Panama Country Trip Overview

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Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor

September 6 – 12, 2016

Ottawa, Canada

Preface

The Government of Canada’s Extractive Sector Corporate Social Responsibility Counsellor is a key implementing component of the Canadian Government’s policy initiative on responsible business conduct, with a focus on Canadian extractive companies investing and working outside of Canada. The Counsellor works with different stakeholder groups, especially the companies to:

• explain Government of Canada expectations regarding responsible business conduct,
• promote company alignment with endorsed international standards and norms, that should be reflected in their corporate policies, and in their on the ground procedures, practices and relationships with host governments and local communities.

As part of the Office’s outreach and advisory programmes, the Counsellor visits countries where Canadian oil, gas and mining companies are operating, particularly those countries with high levels of Canadian investment and activity, or where the political, social and environmental risks are particularly high. Such visits involve outreach to all key stakeholder groups in the country with the aim of understanding their issues, concerns and challenges relating to oil, gas and mineral exploration and extractive operations. During a country trip, the Counsellor visits at least two Canadian owned or managed projects in order to get a first-hand sense of how the companies are addressing social and environmental challenges and building relationships with project affected communities and local government authorities. The Counsellor’s trip is facilitated and often invited by the Canadian Embassy or High Commission in the country of interest.

Country visits are not just about explaining and promoting, but also about understanding, and learning, from all individuals and groups with whom the Counsellor interacts, including Canadian Embassy staff. Sometimes public and private events are organized around the Counsellor’s visit. More important are the frank exchanges with parties directly involved with or affected by Canadian extractive activities, and the opportunities created to hear and take into account their concerns and aspirations, and to support local stakeholder and company efforts to responsibly address social and environmental issues and ensure an equitable sharing of benefits.

Country trips allow the Counsellor to develop a deeper and more nuanced understanding of national and local context, issues and challenges, and establish a foundation for effective ongoing advisory support and for constructive intervention in situations if or when requested or required.

The Panama Trip

Background

Canada’s Extractive Sector CSR Counsellor, Jeffrey Davidson, visited Panama from September 5 to September 13, 2016, accompanied by the Office’s Research Officer. The visit was planned as the third of a series of trips to countries in Central America where Canadian companies are active and where mineral resource development is controversial.

The contemporary history of mining in Panama, from the 1960s to the present, has been a checkered one including some major ups and downs, and its share of positive and negative outcomes. Sector development has been affected by a series of questionable policies, decisions and practices carried out by both Panamanian and external actors throughout this period. Canadian corporate investments and activities in mineral exploration and development have been part of this history, but by no means account for all of it.

In order to understand why certain issues and concerns are central to any discussion of a mining future for Panama and why extractive activities remain so controversial, a fuller appreciation of what happened in the past is required. This history, given the nature and extent of Canadian companies’ involvements, also has implications for home country Canada and the importance it should attach to ensuring alignment of its new progressive trade and investment support policies with its evolving responsible business conduct strategy.

While a short overview of the country’s mining past is presented in the following paragraphs, the reader will find a more extended discussion of some of its important aspects in the main body of the report, and is referred to Appendix 2 for a detailed description of each of the projects which make up this past.

Capital intensive industrial mining only began in Panama in the 1990s, with one commercial open pit gold mine brought into production in 1994;^{Footnote 1} and an older gold mine^{Footnote 2} dating from the late 1800s rehabilitated and re-opened. Earlier exploration projects in Chiriqui (Cerro Colorado and Cerro Chorcha) and Colon (Cerro Petaquilla), suspended for almost 20 years, were rejuvenated.^{Footnote 3} The identification in the 1990s of gold bearing mineralization at Cerro Quema on the Azuero Peninsula of Santos province^{Footnote 4} also led to new exploration activities. Canadian companies played important roles in most of these projects.^{Footnote 5}

However, by the end of the 1990s, the two operating mines had been closed.^{Footnote 6} Exploration activities at Cerro Colorado, Cerro Chorcha and Cerro Petaquilla, had once again been put on hold, as well as exploration efforts at Cerro Quema - effectively placing all “active” exploration projects into a care and maintenance mode.^{Footnote 7}

During the last 15 years, concession contracts for the exploration and possible exploitation of Cerro Colorado and Cerro Chorcha were either suspended or not renewed and the Government passed legislation to prohibit exploration or mining activities within the Ngäbe Buglé comarca.^{Footnote 8} As for the Petaquilla property, a new concession development plan was laid out in 2005, dividing the project’s implementation into gold and copper phases. The first phase would involve the development and operation of a commercial gold mine (El Molejon). The development and operation of a large-scale open pit copper mine (Cobre Panama) would follow later. The Molejon gold mine started producing in 2009/2010, but was abruptly shut down in 2014. Cobre Panama is now under construction and is expected to be in production in 2018.

A number of attempts were made to reactivate mining or revitalize exploration at other sites. Efforts to re-open the Santa Rosa mine fell apart. Initiatives to develop other gold properties have not been successful.^{Footnote 9} Cerro Quema despite multiple changes in ownership and management remains active, but is still in an advanced exploration stage. Its latest owner, another Canadian junior company, Orla Mining, is now undertaking additional drilling, reviewing the results of previous geophysical survey work and completing the detailed mapping of the property.

Recognizing the challenges posed by past history, the current Government has chosen to be forward-looking. It is working to redress the negative impacts of past problematic situations^{Footnote 10}, while making it clear that any new projects, especially the currently active ones, must be able to demonstrate the viability of large-scale “industrial” mining within the Panamanian context. This would have to be reflected in the companies’ willingness and capacity to contribute positively to the national and regional economies, and their ability to carry out their projects in ways that are regarded by Panamanian citizens as socially and environmentally sensitive and responsible. Only then might the Government be in a position to make a strong case for its citizens to support a greater role for the extractive sector in the country’s future development.

The Counsellor’s visit occurred at the invitation of the Canadian Ambassador. The visit was timely given the involvement of Canadian companies in the country’s two currently active projects and the Government’s desire to establish the mining sector as another development platform for the country. Given the short duration of the visit (one week), the trip was organized to expose the Counsellor to a range of perspectives on possibilities for responsible mineral resource development in Panama. This allowed the Counsellor:

• to familiarize himself with some of the potential risks and opportunities that would come with the expansion of an extractive sector
• to gain insights into the current status of the two active Canadian projects, especially with regard to their approaches and commitments to meeting the country’s and Canada’s corporate social responsibility expectations, and
• to be better positioned to discuss with the Embassy possible contributions that it could make to support company, community and host government efforts to “get mining right”

With Whom did the Counsellor Meet and What Places Did He Visit?

The Counsellor met with central and municipal government authorities, civil society representatives, clergy, special interest third parties, business community representatives, and Canadian company managers and staff. Meetings were held in Panama City, in local municipal offices and at the project sites visited. Throughout the trip, the Canadian Ambassador, the Embassy’s Senior Trade Commissioner and Political Analyst and the Counsellor’s Research Officer attended the majority of meetings, events and mine site visits which provided the information basis of this report.

Through face-to-face meetings with stakeholders and pre-and post-trip research, the Counsellor was able to gain a broad, albeit limited understanding of stakeholder concerns and aspirations surrounding natural resource development in Panama.

Please see Appendix 1 for a list of the organizations the Counsellor met with in Panama.

How Did the Counsellor Organize and Prepare for the Visit?

In preparation for the trip, the Counsellor and his staff reviewed publicly available academic, NGO and media reports addressing current and historical challenges relating to mining in Panama. The Counsellor’s office also communicated with Embassy staff, Canadian academics and mining company managers in advance of the visit. These interactions helped to identify issues that could be further investigated or explored when meeting with various stakeholders in country. All of the meetings and both site visits were set up in advance of the trip and arranged by the Embassy.

Report Coverage and its Main Limitations

The observations, concerns, and conclusions shared in this report reflect what the Counsellor saw, heard and learned regarding the current issues surrounding mineral resource development in Panama. It includes information compiled during and after the visit to Panama, as well as historical and contextual information helpful for clarifying key issues that Panama’s nascent mining industry currently faces.

The report was enriched by insights and information provided by the parties with whom the Counsellor met both in and outside of Panama, including Canadian Embassy staff in Panama. Of the parties that were contacted by the Embassy, all graciously agreed to meet and openly shared their ideas and concerns regarding mining in Panama today and its future.

The extent and scope of stakeholder meetings have differed in each of the countries visited by the Counsellor. In Panama, the number of civil society and community organizations with an extractive industry focus is quite limited.^{Footnote 11} Many national organizations direct their attention to other types of industrial and infrastructure developments, as well as indigenous peoples’ concerns, including, for example, the expansion of the Panama Canal, and the development of new hydroelectric and dam projects, like Barro Blanco.^{Footnote 12} As well, there are a number of non-indigenous community based organizations which emerged and raised concerns with specific exploration and mining projects.^{Footnote 13} Of these, the Counsellor was only able to meet with the national environmental NGO, Centro de Incidencia Ambiental – Panama (CIAM).

In contrast, the Counsellor had multiple interactions with high-level government officials and civil servants. These conversations tended to concentrate on the challenges the government faces in developing and strengthening its own capacity to promote, administer and regulate extractive activities and operations, effectively and responsibly. The mine site visits to Cobre Panama and Cerro Quema focused on certain social and environmental aspects of the two projects, such as community investment during exploration, water flow management, population resettlement, i.e. mainly preparatory activities in advance of and during construction. Time and locational constraints allowed for only limited interactions with neighbouring communities, although the Counsellor was able to meet with mayors and local government representatives of project affected municipalities. In other words, only a few civil society and community voices were heard.

As a neutral third party, the Counsellor tries to take a critical approach to the evaluation of primary and secondary information including what he sees on the ground. Due to the limited scope of the visit and time spent in country, this Trip Report cannot provide an exhaustive understanding of the contexts in which extractive activity has occurred or currently occurs. Nor can it claim to provide a comprehensive review of issues and challenges that the country currently faces or may face in the future regarding mineral exploration and mine development. Because some of the information collected is sensitive or was provided on a confidential basis, the Counsellor has been careful in how certain facts are referenced or opinions ascribed. The report content reflects these limitations.

Issues and Observations

Issues

A variety of issues and concerns were raised during the country visit and in the documentation reviewed. Some of the more salient ones are noted below:

Environment

• Human and ecosystem health risks related to use and disposal of hazardous chemicals in mineral processing, especially with respect to gold bearing ores, and the potential for contamination of water sources
• Environmental and biodiversity risks posed to Panama’s section of the Mesoamerican Biological Corridor and other protected forest areas
• Commitments and capacity on the part of companies and government to close mining operations or rehabilitate abandoned mine sites in an environmentally responsible way, especially in the case of open pit metal mines, given past experiences at Santa Rosa and El Molejon

Legal, Regulatory and Institutional

• Government’s capacity and/or will to act expeditiously on applications for exploration or exploitation licenses or environmental permits submitted by private entrepreneurs/companies
• Questions from both ends of the political spectrum regarding the strengths and weaknesses of the existing fiscal and regulatory regimes and development policies; consultation processes and the need to balance economic development and sustainable development goals at national and local levels
• Existing application and permitting processes that do not provide sufficient time or space for informed consultation and review of proposed exploration or development projects by potentially affected people and communities
• Shortage of trained and experienced Panamanians to staff and operate government units with oversight and regulatory responsibilities for extractive activities
• Institutional capacity at national and local levels not yet in place to assure effective oversight and enforcement of regulations
• Weak or absent administrative capacity at the municipal level in mining districts to assure responsible investment or use of mining generated revenues distributed to municipal authorities

Indigenous Peoples

• Control and management of renewable and non-renewable natural resources within indigenous traditional territories
• Migration to and settlement of indigenous peoples in rural areas outside of traditional indigenous territories
• Commitments to consultation and/or consent policies and practices between indigenous peoples and Government of Panama that have yet to be fully formalized, including to ILO Convention 169
• Historic legacies and impacts of encroachment and alienation of indigenous traditional lands by “outsiders”
• Impacts of resettlement programmes relating to mining and hydro-electric projects on communities residing both on and off of comarcas, especially with respect to their livelihoods and cultures

Community Related

• Impacts of exploration and extraction activities on agricultural livelihoods
• Distribution of limited employment opportunities between communities within zone of direct influence of a project
• Responsible management and investment of project generated revenues for municipalities and indigenous community government
• Given the national skilled labour shortage, potential for high-jacking of skilled labour by higher paying sectors like mining and power generation
• Persistence of unauthorized artisanal mining activity within concession areas, that may be related to money laundering of drug traffic money
• Changing patterns of corporate social investment in certain locales favouring some communities at possible expense of others

Most of these issues and concerns are not unique to Panama, but of particular significance for the sector’s development have been indigenous peoples’ issues and concerns relating to exploration and extractive activities. This is discussed in further detail in the section on Indigenous Peoples and Mining below (pp. 20).

The Counsellor’s Observations

The following observations reflect what the Counsellor is able to say about the current situation of the sector, and Canadian companies’ involvement in its development.

1. There is a sense of guarded or cautious optimism regarding possibilities for the growth and development of the country’s still nascent metal mining industry on the part of Panama’s government and business community in spite of its difficult past.
2. Virtually no new exploration or exploitation concessions for metal mining have been approved by Panama’s Ministry of Commerce and Industries during the past five years.
3. Of the three companies that possessed exploitation permits at the time of the Counsellor’s visit, only First Quantum Minerals had all of the permitting in place required to move towards production.
4. The deferral of decisions on the other two properties regarding concession renewals or issuing of environmental permits may reflect Government reticence to commit to project’s which have yet to demonstrate potential financial viability and may also be influenced by the past experiences with these properties.^{Footnote 14}
5. Panama has few technical and academic programs to prepare young Panamanians to work in the mining industry. This has already had an impact on the ability of existing projects to hire local professionals and meet local hiring requirements, but it also limits the government’s ability to properly regulate the existing industry (both metallic and non-metallic sectors).
6. As part of Panama’s national public service decentralization program, all municipalities will have to learn how to manage new revenue streams, maintain and improve public services, and plan their own community investments in efficient and responsible ways. This challenge of good governance and fiscal management will be amplified in the case of any municipality which benefits from the additional revenue flows generated by exploration and mining projects.^{Footnote 15}
7. In the case of the two active Canadian projects, their presence and impacts are most immediately and directly experienced by municipalities (districts) which are adjacent to the companies’ concession areas, but which are not the municipalities in which the projects are physically located. This means that the communities nearest to the projects and most directly affected by them are not the principal beneficiaries of the project taxes and revenue flows allocated by government to go directly to the districts in which the projects are physically located. This has created problematic situations involving have and have-not municipal districts and villages for both projects. In the case of Cerro Quema, the two districts are Tonosi (the beneficiary) and Macaracas districts^{Footnote 16}; and in the case of Cobre Panama, the two districts are Donoso (the beneficiary) and La Pintada.^{Footnote 17} These situations have contributed to inequitable benefit sharing arrangements between the projects and the most directly affected districts and communities, and has led to some resentment between communities and between the companies and communities.
8. Government authorities recognize the existence of gaps in knowledge and regulation that constrain the Government’s capacity to promote and oversee a successful and responsible mining industry. They were eager to learn from countries with more extensive experience in the mineral resource development, including other Latin American and OECD countries, including Canada.
9. There does not appear to be a major national problem with unregulated artisanal mining of gold or industrial minerals in Panama, unlike in some other Latin American countries. Whatever problems and challenges may exist appear to be limited and restricted to certain areas of the country, including the Darien and in one area of the Petaquilla concession.^{Footnote 18}
10. There has been and continues to be inaccurate and/or misinformation about the nature and extent of sector activity, about past and current events, and about the actors themselves that circulates both nationally and internationally. This may be inadvertent, not necessarily purposeful, but serves to conflate facts with fiction and can contribute to misunderstandings and tensions between government, companies, and communities.^{Footnote 19}
11. The philanthropic model of community investment associated with the only operating mine of the recent past (2010-2014), El Molejon, and its operator, Petaquilla Gold, did not reflect best current practice, but elements of this approach and certain of its programmes have been carried over to other projects.^{Footnote 20}
12. The successful resolution of the conflict surrounding the implementation of the Barro Blanco hydroelectric project through dialogue and negotiation created a precedent for the value of direct and inclusive consultation between the government and indigenous groups,^{Footnote 21} especially when it comes to new project initiatives that will impact indigenous communities, whether living within established comarcas or outside of them.
13. The current Government, as with previous governments, is concerned with the country’s continuing dependence on the canal trade and commercial banking. It sees mineral resource development as one of a number of possibilities for diversifying the country’s economy.^{Footnote 22}

Historical Context and Additional Discussions

A summary of the development of the sector is provided in the sections below. Additional detail and references are provided in the footnotes and in a more detailed discussion of each of the exploration and mining projects attached as Appendix 2.

The Limited History of Mining in Panama – to the end of the 1960s

The first external recognition of the presence of gold within the country occurred during Columbus’ fourth expedition to Hispaniola and the Caribbean coast of Panama (1502-1503). Initial indications of the potential presence of gold were the fabricated gold ornaments worn by some of the indigenous people encountered along the Caribbean coast. The expedition’s search for local sources of gold concentrated on the Rio Veragua where Columbus’ crew found indigenous people mining alluvial deposits of gold along the river’s banks.

The Caribbean littoral from Veragua to the Gulf of Uraba ultimately came to be referred to as Castilla del Oro^{Footnote 23}. The gold deposits found and worked were near surface, mainly placer alluvial and alluvial deposits, but also some quartz vein deposits. There was some early colonial mining activity in the late 1500s (the Escobal deposit), followed much later by a brief period of intensive exploitation between 1665 and 1727, mainly in the Darien near Santa Cruz de Cana (the Espiritu Santo mine). It is estimated that the Spanish colonists extracted close to one million ounces of gold during this last period.^{Footnote 24}

Gold most commonly occurs in Panama in gold-bearing fluvial gravels, which historically had been, and in some places continue to be, worked by indigenous peoples.^{Footnote 25} The main locations of placer gold deposits are in the Darien and along the Belen, Coclé and other rivers in northern Veraguas. While Panama was never a significant primary source of precious minerals during the colonial period, it served as the principal conduit for moving mineral wealth from the Pacific coast of Spanish America to Spain.^{Footnote 26}

After the withdrawal of Spain from the region in 1819, the isthmus’ trading route shifted focus dramatically. By the mid-1800s, Panama became a major transit point and travel route for migrant labour coming from the east coast of the United States on its way to the gold fields of California (especially from 1848 – 1856).^{Footnote 27} It was during this period that major infrastructure development occurred within the transit zone, including the construction of the Panama Railway.^{Footnote 28} Ironically, despite the mass transit of “want-to-be” gold miners and mining financiers through the isthmus, there was no apparent interest in looking for gold mining opportunities in Panama; not in the east, i.e. in the eastern province of Panama nor in the western province of Veraguas, both of which were known to contain mineable deposits of gold.

Rehabilitation of old mines for commercial scale development took place in the early 1900s. Both foreign and domestic ventures were involved, but efforts were erratic. For example the Remance underground gold mine in Veraguas was re-opened in the 1920s by a British owned company; then closed during the Depression; and re-activated by a Peruvian owned company in the 1930s. Copper occurrences were known to exist in certain areas; for example the area around Cerro Colorado in Chiriqui province. Foreign geologists visited Cerro Colorado in 1932 and the mid-1950s, and found evidence of copper mineralization. However, commercial interest in this and other mineral bearing areas only commenced in earnest in the late 1960s after the Government of Panama:

1. Established a modern legal and fiscal regime for mineral resource development^{Footnote 29}
2. Initiated serious metallic mineral exploration programmes and surveys in tandem with the United Nations Special Fund^{Footnote 30}
3. Established the Mineral Resources Department within the Ministry of Commerce and Industry to oversee and promote mineral exploration and development^{Footnote 31}
4. Began marketing its most important mineral discoveries internationally in an effort to attract foreign private investors to participate in their exploration and potential development.

The Emergence of Serious Foreign Exploration and Development Interest (late 1960s to early 1980s)

The UN program referred to above, included stream sediment sampling, geological mapping and follow-up studies of targeted areas, and was carried out from 1967-1969. It succeeded in identifying or verifying the presence of important copper-molybdenum occurrences in Colon province.^{Footnote 32} It also identified copper anomalies in the southern part of the Azuero Peninsula at Cerro Quema. In a second phase of studies from 1970-1972, the UN program targeted areas in Bocas del Toro, San Blas and Darien. Additional anomalies were identified, of both gold and copper, with a major copper porphyry find along the Rio Pito in San Blas. Most of the deposits investigated were found in remote areas of the Comarca San Blas of the Kuna indigenous people. The San Blas comarca was legally established in 1953.^{Footnote 33} Kuna traditional and formal authorities were unwilling to consent to additional exploration activity or mine development within the comarca.^{Footnote 34}

During this period, the Government took two approaches to allocating exploration licenses. One was bi-lateral in nature, granting exploration licenses for concessions to smaller domestic enterprises or foreign based companies in accord with the application process outlined in the 1963 Code of Mineral Resources. Domestic entrepreneurs typically partnered with foreign companies to help finance and coordinate exploration activities. This is what happened with the Cerro Colorado property.^{Footnote 35}

The alternate approach was to invite offers or bids for selected properties, typically through an auction process. This approach was taken for Cerro Petaquilla in 1969, but the terms offered were considered to be fiscally “harsh” by most foreign companies.^{Footnote 36} Nonetheless, agreement was finally reached with a consortium of Japanese companies in the early 1970s.^{Footnote 37} This allowed exploration and evaluation of the Petaquilla property to begin in 1973.^{Footnote 38}

While companies expressed interest in other properties, the two key projects initiated during this period were:

• Cerro Colorado in Chiriqui province within the traditional territories of the Ngäbe and Buglé indigenous peoples, and
• Cerro Petaquilla in Colon province, located outside the zones recognized as areas of traditional indigenous occupation, but within or on the edge of the Mesoamerican Biological Corridor.

Canadian companies with direct or indirect interests were involved in the exploration and evaluation of the Cerro Colorado property,^{Footnote 39} as well as in the initial exploration of the nearby Cerro Chorcha property.^{Footnote 40} Canadian interests were not initially involved in the exploration of Cerro Petaquilla.^{Footnote 41}

During the 1970s, the Government attempted to get both Cerro Colorado and Cerro Petaquilla exploration projects onto a development pathway. Neither the Government nor the companies involved were able to move forward on either project. A number of complicating factors were likely involved, including Government inexperience, geopolitical and legal ambiguities and confusion, unresolved issues surrounding the status of indigenous communities and lands, and the companies’ difficulties in navigating and understanding the local environment, its issues and challenges, as well as the emergence of a resistance and opposition movement around Cerro Colorado.

Throughout this period, “Panama had no importance internationally in the primary minerals industry”^{Footnote 42}. In the past, the country had been a small-scale producer of gold and manganese, but in the 1960s and 1970s, activity was limited to the production of salt, construction materials (limestone, siltstone, clay, stone aggregate) and the fabrication of intermediate aluminum and steel products using imported scrap and other mineral inputs.^{Footnote 43} The mineral sector’s contribution to the Gross National Product (GNP) was negligible. This remained the case throughout the 1980s and 1990s, even though private exploration activity resumed at the invitation of and with the support of the Government.^{Footnote 44}

Mid-1980s to mid-2000s

Exploration activity slowed down in the latter half of the 1980s, although a few domestic private companies were evaluating possibilities for re-opening historic gold mines in Darien and Veraguas provinces.^{Footnote 45} Between 1990 and 1994 there were 45 active exploration concessions. However the majority of exploration interests and development activities continued to focus on the search for viable industrial (construction) mineral deposits.

The evaluation of two gold properties in Veraguas and the Azuero peninsula yielded positive results – one (Santa Rosa^{Footnote 46}) became a producing mine; the other (Cerro Quema^{Footnote 47}), an active exploration project. Canadian companies were involved in the exploration and evaluation of both properties, and in mine construction and operation in the case of Santa Rosa (see footnotes 36 and 37 above). Declining gold prices negatively affected the economic viability of the Santa Rosa mine, contributing to its closure. Cerro Quema remained an exploration project. Its ownership changed in 2000 and a Canadian company, RNC Gold,^{Footnote 48} took over management of Cerro Quema’s exploration and evaluation from 2001-2005.

This period also saw a series of major changes in the management control of the major copper projects, i.e. Cerro Colorado and Cerro Petaquilla. Canadian companies became involved in the Cerro Petaquilla project^{Footnote 49} and continued to be involved in Cerro Colorado.^{Footnote 50} However, both properties remained stuck in an exploration mode.

More needs to be said about the Petaquilla project. In 1997, the National Assembly approved a first of its kind concession agreement, Contract Law #9, on February 28, 1997. Ley #9 came to be referred to as Ley Petaquilla.^{Footnote 51} This contract defined the roles and responsibilities of the various parties, development timelines and any special provisions or exemptions. Ley Petaquilla remains the legal framework for the property’s development to this day.

In the case of Cerro Colorado, the property reverted to CODEMIN, the state owned holding company, in 2004.^{Footnote 52}

The collapse of the gold price (1997-2002) and the cyclical declines in copper prices and markets in the early 1980s and late 1990s to early 2000s were major factors in the suspension of exploration and evaluation efforts. Depressed market conditions directly contributed to the deferral of development decisions for both Cerro Petaquilla and Cerro Quema.

Developments from 2006 to the present

This period saw the further consolidation of ownership^{Footnote 53} of the Petaquilla copper project by the Canadian company, Inmet Metal, which was acquired by First Quantum Minerals in 2013. Cerro Quema also went through a number of additional management changes with a final consolidation of ownership interests by the Canadian junior, Pershimco Resources in 2010. Pershimco was acquired by another Canadian company, Orla Mining in 2016. Advanced exploration and evaluation continued at both properties, but construction of the Petaquilla copper mine (renamed Cobre Panama) actually began in 2012 under Inmet management. Construction was temporarily halted during the ownership transition to First Quantum, and then resumed in 2014. Cerro Quema remained in advanced exploration.

The hiving off of the Petaquilla property’s gold deposits and their assignment to another Canadian enterprise, Petaquilla Minerals Ltd, occurred in 2004/2005 following the drafting and government approval of a revised project development plan. The plan laid out a two phase development scenario, starting with the Molejon gold deposit, and later the Petaquilla copper deposits. This also resulted in the reallocation of ownership and development responsibilities for the gold and copper deposits within the Petaquilla concession area.^{Footnote 54} A new company, Petaquilla Gold SA, owned by Petaquilla Minerals Ltd, focused solely on the evaluation and development of the Molejon gold deposit, and exploration of other gold occurrences within the concession area.

The Molejon mine was constructed and brought into production in 2010.^{Footnote 55} The mine was abruptly closed by its owner in 2014^{Footnote 56}. During these 4 years, El Molejon was the only operating metal mine in Panama. It changed the nature and scope of the extractive sector, from its historic focus on industrial minerals. Gold became the country’s primary export commodity in 2010, but fell to third place by 2012.

In parallel, the Government, during the Presidency of Ricardo Martinelli (2009-2014), put in place a variety of measures to promote new exploration and development activity. Some of the measures were highly controversial,^{Footnote 57} and resulted in public protest and legal contestation. Efforts to develop Cerro Chorcha and Cerro Colorado^{Footnote 58}, both located wholly or partly within the Ngäbe Buglé comarca, which was formalized as a comarca in 1997, came to an end when mining within the comarca was officially banned by the Government in 2011 with the passage of Ley No. 11.^{Footnote 59} Despite these developments, the external view of a mining future for Panama was still positive.^{Footnote 60}

Nevertheless, as of July 2017, there were only three properties with active exploitation contracts or concession agreements, two of which are held by Canadian companies (Cerro Quema and Cobre Panama)^{Footnote 61}.

Properties Explored or Developed by Companies with a Canada Connection

Canadian companies have had an on and off involvement with the development of Panama’s mining sector during the past 50 years. Most of the Canada based or connected companies have been junior exploration and mining companies. Some of the projects in which they have participated have been highly controversial, impacting indigenous lands and having major implications for indigenous peoples’ rights. These included Cerro Colorado and Cerro Chorcha, located with the Ngäbe Buglé traditional lands (later their formally recognized comarca), as well as exploration concessions approved within the San Blas (Kuna Yala) comarca of the Kuna people. Other projects outside of the comarcas have raised environmental concerns given their proximity to the Mesoamerican Biological Corridor^{Footnote 62}, national parks^{Footnote 63}, forest reserves,^{Footnote 64} or watersheds already under environmental stress. Furthermore, some exploration and extraction concessions have been acquired, transferred and explored at various times under questionable circumstances or conditions that have involved or affected Canadian interests.^{Footnote 65}

An extended history of investments involving Canadian companies financed the collection and evaluation of geological and technical data in various parts of the country, building up the country’s knowledge of its mineral resource endowment. However, these exploration activities also resulted in the disruption of people’s lives living within or adjacent to these project areas. For all of the investment of time and resources, and the disruptions that have occurred to people’s lives, there has been little to show in terms of concrete development of viable producing mines. There were two short- lived gold mines, Santa Rosa (1994-1998) and El Molejon (2010-2014). There is the ongoing exploration project at Cerro Quema and the almost completed construction of a large-scale open pit copper mine (Cobre Panama).

Below is a list of the projects and the companies that have had a Canadian connection in one form or another.

Cerro Colorado	Canadian Javelin (1971-1975) Canadian Development Corporation (1975-1980) Tiomin Resources (1996-2001) Aur Resources (1998-2004)
Cerro Chorcha	Arlo Resources Ltd (1997-1999) Bellhaven Ventures/Bellhaven Copper and Gold (2005-2009)
Santa Rosa	Greenstone Resources (1990-2000) Seabridge Resources (1999-2000) Erin Ventures Inc (2009-2011) Golden Phoenix (2011-2012)
Cerro Quema	Campbell Resources Inc (1996-2001) RNC Gold/Yamana Gold (2002-2006) Glencairn Gold/Central Sun Mining/(B2 Gold (2006-2009) Bellhaven Copper and Gold (2007-2010) Pershimco Resources (2010-2016) Orla Mining (2016-present)
Cerro Petaquilla – Cobre Panama	Adrian Resources Ltd/Petaquilla Minerals Ltd (1991-2006) Petaquilla Copper Ltd (2006-2008) Metal Mining Inc/(Inmet Mining (1991-2013) Teck Resources/Teck Cominco (1991-2008) First Quantum Minerals (2013-present)
Cerro Petaquilla – El Molejon	Petaquilla Minerals Ltd (2005-2015) Diamante Minerals Inc (2016-)
Rio Pito (Comarca de San Blas)	Western Keltic Mines Inc. (1994-?
Other – Viento Frio	Rayrock Resources (1999-2001) Bellhaven Copper and Gold (2006-2014) Western Troy Capital Resources (2006-2007) Oakmont Capital Corp/Oakmont Minerals Corp (2013-2014)

The State of the Country’s Mining Code and its Regulatory Institutions

Panama is a democratic republic with an elected executive and legislature. The country is divided into ten administrative provinces, each with a governor appointed by the President, and five indigenous autonomous regions (legally recognized comarcas).

Mineral resources are the property of the state, no matter where they are located.^{Footnote 66} Their disposition is governed by the mineral code and supporting regulations of the government of Panama. Panama’s Code of Mineral Resources (CMR)^{Footnote 67}, was approved and launched in 1963. It is the foundation of the country’s legal and regulatory framework for mineral resource development to this day, although it has been periodically amended to clarify, improve procedures and processes or to revise or replace certain provisions, as priorities have changed or experience has required.

In 1970, the Code allowed for the establishment of the Directorate General of Mineral Resources (DGMR) housed within the Ministry of Commerce and Industries (MICI). This was implemented by one of a series of laws and executive branch decrees, which introduced modest amendments to the Code in 1964^{Footnote 68}, 1969, 1970, 1973^{Footnote 69}, 1984 and 1985. A more significant revision of the law’s fiscal regime was enacted in 1988 (Law #3 of 28 January 1988).^{Footnote 70}

In 1996, the government introduced environmental safeguard measures (Law no 32, 9 February 1996) relating to natural resource extraction.^{Footnote 71} In 1998, the legal foundation for the creation of the National Environment Agency (ANAM) was laid out. ANAM became responsible for oversight and management of environmental issues associated with resource development, and environmental permitting of industrial projects.

More recent efforts at mining law reform became a major issue during the presidency of Ricardo Martinelli. In February 2011, the National Assembly approved amendments to the mining law (Law #8) that would open the door to foreign state investment and ownership of mineral exploration and extractive projects in the country. This was meant to enable financing and equity interests in the country’s extractive sector by foreign government entities. This effort seems to have been a response to South Korea’s interest in investing in the Cobre Panama project in Colon, but was also interpreted by indigenous and environmental groups as an attempt on the part of the Government to enable new investments in Cerro Colorado. In the face of serious popular opposition, the Government repealed Law 8 a month later.

In 2012, two additional laws were passed.

1. Law 11 prohibited new exploration concessions on the Ngäbe-Buglé, comarca and cancelled existing concessions/contracts.^{Footnote 72}
2. Law 13^{Footnote 73} established new rates for royalties on mining production, concession payments and other mining-specific taxes, as well as how the public income would be allocated amongst government departments.^{Footnote 74} The new tax regime included surface use and construction phase taxes payable to the municipal government in which a project is located.

The provisions relating to municipal benefits has had unintended consequences. For the past decade, the Government of Panama has been investing in building municipal governance capacity and is now involved in an active decentralization process. Nonetheless, many municipal authorities still have limited capacity to plan and implement public service projects or manage their financing; neither are financial accountability mechanisms yet in place. This was recognized as an inherent weakness of the disbursement concept, i.e. the sharing of mining related taxes with municipal governments hosting such projects; and a potential major governance risk.^{Footnote 75}

At the beginning of the Varella presidency (2014), there was some discussion of a potential moratorium on metallic mineral exploration in the country. This became a “de-facto” moratorium on new projects, which has not been turned into law.^{Footnote 76} In March 2015, the National Assembly created the Ministry of the Environment (MiAmbiente) via Ley 8.^{Footnote 77} This legislation modified the earlier Ley 41 of 1998 which had created The National Environmental Agency (ANAM), integrating Agency staff and its functions into the new Ministry of the Environment.

Indigenous Peoples and Mining in Panama^{Footnote 78}

Most of the Indigenous traditional territories of Panama contain significant concentrations of natural resources including timber, riverine water systems (valued for their hydropower generating potential), and metals (mainly copper and gold). The country’s past and potential for future extractive sector development cannot be fully understood without reference to indigenous peoples’ status, land holdings, community interests and concerns.

Panama’s latest census (2010) identified 12.3% of the country’s population as indigenous, around 460,000 people. Panama’s indigenous population is comprised of the following goups: Kuna, Embera, Wounaan, Ngäbe, Buglé, Bokota, Naso and Bribri. The largest of the groups is the Ngäbe (260,000) followed by the Kuna (80,500). Less than half of the country’s indigenous population live on officially recognized reserve lands, the comarcas. As of today, there are five official comarcas. Three of the comarcas established in 1938, 1996 and 2000^{Footnote 79} belong to Kuna people and are located within the San Blas. The Embera and Wounaan peoples’ comarca is located in the Darien (1983), The Ngäbe and Buglé comarca was established in 1997 in parts of Bocas del Toro, Chiriqui and Veraguas provinces. Together the five comarcas account for 22% of the country’s land area (i.e. 1.7 million hectares), although additional land areas, claimed under the 2008 collective land titling act^{Footnote 80}, have yet to be resolved. If resolved in favour of the indigenous peoples, these areas would potentially increase indigenous land holdings by another 800,00 hectares.^{Footnote 81}

The creation of the comarcas came with distinct semi-autonomous decision-making authority and new political structures. This included some authority over the use and management of natural resources, but the extent of indigenous peoples’ control over non-renewable resources located within their comarcas was limited by the Government retention of ownership rights to the sub-soil resources within the comarcas.

Ironically, it was Omar Torrijos (1968-1981) who made a national commitment to the county’s indigenous peoples to complete the task of creating “comarcas” to protect and preserve indigenous lands and culture. Until then only the San Blas (Kuna Yala) comarca of 1938 had been established. Despite this commitment, no new camarcas were actually created during his tenure.

Colonel Torrijos was intent on promoting an economic development paradigm for Panama based on the commercial development of the country’s natural resources, the most attractive of which were located within traditional indigenous areas.^{Footnote 82} During Torrijos’ tenure, the Government opened the door to mineral exploration and development in Chiriqui province. Foreign investment in the exploration of the copper deposits at Cerro Colorado and Cerro Chorcha began in earnest, but it was Cerro Colorado with its large proven reserves that garnered the government’s attention. This project was seen as a potential major vehicle for reducing the country’s almost total economic reliance on canal related activities and a project in which the State would eventually hold a majority ownership interest.^{Footnote 83}

Both Cerro Colorado and Cerro Chorcha are located within the land areas occupied by the Ngäbe^{Footnote 84} and Buglé peoples. The resource development vision promulgated by the Government did not reflect the concerns and world views of the affected Ngäbe or Buglé communities nor take into account their own use of natural resources and what they needed to sustain their ways of life. The initial reaction of Ngäbe people to early exploration activities was mixed, and in a certain way the actual impacts of Cerro Colorado and its associated hydro-electric project, were “small in comparison with what could have been expected had the projects gone forward.”^{Footnote 85} As of 1980, no communities had lost “more than a small percentage of their lands;” no relocation of communities or households had occurred; noise from the few penetration roads “was not excessive”; and the exploration workforce kept to itself. Whatever effects were experienced, were “localized”, except for the drilling work on the mountain itself, which resulted in runoff of sediments into the San Felix River below.

The issue was not that the mining project destroyed the land base or otherwise directly threatened the physical existence of the Guaymi people. Rather, the overall impact lay in the fact that the mining project simply did not fit [into the Guaymi world]. It was completely foreign, it operated on completely foreign mindsets, it served completely foreign goals. It was an intrusion whose impact made day-to-day life more complicated and, generally, rendered the Guaymies powerless and incompetent in their own territory. …The mining project introduced into the Guaymi area a foreign world, a “latino” world. (Gjording, 1991, pp. 154-155)

Guaymi community sustainability was already complicated and threatened by pre-existing land shortages, declining agricultural productivity^{Footnote 86} and out-migration of local people to find work or establish an agricultural livelihood and lifestyle elsewhere outside of the “comarca”. The intrusion of “uninvited” outsiders undertaking activities without obtaining community consent, the use of technologies that were alien to the Guaymi along with the government’s unwillingness or inability to involve the Guaymi in decisions that would affect their lives or deliver on the formalization of their land and cultural rights; all of these conditions, “not of their choosing” served to heighten Guaymi “unease” and uncertainty regarding their own future. Unaddressed or ignored, these worries and frustrations^{Footnote 87} became the basis for discontent. In February 1980, at a meeting of communities concerned with road construction through the small community of Cerro Puerco, a group of 250 indigenous people issued a consensual statement of concern and resolve. The Cerro Puerco Resolution, while it denounced the road construction project went much deeper. It pushed back against the implementation of Cerro Colorado and of all other projects proposed within the comarca, “without prior consultation with the Guaymi people”, and rejected the mining project indefinitely given what appeared to be its lack of benefits for the Guaymi.^{Footnote 88}

What happened ostensibly around the Cerro Colorado exploration project and the Teribe-Changinola hydroelectric dam project in the late 1970s and early 1980s, established the basis for future resistance and opposition to political actions and economic development initiatives, which were seen to be against the political or cultural interests of the communities that would be affected by them. It allowed for the development of cross-indigenous community decision-making institutions (the Congresos) and leadership arrangements and for the acceptance of assistance and support from select groups of “outsiders”, including the Catholic Church in Panama, as well as research and support organizations based within and outside of the country. Of particular importance were the Centro de Estudios y Accion Social (CEASPA) in Panama, and Latin American Working Group (LAWG) in Toronto, Canada. In a certain way, what happened here also demonstrated the value of the “solidarity” work of out of country groups in providing important intelligence for local resistance efforts, as well as international exposure and voice for isolated communities’ concerns.^{Footnote 89}

Finally, the Government of Ernesto Pérez Balladares approved the formal establishment of the Ngabe-Bugle comarca in 1997 (Ley 10). While the Government continued to encourage efforts to develop Cerro Colorado (see above and Appendix 2), Cerro Colorado never became a mine for reasons relating to poor project economics but as importantly, to the political opposition of the Ngäbe and Buglé peoples and other groups. However, during the Presidency of Ricardo Martinelli (2009-2014), government efforts to support resource development with new amendments to the mining code, especially the passage of Ley 8 in February 2011, raised new concerns for indigenous people, especially the Ngäbe and Buglé. Major protests ensued, leading to the government’s retraction and cancellation of the legislation (2011 Ley 12). As part of the understanding reached with the Ngäbe and Buglé in February, the National Assembly was to produce a bill to protect natural resources within the Ngäbe-Buglé comarca and within off comarca communities (Bill 415). However, when the bill was finalized in January 2012 for presentation to the National Assembly, the article relating to resource protection had been removed.^{Footnote 90} The Ngäbe-Buglé responded with protests and blockades along the Pan-American Highway. In a police action, two protesters died and around 40 people were wounded. This led to a Church facilitated agreement (the San Lorenzo Agreement) which brought government and indigenous leaders back to the negotiating table. Agreement was finally reached, including the abolition of Ley 41 of 1975, which had created the state mining corporation, Corporacion de Desarrollo Minero Cerro Colorado or CODEMIN, charged with the rights and authorities needed for the development of Cerro Colorado. Bill 415 was revised and finalized in March 2012 as Ley 11.

Two proposed hydroelectric projects within the comarca were cancelled as part of Ley 11. The Barro Blanco project already in construction and outside of the comarca but impacting Ngäbe-Buglé communities was not cancelled by Ley 11. Another concern that Ngäbe-Buglé had, was that the dam construction was part of an integrated development plan which would involve the renewal of efforts to construct a mine at Cerro Colorado irrespective of the prohibitions embedded in Ley 11.^{Footnote 91} This was not the intent of the Barro Blanco project, but in such historically contested environments, mistrust persists and misconceptions can easily arise or be perpetuated. The Ngäbe-Buglé and others took to the streets again. The new government of Juan Carlos Varela temporarily halted work on the project in 2015, and entered into negotiations with the affected communities. Agreement was finally reached in 2016. This would allow for the completion of the project and its operation.

The Varela government also passed Law 37 in August 2016,^{Footnote 92} which established a framework for indigenous peoples’ free, prior and informed consent, although the drafting of the bill itself did not involve the full participation of indigenous peoples. Although previous Panamanian governments verbally committed to signing off on the ILO Convention 169, Panama has yet to do so.^{Footnote 93}

The Mine Site Visits

The two mining properties in Panama most likely to enter into production in the near future are Cerro Quema (primarily a gold deposit) in Los Santos province and Cobre Panama (primarily a copper deposit) in Colon province. At the time of the trip, the Cobre Panama project was owned by First Quantum Minerals (FQM)^{Footnote 94}, and has continued to be owned and operated by FQM. The Cerro Quema property was owned by Pershimco Resources^{Footnote 95}, but the company has since merged with Orla Mining, which is now the owner-operator of the project. The Cobre Panama project will be a large open pit copper mine. Cerro Quema should it move into development and production will also be an open pit mine, but will be smaller, at least in its first years of production. A complete list of approved mining concessions associated with these projects can be found on the government of Panama’s mineral resource website.^{Footnote 96}

The Counsellor was able to visit both project sites with the objectives of:

• getting a firsthand view of the project areas
• providing opportunities for the Counsellor and accompanying Embassy staff to talk directly with the projects’ management teams, and engage if possible with other individuals or groups with direct interests in the projects

Project Name	Project Status	Owner at the Time of Visit
Cobre Panama	Under construction	First Quantum Minerals
Cerro Quema	Advanced exploration	Pershimco Resources

Cerro Quema Site Visit – Pershimco Resources (currently Orla Mining)

The project is located in southwestern Panama on the Azuero Peninsula in Los Santos province. Roughly 95% of the Cerro Quema concession is located in the municipality of Tonosi. About 5% of the Cerro Quema concession is located in Macaracas.^{Footnote 97} The closest town site to the project site is the provincial administrative centre, Chitré, approximately 45 km to the northeast (75 km by paved road).

Based on the technical studies completed thus far, the proposed mine would include two open pit operations (at the La Pava and Quema/Quemita/Mesita deposits). These sites are about 2-3 kms from each other. The mineralized material removed from the pits would be transported to a specially prepared pad and subjected to a conventional heap leaching process.^{Footnote 98} A follow-up Carbon-in-Leach / Adsorption-Desorption-Recovery (CIL/ADR) plant would recover the gold from solution and produce doré bars. The leach pad, plant, waste disposal areas and sediment containment ponds are likely to be located between the two pits.

However, the local terrain is rugged and irregular, with elevations ranging from 200-850 m.a.s.l., and sharp relief. Apart from the main access road and exploration drill roads, the area surrounding the project site can only be accessed by footpaths. Much of the area has been deforested^{Footnote 99} and converted into grassy areas and pastureland. Some areas within the concession have been reforested through periodic efforts from 1997 on. There is no evidence of previous permanent settlement within the concession area.

The project’s previous management (Pershimco) defined an area of immediate influence with includes five rural settlements^{Footnote 100} (4 in Tonosi district, and 1 in Macaracas district), but two are not currently used or occupied.^{Footnote 101} Together (as of the 2013 census), the combined population was just over 500 people; many of whose families migrated into the area in the 1940s and 1950s. The broader zone of influence includes the districts of Macaracas, Tonosi, Los Santos and Las Tablas (around 70,000 people as of the 2010 census). The project draws most of its workforce from the surrounding communities, the majority of whom are close enough to be able to commute to work on a daily basis. Most use transportation provided by the company.

Organized exploration of the deposit started in the late 1980s and continued in an off-and-on manner over the following 20 years until 2010 when the property was acquired by Pershimco. Of all of the exploration projects in Panama during the past 50 years Cerro Quema has experienced the most frequent ownership/management changes.

The Cerro Quema mine site was the object of significant protests in the early 2000s when the company of the day began building roads into the area to enable exploration. The exploration roads were not built to proper environmental standards which resulted in sediment erosion and contamination of a river downhill from the exploration areas. The muddying of waters angered some groups of local farmers who staged protests in opposition to the mine’s development. These farmers organized under the name FRESACOMI^{Footnote 102}. Legal contestation of the company’s concession and environmental permits has recently been raised by legal counsel for FRESCOMI with the Government of Panama and the Canadian Embassy.

Environment - Since Pershimco had acquired the property the roads were resurfaced and redesigned to prevent soil erosion and sedimentation of water sources. In 2015 the company spent $1.2 million on environmental initiatives at the early-stage development property which includes: a local fire brigade^{Footnote 103}, a local environmental committee to monitor and upkeep mine developments, a reforestation project in Macaracas, and three water testing units^{Footnote 104}. Importantly, as employees work on environmental projects, such as building sediment dams, the company explains why these constructions are important for maintaining local ecosystems in order to improve understandings of mine operations. At the time of the visit, Pershimco was awaiting the approval of its ESIA.

Social - Upon acquiring the mine, Pershimco’s CSR manager met with FRESACOMI and other local actors in order to listen to and understand their legitimate concerns with the property’s prior management. Some of these individuals now work at the mine, such as on the environmental committee. As the company moved forward, it also held a public forum in Tonosí to inform the public on: the mine’s technical aspects, the prospective ESIA, and the company’s commitment to social development and environmental upkeep in areas such as water and air contamination, smell and noise contamination, soil protection, residue control and cultural historical commitments.

Some of the company’s social investment projects include: support for cattle farmers, an oyster farm initiative, collaboration with a nearby technical school to train welders, the donation of hospital beds to a local clinic, a daily hot meal program in 18 schools, the installation of 8 weather stations to allow local farmers to better predict weather in the area, and a $300 monthly donation to the juntas directivas of 22 nearby communities^{Footnote 105}.

Labour - At the time of the visit, about 150 people were employed by the company on site, nearly all of whom were from the region. The company expected this number to increase to about 500 employees during the development stage and level off around 225 employees during production. Since nearly all workers are from the local region, there are very few dormitories on site. Workers are picked up and dropped off daily by transportation provided by the company. At the time of the visit, the company had not signed any labour agreements with municipalities or communities. One local mayor the Counsellor met with believed that the company was not employing sufficient numbers of local people.

Since the merger, the Counsellor has been in conversations with Orla Mining and understands that the existing social and environmental commitments made by Pershimco will be continued and upheld. At the time of this report’s release, the majority of Cerro Quema’s site managers and CSR personnel remained the same as when the property was owned by Pershimco Resources.

More recently some concern has been raised regarding the legal status of the project licenses.^{Footnote 106} The three original contracts covering the company’s three mineral concessions expired in February and March of 2017. The company has applied for 10 year extensions to each of the contracts, which have yet to be formally renewed by the Ministry of Industry and Commerce. While the Ministry of Environment has completed its technical review of the company’s ESIA, submitted before the Counsellor’s visit in 2016, it has yet to approve it; although the Ministry had issued permits for water use and drilling of three areas during 2017. It seems that the status of the concessions has yet to be finally and formally renewed.

Cobre Panama Site Visit – First Quantum Minerals

The Cobre Panama project concession areas are located in the state of Colon and municipality of Donoso. Nevertheless, in terms of proximity to an urbanized area, residents of the La Pintada municipality are located much closer to the concession than residents of Donoso. Considering the municipal tax benefits resulting from the mine concession, this is a significant factor which was discussed above. The property’s copper deposit is located in a remote jungle area, near the Caribbean coast and is accessible by rural public and private roads, helicopter, or via the company’s seaport. Due to the remoteness of the property, First Quantum built a $54 million port for mine inputs and outputs, as well as a coal-generated power plant which will use imported coal from nearby Colombia.

The concession’s history is more completely described in Appendix 2. The property, now owned and managed by First Quantum, is considered one of the world’s largest untapped copper deposits. While under Inmet ownership Cobre Panama had the Protected Area status lifted from the concession by Panama’s Supreme Court and the property received its ESIA in 2012.^{Footnote 107} Since the merger First Quantum has changed some of the management team and found ways of reducing construction costs, yet the stipulations and agreements in the ESIA submitted by Inmet and approved by ANA (now MiAmbiente) are being respected and carried out by First Quantum.

Environment – Given the location of the mine and its support facilities, the project comes with an array of environmental challenges relating to floral and faunal biodiversity. The company has built a 15 kilometer road between the mine and the port. The road has trapezes installed overhead and tunnels built underneath for the safe crossing of pumas, deer, monkeys and other animals. Before development occurred First Quantum used live traps to relocate some animals and transplanted specified plants as defined by a biologist. The company has been working with Donoso to protect the surrounding 15,000 hectares from clearcutting and burning, some of which the Counsellor witnessed. First Quantum has also partnered with the Ministry of Environment in an attempt to increase the number of park rangers in the surrounding areas, as well as with the Smithsonian Institute on environmental projects and reporting. In regards to water quality, the company has taught various local communities how to test water through a third party.^{Footnote 108}

Social – The company has had to resettle a number of Ngabe settlements located within the planned operating area of the mine and its support facilities. These included two settlements which were relocated; Chicheme (now called Nuevo Chicheme or Nuevo Esparanza) and Petaquilla^{Footnote 109} (now called Nuevo Eden). The resettlement action plan was put together and implemented by a Canadian consulting firm specializing in resettlement in accord with the relevant International Finance Corporation performance standards. The new settlements were also designed by the consultant in collaboration with community members. However the final construction of the settlements and the relocation process was carried out by First Quantum with community members.^{Footnote 110}

While there have been some post construction issues relating to lighting and access to potable water, the communities seem to be viable and functional. Title to the land and the residents still resides with the company, although the company affirmed its intent to transfer ownership to the residents. Both communities also have primary schools and teacher lodging. The teacher housing has allowed both communities to accommodate full-time teachers paid for by the government – something the communities did not have previously. New sanitary facilities employing an organic sewage system were built for each structure, although many locals built their own traditional latrines which they seem to prefer to use. Each of the resettled communities meets with company representatives once per month to discuss issues and have a continuing dialogue.

The company claims to have witnessed heavy amounts of in-migration to the concession since it began developing the property, with some groups reportedly demanding a $1 million payment from the company in exchange for the land they had settled. The Congress of the Ngäbe-Bugle Comarca wrote a letter to the company stating that the migration was illegal and asked the company to help control the entry of the newcomers upriver from the mine and nearby the concession. Unauthorized river bed gold mining and illegal drug trafficking is known to occur. This appears to be controlled by people who are not native to the region. In response, the company has set up check posts with private security guards in an effort to control the entry and exit of people from one of the rivers which flows into the concession.^{Footnote 111} People native to the area have registered their details with security so they can pass without hindrance.

The company’s CSR projects reach 57 communities, including all 22 communities that are located along the access route. The projects are administered by Participatory Community Committees (CPCs) which consist of: a health committee, a committee of parents of students, a water committee and a junta communal. All of the committees are headed by a community leader which changes on a rotational basis. In education the company provides daily lunches to 96 schools (with garden and chicken raising aspects for sustainability), offers scholarships to high performers (78 students were awarded university scholarships in 2015), aids other students in technical areas such as construction and plumbing and has a literacy program which aims to achieve 100% literacy across all of its communities of interest. The water committee mainly oversees the independent water testing outlined in footnote 106. The health committee decides on which health programs will be implemented, which thus far have included vaccination campaigns and the provision of health products in coordination with the Ministry of Health. Other projects the company has moved forward with include: building a bridge for a community so its children could access school on the other side of a river, creating an association of producers so the company can begin to purchase its produce locally, a soccer program for children during summer vacation, the building a basketball court in coordination with a municipality and building a clinic for expectant and new mothers in a nearby town that is equipped with a garden and a ‘sew & repair’ facility so mothers can mend clothes and other goods for the company and earn an income while remaining close to medical care. Finally, the company hopes that the power plant and port it has constructed will allow the area to continue to develop after mine closure.

The nearest major commercial centre, La Pintada, on the main road to Panama City, was favoured by Petaquilla Minerals (Petaquilla Gold), operator of El Molejon gold mine, in terms of physical and social infrastructure improvement. While the town still benefits from First Quantum’s presence, most of the company’s social investment has focussed on communities closer to the project area.

Labour - During the mine development phase, which the company is currently advancing, First Quantum plans to reach a maximum of about 7,000 employees in Panama. Due to Panama’s limited mining history and the lack of technically trained and experienced Panamanians in mining, First Quantum has had to apply for special permission from the Ministry of Labour to hire a foreign workforce of up to 25%. At the time of the visit, 36% of workers were from the Coclé province where the mine is located (with 1,200 of these workers originating from communities in the mine’s zone of influence), at least 39% were from other Panamanian provinces, and a maximum of 25% of workers were foreigners.

The company has partnered with a nearby Chief of Police and with the Ministry of Public Security to participate in the barrios seguros program. The company has hired 20 ex-gang members through this program who are currently working on the mining property. Company representatives expressed great success with the program and are looking into the possibility of hiring more workers through barrios seguros.

When the mine enters production First Quantum expects to employ around 3,000 people. During the production phase, the company anticipates that the percentage of foreign workers will drop to 10%, with Panamanian workers making up 90% of the workforce. Due to the property’s geography, workers sleep at an on-site camp which is equipped with air conditioning, a gym and other amenities.

Final Thoughts

Panama’s experience with mineral exploration, and commercial mine development and operation has gone through a number of phases during the past 50 years. Progress in developing a “modern” and responsible mining industry has been erratic. Exploration and extractive activities have been clouded historically by a complex web of questionable practices and relationships, involving both private sector and government players, some of which continue to haunt the sector to this day. The development of the sector has been and continues to also be complicated by a set of sensitive social, political and environmental circumstances and conditions relating to the rights of indigenous peoples and the existence of fragile ecosystems, especially in areas of high potential or known mineral resource endowment. Today, there are only two seriously active projects in the country, both with Canadian connections – Cerro Quema and Cobre Panama.

The sector’s checkered past along with continuing social and environmental sensitivities pose serious challenges to the current government’s interest in promoting responsible mineral resource development as part of its national economic diversification vision and strategy. At the same time, the Government is aware of its own institutional capacity weaknesses, including the shortage of trained and experienced Panamanians to promote and oversee the expansion of the sector, and is actively seeking outside assistance and support for the expansion of the sector. Last year, for example the Government hosted “mining” missions from Australia and Sweden that focused on institutional capacity building and investment opportunities respectively.^{Footnote 113} It is not known whether any follow-up or new investment interests have ensued.

Another challenge for the government is that the country has reached a level of economic development, which precludes or makes it very difficult to qualify for direct assistance or support from traditional bilateral and multilateral development agencies that are still involved in mining sector capacity building or development activities.^{Footnote 114} This would include agencies such as the Inter-American Development Bank, the World Bank, and a number of OECD bilateral development and geo-science agencies.

As a potential cooperating donor country, Canada has a very limited development assistance program in Panama and does not provide any direct support for extractive sector development. Some might argue that the existing Canada-Panama free trade agreement with its investment protection clauses opens the door to high risk Canadian investment in extractive activities. Unlike in some of its Central American neighbor countries, no extractive companies have taken Panama to court for investment dispute arbitration under the terms of this agreement.^{Footnote 115} The Canadian Embassy has provided support for local area government capacity building workshops, focusing on municipal authorities from mining affected or potential areas.^{Footnote 116}

The possibilities for realizing any sort of in-country consensus for the “growing” of an extractive sector, especially with regard to metallic minerals, may be further complicated by the allegations of insider trading, fraud and corruption surrounding the activities of the former President Ricardo Martinelli relating to his involvement with Petaquilla Minerals, the company’s CEO Richard Fifer, and the former President’s own pro-mining agenda.^{Footnote 117}

There is also a legacy of questionable past policies and practices of both Government and private actors relating to exploration and extraction activities which have yet to be forgotten or forgiven. This will also hinder the government’s ability to progress an economic diversification strategy which includes the extractive sector.

Past controversies and experiences have implications for the business conduct that home countries should expect of their companies entering or already operating in Panama. The ways in which Canadian companies have been involved in Panama’s difficult mining narrative raise a number of important policy questions for Canada.

• The role of Canadian crown corporations in supporting the development of large-scale projects that are socially or environmentally controversial or may have potential negative impacts or implications especially for indigenous peoples. This became a question in the 1990s with the now defunct Canadian Development Corporation’s ownership interest in the US company, Texasgulf Inc (manager of the Cerro Colorado project).
• The use of Canadian venture capital stock exchanges (Vancouver and Toronto), by nominally “Canadian” companies, to raise exploration and development funds for a range of projects in Panama. In this case, there were a number of junior companies flying the Canadian flag^{Footnote 118} whose management was under the control of Panamanian, US, or Australian citizens, with limited Canadian participation.^{Footnote 119} These companies kept small recording offices in Vancouver or Toronto, raised money through the exchanges, and invested in a multitude of exploration projects, that never led to extraction; that managed to disrupt and upset local communities’ lives and economies, and that served to enrich a number of individual investors and senior managers. The construction of the two operating gold mines (Santa Rosa and El Molejon) was undertaken by junior “Canadian” companies and financed using capital raised in the Canadian market; both mines were shut down and abandoned after four years of production leaving behind environmental liabilities, unpaid debts to local workers and businesses, and bad memories of mines that principally benefited a select group of individuals and/or financial or political interests. None of these companies currently exist, but their activities have served to tarnish the Canadian brand.

Export Development Canada now has in place social and environmental safeguard policies and investment criteria that reduce the risk of investing in questionable projects.^{Footnote 120} The Toronto Stock Exchange does not impose Canadian ownership or management requirements for listing on the exchange, nor do companies have to be registered as Canadian companies to be listed on the exchange. How then does Canada hold companies accountable that are listed on the exchange, self-identify as Canadian companies, or are deemed by others to be Canadian for actions or activities outside of Canada that we deem to be irresponsible or fraudulent?^{Footnote 121} The challenge for Canada will be to put in place procedures and protocols that will ensure that Canadian companies entering Panama for the first time are fully informed and oriented as to Canadian government expectations and understanding of responsible business conduct, and the consequences that may be invoked should a company not work responsibly.

In the meantime, the Canadian Embassy given its limited resources can if possible continue to support capacity building initiatives, whether it is sponsoring or co-sponsoring workshops for local area government staff, or facilitating educational inter-changes between universities and technical colleges, or even government research and regulatory agencies in Canada and Panama, or providing local support for Canadian students and professors working with the Smithsonian Tropical Research Institute (STRI).^{Footnote 122}

It seems that the growth and development of an extractive sector in Panama will depend on the co-incidence of a number of factors and conditions, including

• The Government’s ability to strengthen its own internal capacity to oversee and regulate the sector,
• A willingness on the part of all actors to consult and work together in inclusive and participatory ways that will take into account and balance the needs and aspirations of the State, of its citizenry, of local communities that will potentially be impacted by new extractive activities, and of potential domestic and foreign investors and developers
• Positive social, environmental and economic performance of active and ongoing exploration and mining projects, among other things.

For the Canadian companies currently active in the country (First Quantum Minerals and Orla Mining), the onus of demonstrating responsible performance falls on the companies themselves, irrespective of their projects’ economics. First Quantum with Cobre Panama and now Orla with Cerro Quema will have to work constructively with whatever social and environmental investment and management commitments they have inherited from the previous project owners. As their projects move closer to production or development respectively, each of the companies will need to remain attentive and responsive to the evolving and changing expectations and aspirations of the surrounding communities, of local area and central governments, and of Panama civil society as a whole. This may mean recalibrating and changing the way they work with stakeholders as the projects progress, and require enough flexibility and resilience to be able to adjust their own operating practices and procedures, as needed, even if such changes are not necessarily “of their own choosing”.

The Counsellor would like to thank all of the companies, public offices and civil society organizations that he met with for their time and willingness to share their perspectives on the issues and challenges of ensuring a responsible and beneficial mining industry for Panama and its citizens.

Appendix 1

List of Relevant Events and Meetings

Organization Name/Event	Date
Participation at embassy-led Workshop on Municipal Financial Management of Mining Royalties	September 6, 2016
Municipality of Macaracas	September 6, 2016
Municipality of Tonosí	September 6, 2016
Cerro Quema Mine Site Visit	September 6, 2016
Municipality of La Pintada	September 7, 2016
Ministry of Government	September 8, 2016
Ministry of Commerce and Industries	September 8, 2016
Centro de Incidencia Ambiental de Panamá (CIAM)	September 8, 2016
Ministry of Labour and Workforce Development	September 9, 2016
Camara Minera de Panamá (CAMIPA)	September 9, 2016
Ministry of Environment	September 9, 2016
Defensor del Pueblo (National Ombudsman)	September 9, 2016
Cobre Panama Mine Site Visit	September 12, 2016

Appendix 2

Project Cases Studies^{Footnote 123}

Cerro Colorado

In 1971 Canadian Javelin, a junior exploration company, acquired full control of the Cerro Colorado concession.^{Footnote 124} By late 1973, Canadian Javelin had discovered that the deposit was “too big and too complicated” to manage alone, and formed a consortium including other Canadian, Japanese and British interests to be able to finance the evaluation and development of the project. In 1974, Canadian Javelin entered into negotiations with the Government to secure a “mining” concession.^{Footnote 125} The company was unable to negotiate terms acceptable to both itself and the Government; negotiations ended and the exploration agreement expired in early 1975.

The Government then decided to try to develop Cerro Colorado on its own, intent on securing sovereign control over the project.^{Footnote 126} It created the Panama Copper Commission to oversee the project’s development, which was shortly thereafter converted into a parastatal company called the Corporacion de Desarrollo Minero Cerro Colorado (CODEMIN). As with Canadian Javelin, the Government quickly came to realize that it did not have the technical and management skills or the financial resources to implement the project on its own.

In July 1975, the Government signed two contracts with Texasgulf Inc., a US based company^{Footnote 127}. The first was an Association Agreement which established the ownership structure of a new operating company, with 80% of the equity held by the Government and 20% by Texasgulf. The second was an Administration Agreement, basically a management contract which established the terms of reference and fees payable to the company for its management services.^{Footnote 128} The upfront funds initially paid by Texasgulf also allowed the Government to compensate Canadian Javelin for its investments in the early exploration of Cerro Colorado.^{Footnote 129} The project’s feasibility study was completed by May 1978. However, copper prices proved to be too low and development costs too high. A review of alternative development scenarios was unable to identify a viable development option. In early 1980, Texasgulf formally recommended to the Government that work on the project be suspended in view of the project’s unfavorable economics.^{Footnote 130}

The Government, not to be deterred, entered into discussions with another international mining company, UK based Rio Tinto Zinc (RTZ), hoping to push the development of Cerro Colorado forward. CODEMIN and RTZ were able to reach an agreement that was based on selective high-grading of the deposit, and a 51:49 equity split (still favoring the Government). However by the end of 1981, the project was mothballed.^{Footnote 131} A year later RTZ decided to shelve the project feasibility study process.

After a 10 year hiatus in activity, Rio Tinto Zinc turned back its 49% equity interest in Cerro Colorado to the Government of Panama in 1993. In early 1996 a Canadian mid-tier mining company, Tiomin Resources, through its wholly owned Panamanian subsidiary, PanaCobre S.A., entered into a mining concession agreement with CODEMIN to extract, process, transport and market copper from Cerro Colorado. PanaCobre completed a feasibility study as required in 1998 and then applied to delay the development of the project, pending improvement of copper prices and market demand. PanaCobre also lacked the funds to proceed with the development of the project. At the end of the year, Tiomin negotiated an arrangement with Aur Resources, another Canadian company, including an option for Aur to acquire full ownership of PanaCobre in exchange for advanced cash payments. This option was exercised by Aur Resources in February of 2001, ending Tiomin’s involvement with the project.

The project itself remained on care and maintenance during 1999 and 2000 until such time as it was taken over by Aur Resources in 2001. While additional studies were undertaken, PanaCobre’s concession was due for termination or extension in early 2003. Nothing was confirmed, and all rights reverted back to the Government in 2004.

Cerro Petaquilla

The 1973 agreement with the Japanese consortium was a four year exploration contract. Exploration drilling on the property commenced shortly thereafter, leading to the development of preliminary reserve estimates, metallurgical test work, and the completion of a first feasibility study. By the terms of the contract, Panama Mineral Resources Development Company was obliged to enter into negotiations for a mining contract with the Government no later than 1978. In 1980, the project was abandoned due to difficulties in reaching an acceptable development agreement.

Over 10 years later, in August of 1991, an exploration concession for the Petaqilla property was granted by the Government to a Panamanian private company, Georecursos S.A.^{Footnote 132} Earlier that year, Minnova Panama S.A. owned by Falconbridge Copper had reached an agreement with Georecursos that would allow Minnova to acquire an 80% interest in the Petaquilla property. Teck Resources had also entered into a financing arrangement for the Petaquilla project with Adrian Resources Ltd, a Canadian junior, that had a management interest in Georecoursos. This arrangement would allow Teck to pick up half of Adrian’s (or its subsidiaries) ownership interests^{Footnote 133}. In 1992- 1993, Minnova Panama was acquired by Metall Mining (Canada).^{Footnote 134} At the same time, a merger of management and ownership interests occurred involving Minamerica, Georecursos, and Adrian Resources (Canada) and its Panamanian subsidiary, Adrian S.A.^{Footnote 135}

From 1992-1996, active sampling, drilling and other test work were carried out on the property. Apart from the various copper bearing zones on the property, a distinct epithermal gold deposit was identified at Quebrada Molejonese which would later be separately developed as El Molejon gold mine. Moreover, preliminary and updated pre-feasibility studies were completed, as well as a production scoping study that laid out a probable mining and processing scenario.

In 1997, three important developments occurred:

1. The parties to the project^{Footnote 136} negotiated and entered into a “definitive shareholders agreement” (referred to as the “Petaquilla Shareholders Agreement”) on 21 February 1997,^{Footnote 137} which consolidated all ownership and option interests into a new company Minera Petaquilla S.A. This company became the jointly owned operating company for the project.
2. A project specific legal contract defining the roles and responsibilities of the parties with the respect to the exploration and exploitation of the Petaquilla property, referred to as the Ley Petaquilla was approved by the National Legislative Assembly on 27 February 1997.^{Footnote 138}
3. A bankable final feasibility study was also completed and submitted to the Government in early 1998. In May of 1998, Teck, as the principal responsible for organizing the project’s financing, decided to defer a development decision for a year given the current market over-supply and depressed copper prices.^{Footnote 139}

Further work on the property remained on hold from 2000 to 2005. In late 2004, the project partners reached an agreement-in-principle to draft a new multi-phase development plan that would meet Government requirements for a 2005 project start-up. The agreement and plan would allow Adrian Resources Ltd^{Footnote 140}, renamed as Petaquilla Minerals Ltd. , and its new subsidiary, Petaquilla Gold SA, to assume 100% ownership of Molejon and all other properties with significant gold mineralization.^{Footnote 141}

Minera Petaquilla SA would retain control and responsibility for developing the copper deposits^{Footnote 142}. The revised Development Mine Plan was approved by the government in September 2004. By mid-2005, all was finalized and Petaquilla Gold S.A. turned its attention to evaluating development options for Molejon.

El Molejon

Petaquilla Gold SA as indicated above assumed total ownership and management control of all distinct gold deposits within the Petaquilla concession in 2005. By 2010, the company had managed to complete all permitting and construction, and brought the mine into production. El Molejon, the country’s only significant operating mine, with its exports of gold selling quickly. The company heavily invested in local job creation, improvements and to local social and physical infrastructure in the communities neighboring the mine, especially La Pintada. However, the operation within the course of just 4 years turned into a major financial, environmental and social disaster. The mine was shut down under questionable circumstances in 2014.^{Footnote 143} When the company shut the gates, it left over 600 local people without work and pay. The mine site was abandoned; facilities were not properly de-commissioned or the disturbed areas reclaimed. In the end, Panama’s Ministry of Environment had to assume responsibility for coordinating and financing, remediation and rehabilitation of the site, which is still ongoing. The abandonment of both the workforce and the local environment by the operating company amplified the concerns of Panamanians regarding the future role of mining in Panama’s development future.

Cobre Panama

In 2008, Inmet acquired 100% ownership of the project and renamed the operating company, Minera Panama SA. A year later, Inmet concluded an option agreement with Korea Panama Mining Corporation, a wholly owned subsidiary of LS-Nikko Copper Inc (Korea), to acquire a 20% interest in the project.

Cerro Chorcha

Cerro Chorcha had been dormant since the departure of Asarco in 1972. In 1998, Cyprus Minera Panama SA acquired the rights to the property^{Footnote 144} and initiated a new exploration program. However, the exploration concession contract expired in 1999. It was not renewed and was cancelled officially in 2004. Cuprum Resources, a Panamanian company applied for a new exploration concession a month later, which came into effect in early 2006.^{Footnote 145} In the interim period Cuprum signed a community investment agreement with representatives of one of the neighboring indigenous (Ngobe Bugle) communities (Quebrada Tula). Cuprum also entered into an option agreement with a Panama based Canadian junior, Bellhaven Ventures Inc, (Oct 2005), which would allow Bellhaven to acquire all of its shares, subject to Cuprum’s delivery of a valid mineral exploration contract.^{Footnote 146}

Exploration activities resumed at Cerro Chorcha in 2006. At the same time, Cuprum Resources SA, the title holder, became a wholly owned subsidiary of Bellhaven^{Footnote 147}. Bellhaven partnered with Empire Minerals Corporation (US)^{Footnote 148} to secure financing for continuing evaluation of the property.^{Footnote 149} In April 2009, Empire Minerals under its new name, Dominion Minerals, acquired full ownership of Cuprum Resources. However Dominion Minerals was unable to undertake any further exploration work on the property. In December 2009, the Supreme Court of Panama suspended exploration or mining activity in all of the areas of Cuprum’s 2006 exploration contract that fell within the Ngobe Bugle comarca. The Court decision was based on the company and government’s lack of consultation with the indigenous people, the project’s potential for environmental damage, and the company’s lack of an approved Environmental Impact Assessment. The exploration concession which expired in April 2010 was not renewed by the Ministry of Industry and Commerce which instead, under Article 31 of the Mining Code, issued a Mineral Reserve Resolution declaring the Cerro Chorcha property to be part of a “mineral reserve area” in which mining would be prohibited. In 2016, Dominion Minerals registered a request for arbitration with the International Centre for Settlement of Investment Disputes (April 15, 2016), claiming damages against the Government of Panama in the amount of $268 million US. The tribunal to review the case was constituted in July 2017.

Santa Rosa

Santa Rosa became a property of renewed interest when Freeport of Panama SA^{Footnote 150} was granted an exploration concession in 1986. The company carried out an extensive drilling program between 1986 and 1989.^{Footnote 151} In 1990, the company sold off its Panama holdings, including Santa Rosa. Santa Rosa was purchased by Boliden International Mining AB (Sweden) and Greenstone Resources Ltd (Canada), as a joint venture partnership.^{Footnote 152} The partners expanded Freeport’s drilling program. In early 1993, Greenstone became the sole owner of the Santa Rosa project.^{Footnote 153} A feasibility study was completed later that year. Construction of an open pit mine and heap leaching operation began in February 1994 and production commenced in 1995. For a number of reasons, Santa Rosa turned out to be a relatively short-lived project with mine production ceasing in February 1999. Later that year the project went into care and maintenance and was permanently shut down when Greenstone Resources declared bankruptcy. The property was turned over to Seabridge Resources Inc.(Canada) in November 1999. In early 2000, Seabridge announced that it had decided not to take over the property or assume its liabilities.^{Footnote 154}

From the start, the mine experienced a number of critical technical, economic challenges – all of which conspired against the ability of the company to maintain the operation.^{Footnote 155} Gold and silver recoveries were lower than hoped for. Excessive rainfalls complicated management of leachate storage and diluted cyanide concentrations and leachate effectiveness. Finally the international gold price declined dramatically in 1997 to $268 US per troy ounce from an average of $369 US per troy ounce in 1996 and failed to recover until 2002.^{Footnote 156} Between reduced recoveries and lower than break-even gold prices, the mine was no longer economically viable. The departure of Greenstone under such circumstances meant that many of its liabilities and obligations were never addressed or resolved including the salaries owed to its former local employees.

After Greenstone effectively abandoned the project in 2000, Santa Rosa remained dormant for another decade. In 2007, the Government’s judicial administrator in charge of liquidating the mine’s assets awarded much of the concession to a company formed by former mine workers, Minera Canazas, in lieu of lost wages. In late 2009, a Canadian company, Erin Ventures Inc. entered into an agreement with Minera Canazas to acquire majority control of the Santa Rosa assets. Erin agreed to return the land back to the town of Canazas after mining and remediation were completed.^{Footnote 157} This arrangement fell apart when unbeknownst to Erin, titles to the land were found to have already been transferred to another company, which was also applying for the concessions allocated to Minera Canazas.

Instead of Mineral Canazas, a Panamanian company, Silver Global SA was granted the concession contracts in mid-2010.^{Footnote 158} Silver Global signed a letter of intent (July 2011) with another Canadian company, Golden Phoenix, to advance the project. Within a year, Golden Phoenix pulled out of the deal, due to what it regarded as major irregularities in the arrangement.

Silver Global became Veragold Corporation, and in November 2013 the Government approved a new contract (Ley no. 92) for an extraction concession on Santa Rosa. Although Veragold^{Footnote 159} apparently undertook additional test work and contracted for a new feasibility study in 2014, it appears that nothing has come of this, and the mine remains closed.^{Footnote 160}

Cerro Quema

Although the UN exploration program had identified copper occurrences of interest at Cerro Quema, the property only attracted attention in the late 1980s, when a Panamanian company^{Footnote 161} found evidence of significant gold mineralization in the area. The company was granted a mineral exploration concession in 1989^{Footnote 162}, and entered into a 20/80 joint venture agreement with Cyprus Exploration and Development Corporation (part of Cyprus Amax Mining Company (US))^{Footnote 163}. Cyprus carried out an extensive drilling program from 1990-1994 through a subsidiary, Minera Cerro Quema SA^{Footnote 164}, but gave up on the property in 1995.^{Footnote 165} In 1996, Campbell Resources Inc, a Canadian company, acquired all of the shares of Minera Cerro Quema SA. Minera Cerro Quema was granted extraction contracts for gold and silver in early 2007.^{Footnote 166} Campbell completed a feasibility study that year which affirmed that Cerro Quema would be an economically viable project at an assumed gold price of $400 per troy ounce. Campbell’s management team actually gave their approval for the mine’s development in early 1997, but later that year had to defer the investment decision in light of the decline of gold prices to under $300 US. The project was put into care and maintenance: it remained there until December 2001 when Campbell sold its interests in Cerro Quema to an offshore investment company, Carena Equities Corporation.

Shortly thereafter, RNC Gold, another Canadian junior, entered into an agreement with Carena to re-evaluate the property. RNC undertook additional field work, updated the feasibility study and reserve estimates and eventually (2005) acquired a 60% interest in the project. The project did not move to construction. In late 2005, RNC and Yamana merged, and everything was put on hold.

In mid-2006, Yamana sold its 60% interest^{Footnote 167} in Cerro Quema to another Canadian company, Glencairn Gold (later renamed Central Sun Mining). While Glencairn had an interest in evaluating development possibilities,^{Footnote 168} no further work was planned for 2007. By the end of 2007, another company, Bellhaven Copper and Gold^{Footnote 169} entered into option agreements with both Glencairn and Carena Equities Corporation that would ultimately allow Bellhaven to consolidate all ownership interests in Minera Cerro Quema SA. This happened by mid-2009.^{Footnote 170}. Towards the end of the year, Bellhaven initiated discussions with other parties to access the financial resources needed to build a mine and bring it into production. The led to an extended negotiation in 2010 with the Canadian junior, Pershimco Resources Inc.. In order to consummate the deal Pershimco had to acquire and consolidate all outstanding interests and obligations of Minera Cerro Quema.^{Footnote 171}

Pershimco went on to implement a fairly robust exploration program, confirming that Cerro Quema might be more than a gold mine, and that potentially mineable copper porphyry underlies the gold cap. The company also initiated various community donation and engagement projects (as was discussed in greater detail in the site visit section). After the Counsellor’s visit in September 2016, Orla Mining and Pershimco merged. Orla Mining is now the owner and operator of Minera Cerro Quema SA. In March 2017 Orla applied for a 10 year extension to the extraction contracts issued in 1997 to Minera Cerro Quema SA. The project remains, as noted above, in advanced exploration mode.