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First Quantum says it is open to legal means to defend its stakeholders after the Panama government halts its flagship mine

Published Dec 16, 2022 11:20 Updated Dec 16, 2022 11:45
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© Reuters First Quantum says it is open to legal means to defend its stakeholders after the Panama government halts its flagship mine
 
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First Quantum Minerals (TSX:FM) (TSX:FQM) Ltd said that its goal remains to find a “win-win resolution” with the Panama government that will protect 40,000 jobs and its investment, but it will also defend its stakeholders, even if it means taking legal action.

The Panama government led by President Laurentino Cortizo ordered the Toronto-based company on Thursday to halt operations at its flagship Cobre Panama copper mine in the country after missing a deadline to finalize a deal that would have increased payments to the government from the mine.

The government had given First Quantum Minerals (TSX:FQM)’ subsidiary Minera Panama S.A (MPSA) until Wednesday to sign an agreement reached in January to pay $375 million a year to the government from its Cobre Panama mine.

“MPSA made significant progress in negotiations with the government of Panama over the past several weeks and came very close to an agreement to secure the long-term future of the Cobre Panama mine before the government halted discussions and announced plans to order MPSA to suspend operations,” the company said in a statement.

“We are disappointed by the government’s actions...Our most recent proposal would make Cobre Panama one of the highest payers of royalties amongst copper-producing nations in the Americas.”

First Quantum said the company’s proposal would provide for payments of US$375 million a year in tax and royalty revenues.

“We have stated publicly since January that our agreement to this economic benefit should be subject to certain protections in case metal prices or profitability drop significantly. These protections were agreed with the Government of Panama,” said the company.

The Minera Panama contract was renewed in 2017 and remains in legal standing until 2037. Since 1997, the mine was developed with invested capital of more than $10 billion and has been in operation since 2019.

Legal action

First Quantum said its goal remains to find a “win-win resolution with the government” but it will protect its investment.

“We are doing everything possible to support the Cobre Panama workforce, preserve the value and integrity of the mine and defend First Quantum and its stakeholders from the government’s unnecessary actions, including through all available legal means,” said the company.

Meanwhile, Mining.com reported that Panama is reportedly working with a financial advisor to identify new potential partners for Cobre Panama, which raises concerns that President Cortizo could be contemplating nationalizing the asset or removing First Quantum’s license to operate.

“Our base-case expectation is that the government’s position is part of a broader negotiation; however, the recent escalation does raise uncertainty about First Quantum’s ability to operate in the country long term, and the risk that investors will see in Panama going forward,” BMO (TSX:BMO) Metals and Mining analyst, Jackie Przybylowski said in a note quoted by Mining.com.

A protracted suspension of activities at the Cobre Panama mine would tighten global supplies, contributing to an expected annual deficit of 4.7 million tons by 2030, according to experts.

With the uncertainty, First Quantum shares slid 9.3% in Toronto to around C$25 and 8.8% to US$18.37 on the OTC Markets.

Contact the author Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter: @UttaraProactive

Read more on Proactive Investors CA

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First Quantum says it is open to legal means to defend its stakeholders after the Panama government halts its flagship mine
 

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Comments (1)
Jon Tomas
Jon Tomas Dec 16, 2022 13:10
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Considering how often mining company's leave environmental disasters in the wake of their operations, it seems fair to me that they pay exactly what the Peruvians are asking for!
 
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