First Quantum Minerals plans to appeal an order by Panama’s government to halt production at a massive copper mine in the Central American country as the two sides try to reach a tax agreement for the project.
Panama’s Ministry of Commerce and Industries issued a resolution December 20 that gave First Quantum 10 business days to submit a plan for putting the Cobre Panama mine on care and maintenance, a status that would halt commercial operations. The ministry has already rejected a request by First Quantum to reconsider the decision.
“Our next step will be to submit an appeal,” the Vancouver-based miner said in an internal memo seen by Bloomberg News.
First Quantum and Panama have been negotiating new tax terms for more than a year on a mine that accounts for about 1.5% of global copper output. The talks failed to produce an accord by a December 14 deadline set by the government, putting the two sides at an impasse when the threat of a global copper shortfall looms large.
In the meantime, First Quantum said it is drawing up the maintenance plan for the mine to submit to government. The metals producer would be forced to suspend “a significant amount” of workers if the mine goes into maintenance mode, according to the Jan. 6 memo.
“This is a drastic and, in our view, unnecessary step, which will potentially have a huge impact on our employees, our suppliers and the community around us,” First Quantum said in the letter. “This is not an action that should be taken lightly, but we will regrettably be compelled to follow the government’s directive if the final outstanding terms cannot be resolved on a reasonable basis.”
If the order is approved by authorities, First Quantum would have two days to comply.
First Quantum and the Panamanian government resumed negotiations in late December, but an agreement remains elusive. One of the sticking points appears to have been over a minimum $375 million contribution, with First Quantum pushing for an exception in the case of much lower metal prices and profit.
“We are prepared to agree with, and even exceed, the objectives that the government outlined to us in January 2022 related to revenues, environmental protections, and labor standards, including a minimum revenue agreement that is unique and unprecedented in the mining industry,” the Jan. 6 memo said. “This includes a minimum $375-million in government income per year, with downside protections aligned with the government’s position.”