Panama accuses First Quantum of misleading investors, with future of Cobre Panama mine uncertain

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Panama is accusing First Quantum Minerals Ltd. of misleading its investors, as the stalemate between the Central American country and the big copper Canadian miner continues with no new tax agreement in place.

Last week, Vancouver-based First Quantum FM-T said that it was willing to pay Panama US$375-million a year in taxes from now on, but it wanted downside protection in case the price of copper crashes or the company’s Cobre Panama mine encounters production problems.

Ebrahim Asvat, managing partner with the law firm Patton, Moreno & Asvat, and a member of the government of Panama’s negotiating team, said in an interview that First Quantum never agreed to the US$375-million minimum, even with the downside protections built in.

“They have been saying that in their annual report, and in all their press releases. But that’s not the reality,” said Mr. Asvat. “They’re misleading their shareholders.”

First Quantum declined to comment for this story.

Panama and First Quantum had been in talks for more than a year to try to hammer out a new profit-sharing agreement, but talks ended last week with no new deal in place.

Panama’s President, Laurentino Cortizo, last Thursday ordered the mine to close in what some people interpreted as a ploy to give the government extra leverage if talks pick up again with First Quantum.

But Mr. Asvat said on Monday that the two sides have not been back at the bargaining table,

Panama is willing to sit down again with First Quantum to try to solve the impasse, Mr. Asvat said. And while a deal with the Canadian miner is preferred, he did not rule out other outcomes.

“We expect to close a deal with First Quantum, but if they’re not willing to do it, then we’ll have to look for another scenario, and we have to prepare for those,” he said.

Last week, The Globe and Mail reported that Panama was working with an investment bank to shop the mine to other parties.

Cobre Panama is one of the most prized assets in the copper industry. It is the sixth-biggest copper mine in the world, and unlike many other large mines, it is early in its lifespan, having only gone into production in 2019.

First Quantum’s biggest shareholder, Jiangxi Copper Corp. Ltd., a Chinese state-controlled company, in the past has been floated as a possible acquirer of the Canadian copper miner.

“It’s a matter for First Quantum to decide exactly what it wants,” said Mr. Asvat. “If they feel that they don’t want to be in Panama, then they should try to find somebody who would be better suited for that mine.”

Mr. Asvat said the taxes Panama is seeking from First Quantum are similar to levels already paid by miners in Chile and Peru, and below the level First Quantum pays in Zambia.

First Quantum said in a release last week that “legal protections on termination, stability and transition arrangements” were the main sticking points that led to the breakdown in talks.

Shares in First Quantum rose by 0.8 per cent on Monday on the Toronto Stock Exchange to close at $27.53 apiece.