February 17, 2023 11:47 AM GMT+1Exclusive: First Quantum warns...

February 17, 2023 11:47 AM GMT+1

Exclusive: First Quantum warns employees that Panama mine may close if dispute is not settled

Feb 16 (Reuters) - First Quantum Minerals Ltd has warned employees it may have to shutter operations in Panama if the government does not allow its copper exports to resume by next week, according to a memo sent to staff and seen by Reuters.

A long-running contract dispute between the Canadian miner and Panama officials centres on disagreements over tax rates and royalties at the Cobre Panama mine.

In the latest twist, Panama's maritime authority last month ordered First Quantum to suspend copper concentrate loading operations at a major port, essentially blocking the company from shipping and selling its copper.

The Vancouver-based company said the maritime authority had told it that the suspension was due to the scale it was using not being properly calibrated.

Alan Delaney, the mine's general manager, in a Thursday memo to employees described the suspension as an "unprecedented and totally surprising action," and said the scale was measuring accurately.

"If concentrate is not shipped by next week, these technical frustrations may force Cobre Panama to enter care and maintenance or suspend operations," he said.

Panama's maritime authority did not immediately reply to a request for comment. It has not commented publicly on the reason for the port suspension. Panama's trade minister, Federico Alfaro, said on Tuesday that both parties had made "significant progress" on negotiations.

First Quantum said it was appealing the maritime authority's decision.

The company has, meanwhile, stopped recruiting for 595 open positions in the Central American nation, imposed overtime restrictions, and put in place additional leave provisions, according to the memo.

The mine, First Quantum's largest, produced 351,000 tonnes of copper last year and executives had forecast 2023 production of 350,000 to 380,000 tonnes.

Asked about whether the mine would be forced to suspend operations next week, a First Quantum spokesperson referred Reuters to remarks by Chief Executive Officer Tristan Pascall during an earnings call on Wednesday.

"It is the government's decision. If they say, 'Okay, you can ship', we could be shipping extremely quickly, within a matter of hours," Pascall said on Wednesday, adding that the firm remains committed to reaching an agreement.