First Quantum Is Close to Panama Copper Mine Deal, CEO Says

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(Bloomberg) — First Quantum Minerals Ltd. is close to striking a deal with Panama’s government on a massive copper mine in the Central American country after reporting progress on resolving tax and royalty terms for the project.

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“I don’t think we’re very far away,” Chief Executive Officer Tristan Pascall said in a Tuesday call with analysts to give an update on the status of negotiations. “There has been progress and movements since Dec. 14 and these final items do need to be resolved, but they do need to be resolved fairly for us to close this out.”

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The Vancouver-based company is prepared to agree with — and potentially exceed — Panama’s demands to pay a minimum $375 million a year in corporate taxes and a profit-based mineral royalty of 12% to 16% for the Cobre Panama mine, Pascall said.

The update lifts prospects of a breakthrough to the monthlong dispute that erupted after the two sides failed to reach a tax agreement for a mine that’s responsible for about 1.5% of the world’s copper production. A deal would come as a relief for First Quantum’s investors and the tight global copper market, while also affirming Panama’s reputation as an investor-friendly jurisdiction.

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Shares of First Quantum rose 0.8% to C$31.24 at 10:16 a.m. in Toronto.

“First Quantum’s update call struck a positive tone on the prospect of reaching an agreement with the government of Panama,” Morgan Stanley analyst Ioannis Masvoulas said in a note to clients. “The company has made certain concessions on fiscal terms and seeks to finalize all outstanding legal and economic aspects of the fiscal deal.”

First Quantum and Panama have been negotiating new tax terms for more than a year on the open pit mine. The talks failed to produce an accord by the mid-December deadline set by the government, putting the two sides at an impasse when the threat of a global copper shortfall looms large. Demand is forecast to surge for copper, lithium and other raw materials that are crucial to global energy transition. 

The two sides resumed negotiations late last month, while Panama’s Commerce Ministry ordered the company to halt production by putting Cobre Panama in maintenance mode. First Quantum’s CEO said the company is submitting an appeal on Tuesday to keep the government from halting production at the facility.

Read more: First Quantum to Appeal Panama Order to Halt Big Copper Mine

First Quantum started commercial production at Cobre Panama in 2019. The facility can produce 300,000 metric tons of copper a year.

(Adds analyst comment in sixth paragraph, updates shares.)