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 As at December 31, 2008.

Cobre Panamá is a large open-pit copper development project in Panama. The concession is located 120 kilometres west of Panama City and 20 kilometres from the Caribbean Sea coast, in the district of Donoso, Colon province, in the Republic of Panama. The concession consists of four zones totalling 13,600 hectares.

Access to the project area is via the Pan-American Highway system from Panama City to Penonome, surfaced all-weather roads to La Pintada, and gravel roads via the town of Coclecito. The topography in the concession area is low elevation (less than 300 metres) but rugged with considerable local relief covered by dense rainforest. Climatic conditions are tropical with high precipitation levels, high humidity and relatively high temperatures of 25ºC to 30ºC year-round.

Geology
In 1968, a United Nations Development Program team discovered copper, gold and molybdenum porphyry mineralization in the Petaquilla River region of north-central Panama during a regional survey.

Subsequent exploration outlined the Botija, Colina and Valle Grande porphyry deposits which developed around granodioritic stocks within and peripheral to the Oligocene Petaquilla batholith. Significant epithermal mineralization has also been identified in a more distal setting to the batholith, as well as several other prospects and deposits.

Business structure
We have a 100 percent equity interest in Minera Panamá, S.A. (MPSA), the Panamanian company that holds the Cobre Panamá concession. MPSA was incorporated in January 1997 under the laws of the Republic of Panama and has a mineral concession to explore and exploit the Cobre Panamá (formerly Petaquilla) property (Contract-Law No. 9 of February 26, 1997, promulgated by the Government of Panama). Contract-Law No. 9 has an initial twenty-year term from its date of enactment in February 1997 with provisions for two consecutive extensions of twenty years each.

In June 2005, Inmet, Petaquilla Minerals and Teck Cominco Limited (Teck) (the shareholders of MPSA at that time) entered into an agreement to develop the project in phases, subject to approval by the Government of Panama. In the first phase, Petaquilla Minerals would assume full risk to develop the Molejon gold deposit, which is situated in the concession, as a stand-alone gold mine.

In December 2005, the Panamanian Minister of Commerce and Industry (MICI) issued a resolution declaring that for the purposes of Contract-Law No. 9, the start of development of the Molejon gold deposit would constitute the start of the development of the copper project and related infrastructure, and would also constitute compliance with MPSA’s obligations under Contract-Law No. 9 to begin construction of the copper project.

The agreement concerning the Molejon gold deposit between Inmet, Petaquilla Minerals and Teck does not confirm a decision by the shareholders of MPSA to proceed with a larger scale development of the Cobre Panamá project.

At the start of 2008 we had a 48 percent interest in MPSA.

On March 26, 2008, we entered into an agreement with Teck to proceed with the development of the project. We agreed to work closely with Teck in project development, acting as operator of the project on their behalf. We also agreed to fund our and Teck’s share of project expenditures until we had contributed US $50 million in development costs, or until September 30, 2009, whichever was earlier.

On September 19, 2008, we acquired approximately 95 percent of Petaquilla Copper Ltd., which held a 26 percent ownership in the project, at a price of $2.20 per share. We acquired the remaining 5 percent at the same price in November. The common shares of Petaquilla Copper Ltd. were delisted from the Toronto Stock Exchange in December.

On November 20, 2008, Teck notified us of its intention to not continue to participate in the project. We acquired its 26 percent interest in the project pursuant to the March 26, 2008 agreement for the US $26 million we had already invested in the project on Teck’s behalf plus accrued interest and US $3 million. The transaction closed in December 2008. As a result, at December 31, 2008 we had a 100 percent interest in MPSA.

Option  Agreement
On October 28, 2009 Inmet and MPSA entered into an option agreement (Option Agreement) with LS-Nikko Copper Inc.  (LS-Nikko) through its wholly-owned subsidiary Korea Panama Mining Corp. (KPMC) under which KPMC has the right to acquire a 20 percent interest (Option Interest) in the Cobre Panama copper project in Panama (Project). If KPMC exercises the option, it will receive an equity interest in MPSA, owner of the Project. LS-Nikko may, prior to January 31, 2010, elect to increase the Option Interest to 30 percent.  We granted an extension to this right to February 28, 2010 while it continues to seek additional partners.

LS-Nikko has guaranteed KPMC’s obligations under the Option Agreement and Korea Resources Corporation (KORES) will provide financial support to KPMC.  The Option Agreement contemplates that KORES may in future become an equal shareholder of KPMC with LS-Nikko.

During the option period, KPMC and Inmet will fund their respective proportionate shares of MPSA’s development costs to a maximum of US$150 million, and Inmet will fund MPSA’s development costs in excess of US$150 million. Assuming MPSA incurs US$150 million of development costs during the option period, KPMC’s non-refundable share would be US$30 million with a 20 percent Option Interest or US$45 million with a 30 percent Option Interest.

The option will be exercisable for a 60 day period after Inmet has publicly announced a decision to proceed with construction and development of the project.  Should the option be exercised, KPMC must invest in MPSA an amount that will be its proportionate share of Inmet’s US$501 million investment in MPSA. Such proportionate share will be approximately US$125.5 million if the Option Interest is 20 percent and US$215 million if the Option Interest is 30 percent.  In addition, KPMC would also invest in MPSA its proportionate share of MPSA’s development costs during the option period, if any, that are in excess of US$150 million.

Assuming the option is exercised, Inmet, LS-Nikko, KPMC and MPSA will enter into a shareholders’ agreement containing usual and customary terms to govern the affairs of MPSA and their relationships amongst each other, the essential terms of which have already been agreed to by them.  Among other things, the terms will address financing of the Project and governance of MPSA. In addition, Inmet would continue to oversee development and operation of the Project.  MPSA and LS-Nikko will also enter into, on terms to be negotiated, an offtake purchase agreement on closing of the option under which LS-Nikko would be entitled to purchase, pro rata to the Option Interest, a share of MPSA’s concentrates production, subject to LS-Nikko arranging for related financing.

Key project statistics (estimated)*

* As at April 30, 2009.

quick links

Download the Cobre Panamá section from our fourth quarter press release for the most recent update.

Feasibility Study Update- Volume 1
(PDF English - 13.3 MB)


Feasibility Study Update - Volume 2
(PDF English - 6.3 MB)


Feasibility Study Update - Mine Plan
(PDF English - 32 KB)



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Press Release October 28, 2009
Press Release November 28, 2008
Press Release November 20, 2008
Press Release April 30, 2008
Press Release March 26, 2008
Press Release February 8, 2008
Press Release May 7, 2007
Press Release January 10 2007