Canada’s First Quantum Minerals (TSX: FM) has failed to reach an agreement with Panama’s government over its operation of the Cobre Panama mine, the company said in a statement on Thursday.
The Vancouver-based miner, which faced a deadline of midnight on Wednesday to get a new royalty agreement in place, added that it remains open to dialogue.
The Panama government had warned that if an agreement wasn’t reached by that time, it would take “alternative measures” to ensure the operation of the mine.
The country’s Ministry of Commerce and Industries said on Thursday that First Quantum had made “unreasonable demands”, which often moved the two sides further apart instead of closer together.
Minister Federico Alfaro Boyd noted they negotiated in good faith past the deadline last night, adding that early this morning First Quantum sent it a new proposal that “fundamentally changed” certain aspects of the agreement.
President Laurentino Cortizo is expected to address the nation on the matter later Thursday after holding a special cabinet meeting.
There are rumours that the massive copper mine could be nationalized, as the Mining Chamber of Panama earlier this week raised the option of seizing the operation as a possibility.
“When our country needs to attract capital from abroad, to boost the economy, generate quality jobs and promote sustainable human development, it is sadly contradictory to send the message to the international community that in Panama there are inclinations towards the expropriation of private investment,” the chamber said in a Dec. 12 release.
The country’s Chamber of Commerce issued a separate statement on Sunday, criticizing the way authorities have handled the deal.
In the communiqué, the Chamber’s president Marcela Galindo De Obarrio expressed concern about the “erratic turn” the negotiations have taken.
First Quantum and the Ministry of Commerce and Industries of Panama began negotiations to renew the contract for Cobre Panamá in September 2021. An agreement was reached in January when the company agreed to up its royalty payments for the copper mine to $375 million a year.
As part of that deal, the miner also accepted to give the government 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.
“While we don’t expect an immediate impact on operations, it leaves uncertainty until a deal is reached,” RBC Capital Markets analyst Sam Crittenden said in a note to investors on Thursday.
First Quatum’s Cobre Panama achieved commercial production in September 2019. The asset is estimated to hold 3.1 billion tonnes in proven and probable reserves and at full capacity can produce more than 300,000 tonnes of copper per year, or about 1.5% of global production of the metal.
(With files from Reuters)