First Quantum Minerals Ltd. has suspended engineering contracts with SNC-Lavalin Group Inc. and other partners at Cobre Panama, taking a first swipe at cutting costs on the massive copper project acquired with the takeover of Inmet Mining Corp.
SNC-Lavalin said in a statement on its website that it was de-booking suspended and terminated work related to the process plant at Cobre Panama worth $120-million in anticipated services revenues.
"Subsequent to this acquisition, a joint venture led by SNC-Lavalin International Co. Inc., a member of SNC-Lavalin Group Inc., and including GyM S.A. and Techint International Construction Corp, has received a notice of suspension from Minera Panama S.A. (a subsidiary of Inmet) related to the majority of the work to be performed under its EPCM contract for the balance of plant of the Cobre Panama copper mine, " the Canadian engineering firm said.
It did not state the value of business affected at engineering partners GyM S.A. and Techint. International Construction Corp.
First Quantum acquired Cobre Panama, one of the world's largest undeveloped copper projects, in March after a hostile takeover campaign that saw it pledge to slash costs at the open pit operation by employing in-house expertise rather than Engineering, Procurement, and Construction Management (EPCM) firms.
At one point the company said it might cut as much as $1-billion off the price tag from the Panama copper mine that will be the largest ever in Central America and contribute as much to the country's GDP as the namesake Panama Canal.
The company has had a team on site in Panama since the acquisition became official last week, although it has said it will be three to six months before it says how much it can save in building the mine, which will produce some 300,000 tonnes of copper per year after it comes on stream in 2016.
The company did not comment on Tuesday about the SNC-Lavalin statement.
Previously it has said it will focus cost-cutting efforts on the area of indirect costs at Cobre Panama - seen ranging as high as $2.5-billion – in large part because direct costs of some $4-billion have already been contracted out.
First Quantum points at its similarly-sized Sentinel copper mine in Zambia, which will cost just $2-billion to build, as evidence of its cost cutting prowess.