TORONTO/PANAMA CITY - Canadian miner First Quantum Minerals will launch formal arbitration proceedings against Panama in July over the country's decision to close the giant Cobre Panama mine last November, two people familiar with the matter told Reuters.

The move coincides with the start of a new administration in the Central American country that could determine the future of one of the world's newest and biggest copper mines that had been responsible for 1% of global output prior to being shuttered.

Shares of First Quantum were trading down by 2% on the Toronto Stock Exchange on Friday morning.

First Quantum said in December it had initiated proceedings against Panama at the International Court of Arbitration in Miami, Florida, seeking $20-billion over the shut-down of the mine after the country's Supreme Court declared its contract unconstitutional.

In the initial stage of arbitration, concerned parties negotiate for six months in a bid to avoid moving on to formally launching proceedings. The miner will now go ahead with the next stage of the process, the sources said.

"First Quantum will meet the July 30 deadline of launching a formal arbitration against Panama as it has a fiduciary duty to do so," one of the people with knowledge of the developments said, asking to remain anonymous as they are not authorised to speak to the media.

In response to a Reuters query, First Quantum declined to comment on the arbitration but directed Reuters to its statement on May 6 where the company said it looked forward to a dialogue with the new administration.

Fallout from the crisis sparked over Cobre Panama hit the company hard, wiping some C$9-billion ($6.57-billion) from its market capital and prompting a series of capital restructuring measures to strengthen its balance sheet. For Panama, the dispute is seen having a material impact on growth.

First Quantum's share price has since recovered to C$19 on the Toronto Stock Exchange from C$10 in December last year.

Panama's President-elect, Jose Raul Mulino, in May ruled out talks with First Quantum over the future of the shuttered mine unless the company dropped its arbitration claims.

However, the sources said the Canadian miner is pressing on regardless as missing the July deadline would mean having to file a new intent of arbitration with a further six months of negotiations.

Riyaz Dattu, Canada legal practice leader of law firm Arentfox Schiff, said on average it takes four years for an arbitration settlement against a government to conclude.

First Quantum had also been negotiating with the outgoing Panama administration to allow it to sell 130 000 tonnes of copper concentrate currently stuck at the mine.

Panama's new cabinet will be sworn in on July 1. The cabinet ministers of industry and environment will have a key role to play in determining the future of the mine.

The outgoing industry minister did not respond to a query on whether the government would look for a settlement.

In a separate event on Thursday in Panama City, incoming industry minister Julio Molto said the issue of the disputed mine was a priority for the new government.

"What I can tell you is that whatever solution we agree on, it is most likely that this issue will not be resolved with another contract," Molto said at the American Chamber of Commerce and Industries of Panama.

On Thursday, a new report from the International Monetary Fund said Panama's GDP was expected to drop by 2.5% in 2024 due to the closure of Cobre Panama mine.

"Key risks include the loss of investment grade (credit rating), further social unrest, the fallout from the end of copper production (including from international arbitration proceedings), and external risks," the IMF said.