A $10 billion Panamanian copper mine has been sitting idle since November - and it's part of why the metal's price is surging

First Quantum's mine was shut down because the company couldn't reach a new tax deal with the Panamanian government.

• A Panamanian mine has been a key reason for the growing copper shortage.
• Cobre Panamá, operated by First Quantum, has sat idle since November, Bloomberg said.
• The mine was responsible for 1.5% of the world's copper before its closure, and the reduced supply has pushed prices higher.

The closure of a massive mine operation in the Panamanian jungle is among key reasons for why the world is short on copper, Bloomberg reported. 

The metal ore's spot price has climbed more than 11% so far this year, reaching a high not seen in over a year. It's a consequence of a widening supply-demand imbalance: as industries race to secure the mineral for green energy projects, miners are rapidly falling behind.

"Tight copper mine supply is increasingly constraining refined production: the much-discussed lack of mine projects is finally starting to bite," Bank of America wrote last week, in a note announcing that the "copper supply crisis is here." 

Contributing to this project shortage is Cobre Panamá, a $10 billion operation that's been sitting idle since November. Before its closure, the site produced 1.5% of the world's copper supply, Bloomberg said. 

Specifically, the mine can produce enough minerals to build five million electric vehicles each year.

The reason why it shut down boils down to the company's inability to appease a Panama national government seeking more favorable tax terms, according to Bloomberg.

The enterprise is owned by First Quantum, a Canada-based mining firm with a reputation for quick project turnarounds and an appetite for low-investment — though often profitable — markets.

When it inherited Cobre Panamá through a hostile takeover, it also took on an outdated tax deal that was beneficial to the producer. This deal offered little returns to the country's government, sparking national ire, and years of negotiation and standoffs.

Though the issue was eventually resolved, COVID-era economic conditions fueled anger towards the mine among Panamanians, especially a construction union called Suntracs. With labor issues in mind, the group led protests against Cobre Panamá, and civil unrest erupted.

Unfolding disorder finally sparked a national referendum on what to do with the mine, leading to its closure in November. Since that month, First Quantum's stock has fallen nearly 15%.

The company did not respond immediately to Business Insider's request for comment. 

Copper hasn't been the only commodity to rocket on low inventory. Its market upside has been replicated by products such as coffee and cocoa, with supply of both materials slashed by droughts and bad harvests.