Panama panel recommends First Quantum mine restart to fund phased closure

By Elida Moreno and Divya Rajagopal

PANAMA CITY, ‌Sept 30 (Reuters) - A Panamanian ​government commission ​on Wednesday recommended opening formal negotiations with First Quantum Minerals to set conditions to reopen the shuttered Cobre Panama mine, one of the world's largest open-pit copper deposits.

The commission's report recommends that Panama ‌evaluate a new agreement with First Quantum that would end pending international arbitration claims and allow ⁠the project to operate under conditions designed to finance an "orderly closure" of the mine over time, at no cost to the state.

The panel argued ‌that closing a site of this ‌scale would take decades, require ongoing environmental management and monitoring and impose a heavy fiscal burden if the site could not fund its own closure.

The Cobre Panama mine was responsible for 1% of global copper production until the ​government shuttered it in 2023 following protests from local residents over tax contributions and its environmental impact.

The report did not lay out the scope, timing or legal structure for any restart. Reuters reported earlier on Wednesday, citing sources, ⁠that the commission would propose a state tie-up with First Quantum to restart the shuttered mine.

President Jose Raul Mulino said on Wednesday he would study the ​report carefully before deciding on the future of the mine.

"We have to be very, very clear. An operation of this scale is not closed in a year or five," said ​Julio Molto, Panama's commerce minister and a member of the commission.

The ‌report said the mine should not expand its footprint and should instead move toward progressive closure, with operating activity helping pay for rehabilitation, long-term monitoring and a closure reserve.

First Quantum said ⁠it would engage "constructively and in good faith" with the Panamanian government to establish a legal framework for Cobre Panama that is "fair, transparent, durable, and aligned with Panama's Constitution and laws."

First Quantum shares initially slumped as much as 31% in Toronto trading during the government announcement, ⁠in which several ministers repeatedly stressed the mine's "orderly closure." The report detailing a reopening was made public later. The miner's shares closed down ​15%.

Several analysts said the market reaction appeared to reflect an overly negative reading, with Scotiabank calling the government update "confusing" in a note to clients.

Scotiabank said the ministers were effectively authorizing talks to restart the operation under renegotiated terms, while the references to "orderly closure" appeared to ‌concern the mine's eventual end-of-life closure rather than a near-term shutdown.

J.P. Morgan analysts said the official document implied a multi-decade operating framework followed by monitoring and closure, although they cautioned ‌that the scale, timing and economics of any restart remain undefined.

Any eventual agreement, according to the report, must not recreate the previous ⁠contract structure struck down by the court, must ‌provide greater transparency and public benefit ​and must require the final settlement of all arbitration claims before implementation.

(Reporting by Anthony Esposito, Divya Rajagopal and Elida Moreno; Writing by Kylie Madry; Editing by Emily Green, Emelia Sithole-Matarise, Nick Zieminski and ‌Sonali Paul)

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