp has now been built next to the concessions with water, power and communication services.
Regular access to the site from Chitre, the nearest town with regular air service, is via paved highway for 75km through to the small village of Rio Quema, and then by all-weather road for 5km to the project site. The portion of the access road between Rio Quema and the southern concession boundary is a public road.
‘We have paved road up to the camp so there is no major challenge besides a simple access road to the mine,’ Simpson said. ‘The usual mobile equipment for a mining site will be required, but as the site is proximal to a paved highway, only access roads will be required.’
Other key statistics are an average gold grade of 0.77g/t with 86% recovered on average. In financial terms, an initial capital expenditure of US$117mln should generate US$8.63/t in operating costs, a total byproduct cash cost (US$/oz gold) of US$402, and a net asset value of US$110mln. Payback period is calculated at 2.2 years.
Orla Mining emphasises that Cerro Quema is located in a sparsely populated area with no rare ecosystems or endangered species. The company also stressed what it described as excellent infrastructure – paved road, power, water, year-round access, airport and major highway access – as well as prospective geology for discovering more oxide and sulphide mineralisation.
While there was a preliminary assessment in 2014, a new zone at Caballito comprising low-arsenic copper-gold mineralisation located south of the Quemita reserve was discovered in 2017. This new mine is 650-800m-long, 350-400m-wide trending northwest-southeast according to a 2017 survey. Copper content of more than 1% has been detected.
Regarding local geology, Simpson said it is complicated, ‘but also very prospective for finding mineralisation. The company has an existing oxide gold reserve and an exciting new copper-gold sulphide discovery. We plan to continue exploring for additional mineral deposits’. There are indeed other gold-in-oxide and copper-gold sulphide targets on this 15,000ha concession. A ground geophysical programme and follow-up drilling are planned for this year, while concessions have been fully permitted for exploration.
Training and CSR
Two final aspects of the companies’ involvements in Panama are their training of local citizens and commitment to corporate social responsibility (CSR). For Orla Mining, Simpson said ‘the company has an agreement with a local technical school and give scholarships to locals in the community to obtain licences for industrial trades.
The company will also encourage and support local citizens through training and development to enable them to work at the project if they wish’.
Regarding the company’s CSR programme, he said the biggest commitment is the hot food programme with 12 schools surrounding the project and feeding approximately 500 students. ‘The company supplies the raw ingredients to the schools and the mothers of the children are in charge of cooking the meals. This programme runs during the school calendar year,’ he said. The company has also built the senior citizen centre in the town of Tonosi and supports the sports leagues of surrounding communities. The CSR approach and investment will grow when the project is developed.’
Support for investment
Reflecting Panama’s drive for mining growth, a number of organisations are in place to assist investment. For example, Business Panama Group gives advice on raising capital for investment, immigration procedures, transportation, logistics and CSR.
It may be tempting to dismiss the low g/t figure for mining sites in Panama, but the ambition of companies in the area prove that investment and vision will generate their deserved financial rewards.
Correction: Please note that since the original release, the figures for gold and silver under the mineral reserves section have been amended.