Canadian firm blames Panama for closure of copper mine

The open pit copper mine Cobre Panamá, run by Panamanian Mining company Minera Panamá, a subsidiary of Canada's First Quantum Minerals Ltd., stands in Donoso, Panama, Dec. 6, 2022. Panama’s president announced on Dec. 15, 2022 that the government ordered the company to cease operations after it failed to sign a new contract outlining substantially higher payments to the government. (AP Photo/Abraham Teran)

The open pit copper mine Cobre Panamá, run by Panamanian Mining company Minera Panamá, a subsidiary of Canada's First Quantum Minerals Ltd., stands in Donoso, Panama, Dec. 6, 2022. Panama’s president announced on Dec. 15, 2022 that the government ordered the company to cease operations after it failed to sign a new contract outlining substantially higher payments to the government. (AP Photo/Abraham Teran)

PANAMA CITY (AP) — A Canadian company claimed Friday the government of Panama has cut off talks with it, resulting in the closure of a huge copper mine.

Canada’s First Quantum Minerals Ltd. said in a statement that it had been negotiating with the government of Panama, which wants vastly increased royalty payments of $375 million per year from the company.

Analysts say the dispute threatens to have a huge economic impact in Panama, where the Cobre Panamá mine accounts for 3% of Panama’s gross domestic product, and poses a big challenge for the government, which will still have to administer the open-pit mine.

First Quantum said in a statement Friday it had agreed to those payments, and “came very close to an agreement to secure the long-term future of the Cobre Panamá mine before the Government halted discussions.”

The company said it wanted a protection clause in case metals prices or profitability at the mine drop, presumably to reduce royalty payments in that case.

Panama’s president announced Thursday that the government ordered Frist Quantum's local subsidiary to cease operations at the mine, the largest private investment in the history of Panama. The company says it has invested about $10 billion in the project since 1997.

But it will not be easy to simply close such a huge operation, with a workforce of 40,000 and mine pits that need to be monitored and serviced.

Environmental law expert Rodrigo Noriega said the government might have to take several moves.

There are “different options, they could authorize the mine to continue operating while the talks go on, which would be a benevolent plan, or you could seek out a third company to administer it while the case with the mining company is resolved,” Noriega said.

President Laurentino Cortizo’s Cabinet voted Thursday to order the mine to halt operations and instructed the Labor Ministry to take steps that would guarantee employment and labor protections for the mine’s workers.

The government blamed the subsidiary, Minera Panama, saying it failed to meet commitments agreed to in January for a new contract that was “reasonable and satisfactory” for the Panamanian people.

The government has said that on Jan. 17, Minera Panama agreed in a letter to a deal with the government that included the minimum annual payment of $375 million. Despite negotiations, the company did not sign the new contract by the Dec. 14 deadline set by the government.

First Quantum has said the agreed-on figure “would make Cobre Panama one of the highest payers of royalties and taxes amongst the large copper producing mines in the Americas.”

The company said “necessary legal protections on termination, stability and transition arrangements could not be agreed upon.”