| 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.
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