Panama says Canada's First Quantum operating without contract

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By Milagro Vallecillos and Valentine Hilaire

PANAMA CITY (Reuters) -Panama's government on Tuesday doubled down on an order that Canada-based miner First Quantum Minerals (OTC:FQVLF) halt operations at its local copper mine, saying the miner had been operating without a contract since 2017.

Earlier, First Quantum (NASDAQ:QMCO) said it would submit an appeal against Panama's order by the end of the day.

The Panamanian government and the Canadian miner have been at odds for more than a year over a new deal in which the Central American government aims to raise annual mining royalties from First Quantum to a minimum of $375 million.

Panama's government ordered the firm last month to pause operations at its flagship copper mine after missing a deadline to finalize the deal.

On Tuesday, Panama's commerce and industry ministry said First Quantum had been operating without a contract after the previous one was annulled by the Supreme Court in 2017.

That court ruling was published in the government's official gazette in December 2021, but First Quantum continued operating as a new deal was negotiated.

First Quantum's Chief Executive Tristan Pascall said in a call with investors on Tuesday morning that following the Supreme Court decision, the government of Panama issued public statements "reaffirming that the contract remained valid."

He cited "the government's good faith engagement" with First Quantum and its local subsidiary.

On the call, Pascall said First Quantum was prepared to agree to, and in part exceed, the objectives that the government outlined in January 2022 concerning revenues, environmental protections and labor standards involved in a new contract.

But there are "more than a few disagreements" between the miner and the government, Panama's commerce and industry ministry said later in its statement.

"The parties disagree on certain fundamental issues," the ministry said, including royalties, depletion deductions, and international measures to mitigate tax evasion.

Pascall said current sticking points include legal protections against expropriation and early termination, as well as the long-term stability of the contract and royalties.

Panama defended the terms of the proposed new deal with First Quantum as being "in line with international standards", adding that the miner's recent proposals "have put more distance between both parties."