First Quantum (TSX: FM) is nearing the end of its processing operations at the Cobre Panama mine, operated by its Minera Panama subsidiary. The firm on Sunday reportedly sent a letter to the Panama Maritime Authority, outlining that as of Thursday it would be forced to suspend such operations.
The suspension comes as the firm is slated to run out of storage space for extracted material, following the government of Panama halting the process of concentrate being loaded at the Punta Rincon port. Loading operations have been halted since January 26, following a resolution by the maritime authority that claimed the scales were not sufficiently calibrated at the port.
READ: First Quantum Sees Concentrate Loading Operations Halted At Cobre Panama Mine
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First Quantum, for its part, indicated after the suspension that historically the operating subsidiary of the mine has provided internationally accepted certifications for the scales. It then used a local provider to certify the scales, yet the authority responded days later that the provider was not approved to conduct such certifications, despite being on a list of approved providers they had given to Minera Panama.
The resolution is the latest in an ongoing dispute between the Cobre Panama mine as the Panamanian government works to extract higher royalties from the operation.
At the time of announcing the halt, Minera Panama had indicated that it may be required to shutter the mine if shipping did not resume as a result of low storage capacity for concentrate existing on site.
The courtesy letter
Within the letter addressed to the maritime authority, Minera Panama is said to have requested that they be able to resume cargo operations. The letter is said to have outlined that the resolution that originally halted operations has been complied with, and that an appeal is currently in process related to the status of the mine.
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READ: What’s Going On With First Quantum’s Cobre Panamá Mine?
“If we are allowed to load the vessel, MPSA would have the storage capacity to continue operations for approximately 15 days while meetings with the Government continue regarding a renewed concession contract for Cobre Panama. In recent weeks, in fact, significant progress has been made and we believe it is important to give this opportunity to continue,” the letter reportedly reads.
Despite the letter, a decision on the resolution has reportedly not been made.
Ongoing discussions
Separately, last week First Quantum and the government of Panama were said to have just two remaining points to reach a consensus on to settle the dispute in relation to the mine. The new contract is set to govern the operation of the Cobre Panama mine for the next two decades.
Despite nearing consensus, the Ministry of Commerce and Industry has not yet responded to an appeal filed by Minera in respond to demands that the mine be placed into care and maintenance. The government entity reportedly has up to two months to respond from the date of initial filing of the appeal, a timeline which is set to expire mid-March.
The mine is being attempted to be forced into care and maintenance by the government of Panama as the nation looks to extract higher royalties from First Quantum. Panamanian President Cortizo in January said he wants to see the mine pay “at least” $375 million in annual royalties to the government, which is a figure over ten times higher than the royalty rate previously in place. The figure represents roughly 5.2% of First Quantum’s revenue in 2021.
The mine itself produces approximately 300,000 tons of copper concentrate per year, and represents 45% of forecasted copper production and 48% of gold production for the company in 2022. The mine meanwhile accounts for roughly 3.5% of the total GDP of Panama, and employs just under 5,000 individuals directly.
First Quantum last traded at $26.98 on the TSX.
Information for this briefing was found via Prensa Latina and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
