Intellectual Property
Health Law
Labor Law
Maritime Law
Mining Law
Offshore Corporations
Panamanian Corporate Law
Privatization
Commercial Law
Taxation
Litigation
Banking Law
Insurance
Immigration Law
Merger Acquisitions & Joint Venture
Privatization & Government Contracts
Real Estate & Property Law
Securities Regulation

Trust & Foundations

Commercial Transactions and
Contract Law
Banking & Finance Law
Communications Law
Immigration
Litigation on Commercial & Civil Matters
 

MINING LAW

Exploration Concessions
Extraction Concessions
Employment
Royalties
Mortgage, Assignability and/or Transfer
Taxes


The governmental authority in charge of all mining activities is The Directorate General of Mineral Resources, a department of the Ministry of Trade and Commerce. As a matter of information, the grant of concessions must the approved by the Minister of Commerce and countersigned by the General Controller of the Republic of Panama.


EXPLORATION CONCESSIONS

The initial period of an exploration concession shall be four (4) years and the maximum surface in hectares which may be included in one concession shall be 25,000.00 hectares. Upon request, the Executive Organ may extend twice the term of the Exploration concession for a period of two (2) years each time, provided that the concessionaire, upon requesting the extension, has complied with the mineral explorations and other works and obligations with respect to the concession and also provided that upon the request thereof the concessionaire accepts the privileges, terms and conditions in force and effect at the time, or in lieu thereof he returns in that moment, at least 15% of each zone held under the concessions he intended to extend.

Our Mineral Resources Code provides that during the exploration period the pre-extractive operations must start. Meaning, the construction of roads, leach pads etc. with no obligation to request for an extraction concession, may start. Furthermore, during the exploration or the extraction concession the title-holder has the obligation to start extraction operations of the minerals covered by the concession, after obtaining the extraction concession, once these have been found in commercial quantities and to continue said extraction. The Mineral Resources Department does not permit any work that could compromise the environment before the environmental reports (reconnaissance and feasibility) are approved by the competent authorities ANAM” (National Environment Association)


EXTRACTION CONCESSIONS

For extraction concessions, the initial period and the maximum number of hectares which may be included therein will depend on a classification of minerals and surface provided in the Mining Code (20 to 25 years). The Executive Organ shall grant three (3) extensions of an extraction concession, the first for a period of ten (10) years, the second and third ones for a period of five (5) years each, provided that upon the request thereof the concessionaire accepts the privileges, terms and conditions in force and effect at the time, or in lieu thereof he returns in that moment, at least twenty (20%) of each zone held under the concessions he intended to extend. The applicant may request only a maximum of 5,000 HC. for exploitation concessions of gold and silver. The rest of the surface may stay as exploration concessions until they expire or until the applicant finds a new deposit in which case he could request another exploitation concession of a maximum of 5,000 HC.


EMPLOYMENT:
Panamanian citizens shall be given job preference during all stages of the mining operation, according to the dispositions of the Labor Code.

All holders of mining concessions and contractors conducting mining operations are under the obligation of hiring a qualified Panamanian professional who is responsible for the activities of the concession and who should be registered as such at the Mining Department.


ROYALTIES:
By means of Law No. 3 of 1989, the Royalties to be paid to the Government for the extraction of minerals were fixed in practically all minerals to 2% of the Gross Negotiable Production.


MORTGAGE, ASSIGNABILITY AND/OR TRANSFER:
Mining concessions may be partially or totally transferred or encumbered subject to prior approval, by written resolution, of the competent authorities. In order to obtain this approval, the assignee or the lender must prove his technical and financial capability.

Any mortgage, encumbrances or transference of a concession must be registered at the Mining Department. Also, every concessionaire, upon approval, may entrust a part or the total operations to a contractor, provided that he is a qualified person capable of acquiring or administering a concession in Panama, but such assignment shall not affect the responsibility of the concessionaires. The contractors may be able to import materials to be used exclusively in the mineral operations corresponding to the respective concessionaire in the same manner and subject to the same conditions as the concessionaire; this is exempted of all import taxes on the materials and on the diesel to be used in the activity.


TAXES:
The mining corporations must pay the following taxes:

1. Income taxes (the rate is 30% upon net income when it is less than US$ 500.000.00 and 34% of the net income from US$ 500,000.00) according to our tax law or fiscal code.

     

    (a) Losses sustained as a result of operations other than mineral operations may not be credited or deducted from income derived from mineral operations.

    (b) Every concessionaire shall have the right to include as operational expenses those that, pursuant to the income tax law in force are deductible. The following items may be deducted as operational expenses in addition to surface tax, royalties, direct taxes, import duties and the charge for depreciation:
    An annual deduction for amortization of minerals;
    The cost of shafts, adit levels and drifways, open pit excavations, well drilling and other similar unsuccessful operations where performed in search for minerals in commercial quantities;
    All expenses for services, supplies and other expenses incurred in connection with the preliminary geological reconnaissance, mineral explorations, pre-extractive operation, and in connection with the excavation of adit level and driftways, open pit excavations; well drilling and other similar operations performed with the purpose of extracting minerals;
    Losses incurred in the operations of a concessionaire according to income tax computations for the year in course or for preceding years which have not been deducted already may be deferred to subsequent periods. However, said losses may not deferred for than 3 years, counted as of the fiscal period during which the same were incurred. Losses, which are not deducted within the period referred to, may not be deducted in subsequent years and shall not be refundable on the part of the National Treasury.

    (c) In the exploitation of mines, quarries and other non-renewable natural resources deductions on account of mineral exhaustion may be made in proportion to units produced or extracted. For such purpose, the approximate content of such deposits shall be calculated on the first day of each fiscal year and shall be added to units produced that year. The relation of units produced during the year to the above amount shall provide the rate of repayment for said year and shall be applied as a percentile to the value of the asset in order to obtain the deduction allowed for mineral exhaustion. The same operation shall be carried out during subsequent years until full repayment of the mineral deposit. (Depletion)

    (d) Royalties shall be paid in cash, unless otherwise provided by the Government. The percentage of the gross negotiable production to be paid to the Government is 2%. The payments of royalties shall be made quarterly within 60 days from the date they are owed.

    (e) The surface tax per hectare applicable to an exploration concession shall be:
    1 to 2 years ------ .50 cents per hectare
    3 to 4 years ------ 1.00 dollar per hectare
    5 and up -------1.50 dollars per hectare
    The surface tax by hectare applicable to extraction concessions shall be as follows:

     

    FOR GOLD: first 5 years----------- 1.00 dollar per hectare
    from year 6 to 10----- 2..50 dollars per hectare
    from 11th year--------3.50 per hectare

    (f) All materials to be used exclusively in the mineral operations are exempted of all import taxes.

 

 

 
HOME | THE FIRM | LAWYERS | FIELDS OF PRACTICE | CLIENTS | CONTACT US | LINKS
.
Benedetti & Benedetti 2004 :: Web Site produced by EM Technologies Corp.