UPDATE 1-Panama president says will repeal mine law reform

* Move could affect development of Inmet copper project

* Repeal will again block foreign govt investment in mines

* Inmet CEO confident that project will not be delayed

* CEO says new law will decide outcome of partnerships (Adds comments from interview with Inmet CEO)

By Sean Mattson and Euan Rocha

PANAMA CITY/TORONTO, March 3 (Reuters) - Panamanian President Ricardo Martinelli on Thursday asked lawmakers to repeal a recent law that allows foreign government investment in mines within the Central American country.

The law, passed less than a month ago, is crucial to Canada’s Inmet Mining , as the company plans to partner with state-owned firms such as Korea Resources Corp in a bid to finance and build the $4.3 billion Cobre Panama copper-gold project in the country.

Martinelli, who originally championed the new law, made the surprise announcement about the repeal at a meeting with an indigenous community in Western Panama. The group has strongly protested against the legislation.

Martinelli rushed the repeal proposal through an emergency cabinet session in Panama City on Thursday. And Trade Minister Roberto Henriquez has taken the proposal to the legislature asking lawmakers to repeal the law in its entirety, according to government statements.

The legislature is expected to approve the repeal when it reconvenes in the coming days.

Inmet’s Chief Executive Jochen Tilk said that the government did inform Inmet of plans to repeal the new mining law.

The company does have the right to proceed with the development of the project, but the fate of its proposed tie-ups with foreign state-owned investors will probably only be decided when a new law is enacted, Tilk told Reuters in an interview late on Thursday.

“We think we can develop the project, as it affects partners it will really depend in the end on how the final code will be enacted,” he said.

Tilk said he was confident the move to repeal the law will not delay the development of the project, as the company has a strong enough balance sheet to “initiate the process” of developing Cobre Panama.

“There are clearly many options and different types of funding support (that we can tap),” he said.

Tilk said the government’s move to repeal the new law is aimed at giving indigenous communities and other stakeholders an opportunity to express their views, before a new code is enacted.

“We do support this and think this is the right approach and we think the government is taking the right step to include the indigenous communities,” he said.

A spokeswoman for Martinelli’s office said there was no word on whether another reform of the original 1960s-era mining law that had blocked foreign government investment in the sector would be presented to lawmakers.

She said lawmakers planned to meet with indigenous leaders to discuss possible reforms in the coming weeks.

Inmet’s project is expected to produce more than 250,000 tonnes of copper a year, as well as significant quantities of gold, silver and molybdenum over a 30-year life span.

Toronto-based Inmet, which owns copper mines spread across Turkey, Finland and Spain, is in the process of attempting to acquire rival Lundin Mining .

However, the company’s friendly deal with Lundin could be derailed by a counter offer from Equinox Minerals worth about C$4.8 billion. Many analysts doubt that Inmet will enter into a bidding war for Lundin, as it needs to build a war chest in order to finance Cobre Panama.

Inmet’s shares, which closed Thursday at C$69.12 on the Toronto Stock Exchange, have risen more than 60 percent over the last six months, driven largely by strong demand and prices for copper. ($1=$0.97 Canadian) (Reporting by Sean Mattson in Panama City and Euan Rocha in Toronto; Editing by Clarence Fernandez)