Work orders terminated at Cobre Panamá as First Quantum begins cost review

Wednesday, April 3, 2013

Canada-based engineering and construction company SNC-Lavalin has had work orders terminated at the Cobre Panamá copper-gold project, after new owner First Quantum Minerals (TSX: FM, LSE: FQM) announced plans to review the project and reduce costs.

SNC-Lavalin and JV partners GyM and Techint International Construction had been due to conduct engineering, procurement and plant work at the project but received notices of suspension from Minera Panama, a subsidiary of Inmet Mining, according to a statement by SNC-Lavalin.

First Quantum announced the successful completion of its takeover of Inmet on Wednesday (Apr 3), with 92.7% of Inmet's shares tendered to the offer, worth about Cdn$5.1bn (US$5bn).

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The value of the terminated or suspended work is about Cdn$120mn (US$118.3mn), SNC-Lavalin added.

First Quantum announced plans for a "detailed review" of Cobre Panamá after securing an initial 85.5% of Inmet shares in March, with a view to "determine the appropriate next steps in how the project can be completed as efficiently as possible."

The company previously said it planned to reduce the US$6.2bn capital costs, partly through bringing work in-house rather than through contractors.

"First Quantum typically directs and executes its projects on an internal direct-hire basis, with additional external expertise brought on only as required," SNC-Lavalin added.


First Quantum's takeover of Inmet is "positive" for the company, Numis analyst Cailey Barker said in a note, helping it move towards becoming a global copper leader.

The focus for the company now will be looking at "how to save money at Cobre Panamá and integrate the operations," he added.