First Quantum Minerals is facing a more than eight-fold increase in its tax bill in Panama
’s tussle with Panama over taxes is a microcosm of a global phenomenon that threatens the profitability of some of Canada’s biggest mining companies, but worst-case scenarios of sites being nationalized will be the exception, not the rule, experts say.
“Government officials are looking at these companies making lots of money, and looking for a bigger piece of the pie to help fund government spending,” said Shane Nagle, mining analyst with National Bank Financial. “You will choke the goose that lays the golden egg, literally, the golden egg, if you choose to implement a regime that takes too much of the froth off the top,” said Peter Marrone, founder and executive chair of Yamana Gold Inc., which has operations in Brazil, Argentina and Chile.
“Countries are looking at their tax and royalty regimes to get as much as they can for the extraction of a non-renewable resource in their country without making that extraction unfeasible,” said Alan Hutchison, mining lawyer with Osler, Hoskin & Harcourt LLP. The amount Canadian miners pay to foreign governments differs not only on the tax regime, but the size of the mine, and the amount of tax credits available. In the early years of a mine, companies routinely pay little-or-no tax, because of credits amassed during its construction. This goes a long way to explaining why First Quantum paid US$444-million to the Zambian government on the Kansanshi mine in 2021, or more than 10 times the US$42.6-million paid to Panama for Cobre Panama.
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