Panama’s government has ordered First Quantum Minerals (TSX: FM) to halt operations at its Cobre Panama copper mine after it failed to agree on the terms for a new contract with the Canadian miner.
The move, unusual among Latin American countries, came after First Quantum missed a Wednesday night deadline to ink a new royalty deal that has been in the works since September 2021.
The miner said on Friday it was doing everything possible to support its operations in Panama, “including through all available legal means.” It also expressed disappointment at what it considers “unnecessary actions” by the government.
According to Ebrahim Asvat, lawyer and part of Panama’s negotiating team, the mine closure is not immediate.
“What the national government decided was to order each ministry to take the necessary steps to maintain the copper mine with adequate care and maintenance,” he told Eco TV.
An agreement was reached in January, with the company committing to up its royalty payments for the mine. It also agreed to give Panama between 12% and 16% of its gross profit, which would replace the previous 2% revenue royalty.
First Quantum agreed as well to start paying 25% corporation tax, from which it was previously exempted, until its investments at the mine were recovered.
Sealing the deal dragged on for months, until President Laurentino Cortizo’s administration set a Wednesday night deadline for First Quantum to ink the new contract.
The miner then sent a new proposal that “fundamentally” changed the deal’s economics, the Ministry of Commerce and Industries said on Thursday morning.
The point of contention seems to be a clause that would make the Vancouver-based miner pay a minimum of $375 million in royalties to the state.
According to Bloomberg, First Quantum had been pushing for an exception in the case of much lower metal prices and profit.