The mineral deposits that exist in the subsoil of the Republic of Panama belong to the State. Such ownership is stipulated in Article 257 of Panama's Political Constitution. Because mineral deposits in the subsoil of the Republic of Panama belong to the State, the Government of Panama has, in general, regulated the mining industry by means of Law Decree 23 of 22 August 1963 (as amended to date, "Law Decree 23"), which approved the Code of Mineral Resources of Panama. The Code of Mineral Resources regulates matters concerning the mining industry in Panama including, without limitation, the granting of concessions for exploration for mineral resources, as well as concessions for extraction of the same; the duration and extension of such concessions; the granting of concessions for transportation of mineral resources; and the classification of minerals, among others.
There are various other laws that regulate matters relevant to the mining industry, such as Law 109 of 8 October 1973 (as amended to date, "Law 109"), which regulates the exploration and exploitation of non-metallic minerals, which are used as construction materials, ceramics, refractory and metallurgical minerals. Furthermore, there are legal rules that pertain to the use of explosives (which are frequently employed in mining activities) as well as regulations pertaining to environmental standards and indigenous reserves, among others.
Note that the mining industry is regulated independently and by regulations that are different from existing and separate regulations for the oil (hydrocarbons) and gas industry.
The Code of Mineral Resources created the National Directorate of Mineral Resources (hereinafter, the "NDMR") in order to ensure the efficacy of the technical and administrative functions related to the application of the Code of Mineral Resources. The NDMR is directed and under the immediate responsibility of the Ministry of Commerce and Industries of Panama. Therefore, the Ministry of Commerce and Industries of Panama, through the NDMR, is the main authority in the mining industry.
Concession for mining activities
The process for authorizing or obtaining a concession for mining activities depends on the particular activity to be conducted, that is, prospecting, transportation, exploration, or extraction.
A mining prospecting permit is required to be obtained from the NDMR in order to engage in prospecting. To obtain a prospecting permit or a mining exploration concession an application must be filed with the NDMR. Prospecting permits are granted by means of NDMR-issued resolutions. The party requesting a prospecting permit it must indicate the type of minerals that it wants to prospect for and the name of the Province, District, or area that it wants included in the concession.
To obtain a transportation concession, an application must also be filed with the NDMR. To obtain the concession, the applicant does not need to hold a mining concession. However, if the applicant is in fact the holder of a mining concession, then the granting of the transportation concession shall be mandatory. Transportation concession applications may be denied when the granting of said concession would be contrary to the nation's interests. Transportation concessions shall be granted only as a means to establish mining transport facilities.
Mining exploration concessions are granted by a contract between an applicant and the Ministry of Commerce and Industries of Panama, which has to be countersigned by the Comptroller of the Republic of Panama. To obtain a mining exploration concession, an applicant must file a formal written request with the NDMR.
In addition, a mining extraction concession, granted by the NDMR, is required to engage in mining. Such mining extraction concessions are granted through contracts signed between an applicant and the Ministry of Commerce and Industry of the Republic of Panama and need to be approved by the Cabinet Council of the President of the Republic of Panama, and countersigned by the Comptroller of the Republic of Panama.
Mining extraction concessions may be obtained either by means of a formal written request to the NDMR or by the presentation of an offer at a public bid process. Article 20 of the Code of Mineral Resources stipulates that if a request for a mining extraction concession is presented by a person or entity that does not have a mining exploration concession for the same zone and involving the same minerals, such request must be accompanied by a fee proposal payable to the Republic of Panama for the right to the concession. On the other hand, Article 21 of the Code of Mineral Resources establishes that the granting of a mining extraction concession is mandatory in cases where the person requesting the concession is already a title-holder of a mining exploration concession.
It is important to mention that the following persons are prohibited from obtaining mining concessions, and may not utilise or benefit from them: i) foreign governments or states or any entity or official or semi-official foreign institution; ii) public officers or employees that directly or...