The contested contract, inked in October, followed 10 months of negotiations between the parties and was supposed to end years of legal uncertainty around First Quantum’s rights to mine the asset.
Instead, it triggeredland and sea proteststhat have brought Panama’s economy almost to a complete halt, blocking the delivery of crucial supplies country-wise and to the mine.The company was forcedto halt operationsthis week.
A previous contract was ruled illegal once before, in 2017, butthe mine continued to operate as usualwhile both parties negotiated a new deal. Unprecedented public anger against the project this time forced the government to adopt a stricter approach, with President Laurentino Cortizo asking First Quantum to shut down the mine.
Panama orders First Quantum’s copper mine closure
The consequences of this week’s developments are just starting to emerge. Panama’s Trade Minister Federico Alfaro announced his resignation late on Tuesday, warning the court’s ruling could have serious consequences for the country.
“We are likely to see the loss of jobs, economic instability, international claims from investors and the impact on the level of investment already announced by the rating agencies,” Alfaro wrote inhis resignation letteraddressed to the President and shared on social media.
First Quantum noted on Friday it was suspending its 2023 production guidance for Cobre Panama, which accounts for about 1.5% of the world’s copper production.
It warned the government decision to close Cobre Panama does not take into accountseveral key issues, such as a planned and managed closure scenario, in which key environmental measures are required to be implemented to maintain environmental safety of the site and its surroundings.
“[It is also not clear] what the Government’s plan is for the management of the tailings storage and water treatment facilities to preserve water quality, maintain safety and prevent failure,” First Quantum said.
“Furthermore, the future of Cobre Panama’s rehabilitation, reforestation and species conservation programs, as well as protection of almost 20% of Panama’s total protected areas, currently funded by Cobre Panama will need to be addressed,” it added.
Five to ten yearsFirst Quantum said this week a responsible closure of the mine would take five to ten years, which is how long rehabilitation measures normally take to be implemented.
The Vancouver-based miner is asking the government to clarify how it plans to fund the future of Cobre Panama’s rehabilitation, reforestation and species conservation programs, as well as the preservation of almost 20% of the country’s total protected areas, which are all currently funded by its copper mine.
Cobre Panama, in production since 2019,generated 112,734 tonnes of copper in the third quarter of 2023, contributing $930 million to First Quantum’s overall third-quarter revenue of $2.02 billion.
The mine accounts for about 5% of Panama’s GDP and makes up 75% of its export of goods.
Lawyers contacted by MINING.COMsaid both the Panamanian government and First Quantum are now in a “tricky spot” since Cortizo’s administrationpassed a bill on Nov. 2banning all new mining concessions and extensions. That could prevent the two parties from negotiating a new deal.
First Quantum has been in a similar position before. In 2012, the company exited the Democratic Republic of Congo after filing an arbitration procedure for the revocation of its mining contract.
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