Panama update
Orla Mining | 19 March 2024
Panama update
- News Release
In November 2023, the National Assembly of Panama passed Law 407 that included a moratorium on
granting, renewing, or extending concessions for the exploration, extraction, or exploitation of metal
mining in Panama. On December 15, 2023, Minera Cerro Quema, S.A. (“MCQSA”), the Company’s
subsidiary that holds the Cerro Quema Project, received three resolutions from MICI. The resolutions
rejected the request for extension for the three mining concessions comprising the Cerro Quema Project,
retroactively declared the concessions canceled, and declared the area comprising the concessions to
be a reserve area under the Panamanian mining code. Under the Panamanian mining code, MICI is
prohibited from granting mining concessions for exploration or extraction on a reserve area. On
December 26, 2023, MCQSA filed requests for reconsideration of MICI’s decisions. On March 11, 2024,
MICI rejected the requests for reconsideration. For further details, please see the Orla’s press release
dated December 18, 2023, Orla Mining Provides Update on Panama and the Cerro Quema Project.
The Company is exploring all legal remedies available to protect its historical investments and potentially
unlock additional value for its stakeholders in respect of the Cerro Quema Project. The Company intends
to file a Notice of Intent to Arbitrate under the Panama-Canada Free Trade Agreement. The Notice of Intent facilitates consultations between
the Government of Panama and the Company. In the event that such consultations are unsuccessful,
the Company expects to proceed to file a Request for Arbitration. Although the Company intends to
pursue these legal remedies, the Company’s preference is an amicable resolution with the Government
of Panama that results in a positive outcome for all stakeholders.
In light of these events, the Company has evaluated the facts, circumstances, and the significant
uncertainties associated with mining in Panama. Orla took a prudent approach and did not include any
estimated future cash flows from activities involving the exploration, extraction, or exploitation of metal
mining since these activities were legally prohibited as at December 31, 2023. As a result, the Company
recognized an impairment charge of $72.4 million at the Cerro Quema Project during the year ended
December 31, 2023. The estimated recoverable amount of $10.0 million relates to the value of land
ownership and possession rights in Panama, which the Company acquired with a view to developing the
project. This impairment has been taken without prejudice to, or without at present attributing any specific
value to, the legal remedies that may be obtained through any arbitration proceedings or otherwise.
