The open pit copper mine Cobre Panama, run by Panamanian Mining company Minera Panama, a subsidiary of Canada's First Quantum Minerals Ltd., stands in Donoso, Panama, on Dec. 6.Abraham Teran/The Associated Press
First Quantum Minerals Ltd. FM-T, Canada’s largest copper miner, has resumed formal talks with the Panamanian government to avoid a shutdown of its flagship Cobre Panama mine over a tax dispute.
Year-long negotiations broke down earlier this month after both sides missed a government deadline to reach a deal on sharing profits. Panama then ordered the mine to cease commercial operations, and the company responded by launching international arbitration proceedings.
First Quantum chief executive officer Tristan Pascall asked to come back to the negotiating table last Friday and flew down to Panama to resume talks on Monday, according to a statement from Panama’s Ministry of Commerce and Industries.
The ministry said Wednesday, however, that its order to put the mine into “care and maintenance” remained in force, which would wind down commercial activities with an option of resuming some time in the future. First Quantum is required to submit a plan to follow that order within 10 working days of Dec. 21. The ministry said it would continue to monitor compliance with the order.
Vancouver-based First Quantum described talks as continuing and constructive on Wednesday, and said mine operations have continued with no interruptions.
“We have ambitious plans for Cobre Panama and strongly believe that an agreement would pave the way for additional investment in Panama and its people,” Mr. Pascall said in a statement.
The company added, however, that it continues to pursue a legal challenge in the Panamanian courts and an arbitration proceeding under the Canada-Panama Free Trade Agreement.
Canada’s federal government has also attempted to smooth things over. International Trade Minister Mary Ng spoke with Panama’s Commerce and Industries Minister, Federico Alfaro Boyd, about the issue last week and will continue to stay on the file, said Alice Hansen, Ms. Ng’s director of communications.
First Quantum did not respond to requests for comment. Shares of the company gained 3 per cent on the news Wednesday, to close at $28.67 on the Toronto Stock Exchange.
Cobre Panama is First Quantum’s largest mine and generated about 41 per cent of the company’s revenue, according to its third-quarter financial report. The mine is operated by a subsidiary called Minera Panama, S.A., and also produces gold, molybdenum and silver.
It is also one of the most significant private investments in Panama, accounting for about 3.5 per cent of the country’s gross domestic product.
The dispute began last year when Panama began pushing for a larger share of the money generated from the mine, which opened in 2019 at a cost of US$6.3-billion.
The push was part of an international move by many overseas countries in recent years to retain more benefits from miners as commodity prices soared.
Panama’s government said in January it wanted First Quantum to pay a royalty of 12 to 16 per cent of gross profits from the mine, up from 2 per cent of revenue.
When talks broke down two weeks ago, First Quantum said it was willing to agree to Panama’s request of a minimum annual tax payment of US$375-million, as long as there were conditions to cover situations in which copper prices crash and the mine’s profitability erodes significantly.
One of Panama’s negotiators, however, later told The Globe that the company had not made that concession at the bargaining table.
With files from Niall McGee
Chris Hannay