Panama government to recommend copper mine restart through state tie-up, sources say

By Divya Rajagopal, Emily Green and Kylie Madry

MEXICO CITY/TORONTO, Sept 30 (Reuters) - A Panamanian government commission will recommend to President Jose Raul Mulino on Wednesday to restart the suspended Cobre Panama mine, two sources familiar with the matter said, proposing a state partnership with Canada's First Quantum Minerals FM.TO.

The final government audit of the mine - which was responsible for 1% of copper production worldwide when it was idled in 2023 - was highly expected by market participants as prices of the red metal hover near all-time highs.

The site faced widespread public backlash over environmental concerns and the Supreme Court later ruled that its 20-year-old mining contract was unconstitutional.

The government is weighing the mine's economic importance in the face of lagging growth and high unemployment against lingering public anger over environmental oversight and the state's share of the benefits.

A study published earlier this month by the government found that the mine's closure had slashed more than 30,000 jobs and reduced taxes and royalties to the state by nearly $1.4 billion.

Reuters reported exclusively in July that the government committee was considering creating a state-owned mining firm to partner with First Quantum, among other options.

On Wednesday the group will formally recommend the joint venture to Mulino, said the sources, who requested anonymity as they were not authorized to speak on the matter. Mulino will make the final decision.

A presidential spokesperson did not immediately respond to a request for comment. First Quantum declined to comment.

"The idea is to make an agreement with First Quantum viable through a joint venture," one of the sources said, cautioning that a deal would still need to be reached with the miner.

Cobre Panama was once First Quantum's best mine, responsible for 40% of its revenue.

Panama was considering that the mine's underlying concession remain with Panama and operational control with First Quantum, Reuters reported in July. It was not clear if this was the model that was still under consideration.

A state-owned entity joining the agreement could be a workaround for a Panamanian law passed in 2023 that bans new mining concessions.

Sources previously said that a 60% to 65% stake for First Quantum was on the table.