Cobre Panama Financing Deal Reflects Both Opportunities And Challenges
BMI View: Inmet Mining ' s recent announcement that is has secure d financing for its Cobre Panamá project underscores our positive outlook for the Panamanian mining sector , while reflecting rising costs for firms in the region . The project is one of several gold-copper projects in development in Panama and has the potential to be a major supplier to metals markets in the coming years. However, rising costs throughout the region and slackening demand for base metals may render Cobre Panamá and other projects in the region uneconomical.
The large investment reflects the potential for growth in Panama's mining sector in the coming years. Inmet holds an 80% stake in the mine, with the other 20% owned by Korea Panama Mining Corp. The company announced in late November 2012 that it secured all necessary financing to develop the project, with US$1.3bn for earthwork, US$1.2bn for a processing plant, US$670mn for construction of a power plant, and US$500mn for a port. Cobre Panamá, holding an estimated 14.5mnt (million tonnes) of copper and 9moz (million ounces) of gold and with large, additional inferred resources, could reshape Panama's mining sector by significantly increasing mining output. We forecast gold prices to average US$1,775/oz and US$1,875/oz in 2013 and 2014, which bodes well for Inmet. At the same time however, we forecast copper prices to fall on the back of decreasing demand growth from China and a well-supplied market. For 2013 and 2014, we see copper prices averaging US$7,400/tonne and US$7,200/tonne, respectively. Given the sector's increasing costs, if copper prices remain weak for a sustained number of years, development of the mine's copper ore may become economically unfeasible.
Potential Costs Loom
|Gold & Copper Attract Investment|
|Panama - Gold & Copper Projects|