By Elida Moreno and Kylie Madry
PANAMA CITY (Reuters) -Panama's government ordered Canada's First Quantum Minerals on Thursday to pause operations at its flagship copper mine in the country after missing a deadline to finalize a deal that would have increased payments to the government from the mine.
The government had given Minera Panama, which is majority-owned by First Quantum Minerals, until Wednesday to sign an agreement reached in January to pay $375 million a year to the government from its Cobre Panama mine.
Panama's government ordered the commerce and industry ministry to suspend Minera Panama's operations at the mine after a midnight deadline was missed. First Quantum shares tumbled 14.7% in Toronto trading.
First Quantum estimates the Cobre mine to produce 340,000 to 350,000 tonnes of copper in 2022, accounting for more than 40% of its overall copper output. The company has invested $6 billion in the open-pit mine, where operations began in 2019.
It is considered the largest private investment in the Central American country and accounts for roughly 3.5% of Panama's gross domestic product.
Months of talks between the miner and the government continued until early Thursday morning, the commerce and industry ministry said. It added that the miner then sent a new proposal that "fundamentally" changed the deal's economics.
The miner said earlier Thursday the deal was not finalized because "necessary legal protections on termination, stability and transition arrangements could not be agreed."
First Quantum company earlier said it was open to further dialogue but did not immediately respond to the announcement that its operations would be suspended.
"While we view the deadline's expiration to be a setback, we are encouraged by the fact that almost all of the terms of the economic package have been agreed upon in principle," Eight Capital said in a research note Thursday.
Authorities and the company began negotiating a new concession contract late last year after Panamanian President Laurentino Cortizo promised to extract better benefits for the country from the copper mine.
The Panamanian government has hired financial advisers to explore alternatives with other companies within the last months, according to sources familiar with the matter.
Eight Capital said next year could be “a campaigning year” in the run-up to Panama's general elections, scheduled for May 2024.
"So we believe prioritization of an agreement is high, and we believe an ultimate resolution will be successful," Eight Capital said, despite the risk of government commentary.