Shares in Canadian miner First Quantum Minerals (FM.TO) fell as much as 30% on Monday after Panama's government said it will hold a referendum on whether to scrap a mining contract awarded to the company earlier this month.
The sell-off wiped C$5.6 billion ($4.1 billion) from the market value of Toronto-listed shares in First Quantum, which operates one the biggest and the newest copper mine in the Central American country.
President Laurentino Cortizo's decision to hold a binding referendum on Dec. 17 comes after 10 months of protests by thousands of people who oppose First Quantum's open pit mine at Cobre Panama. Protests against the mine continued on Monday.
Its operations have also been disrupted by a row over a revenue-sharing agreement, which culminated in mass demonstrations at the weekend where protestors stormed a port used by the company.
First Quantum said on its website that it condemned the "illegal and violent" attempt to disrupt operations at the port, adding that the incident represents a significant threat to its local unit's operations and the safety of its staff.
It was not immediately available for further comment.
Panama's government and the company had agreed a contract that would guarantee Panama annual income of $375 million while allowing First Quantum's local unit to operate the Cobre Panama mine for at least 20 years.
Cobre Panama represents nearly 5% of Panama's gross domestic product and 1.5% of global copper production, according to RBC Capital Markets.
"While it may be tempting to buy these shares on today's weakness, we do not see a clear path to a resolution of this issue aside from either significantly higher royalties or international arbitration," Jefferies said in a note to clients.
The issue is likely to be an "overhang" on First Quantam's shares until the outcome of elections in Panama next May, it added.
By afternoon, the stock was down 26.3% at C$20.62, while the benchmark Canada share index was up 0.5%.
($1 = 1.3844 Canadian dollars)
