By Valentine Hilaire

(Reuters) -Panama will reject all new mining projects, the president said on Friday, as his government defends a controversial contract extending operations for two decades at a major copper mine that has sparked growing protests demanding its cancellation.

President Laurentino Cortizo announced that the new mining restrictions will apply to both future mining projects as well as those currently seeking permits.

"All of them will be rejected," he wrote in a post on X. "This ban will go into effect from today."

The abrupt mining pause comes barely a week after Cortizo hailed the revised contract that allows the local unit of Canada's First Quantum to continue operating its lucrative Cobre Panama project.

The extended First Quantum concession for the sprawling open-pit mine guarantees state coffers at least $375 million annually while allowing it to operate for at least 20 more years, with the possibility of further extensions.

Thousands of protesters have taken to the streets to criticize the deal, as well as the mine's environmental costs, and demand its withdrawal.

Earlier on Friday, Economy Minister Hector Alexander echoed Cortizo's support for the contract.

"Panama is a mining country," Alexander told Reuters, arguing that without the mine, the country's economy would barely grow this year, versus the robust 6% growth the government estimates.

The Cobre Panama mine alone accounts for nearly 5% of Panama's economy.

Also on Friday, Panama's top court agreed to consider a second lawsuit challenging the contract.

In recent days, protesters have erected road blockades to pressure authorities, which also led to the suspension of classes nationwide earlier this week.

In an interview, Edison Broce, a lawmaker who opposes the contract, predicted that politicians who support it will be punished in elections next year.

He urged Cortizo and his government to heed the protesters.

(Reporting by Valentine Hilaire; Editing by Christian Plumb, Marguerita Choy and Raju Gopalakrishnan)