PANAMA CITY (AP) – A Canadian company claimed on 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 USD375 million per year from the company.
Analysts said the dispute threatens to have a huge economic impact in Panama, where the Cobre Panamá mine accounts for three per cent 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 on 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 on Thursday that the government ordered First Quantum’s local subsidiary to cease operations at the mine, the largest private investment in the history of Panama.
The company said it has invested about USD10 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 authorise 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 on Thursday to order the mine to halt operations and instructed the Labour Ministry to take steps that would guarantee employment and labour 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 January 17, Minera Panama agreed in a letter to a deal with the government that included the minimum annual payment of USD375 million. Despite negotiations, the company did not sign the new contract by the December 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”.