First Quantum Minerals Ltd. remains confident in its operation of the Cobre Panama copper mine amidst attempts to nullify its contract in Panama, reveals an insider. The Canadian firm anticipates continued mining activities while engaging in fresh negotiations for a renewed contract, regardless of any legislative or judicial rescindment of its recent agreement with the Panamanian government.
In a surprising twist, Panama’s congress retracted a contentious clause from a new mining bill late Thursday, which would have invalidated First Quantum’s contract. Following this development, the company’s shares soared by 9.7% in Friday morning trading in Toronto, recovering significantly from a steep 50% decline earlier in the week.
Despite facing interruptions and supply shortages due to ongoing protests and blockades, the mine has not ceased copper production. These protests were sparked by opposition to First Quantum’s new 20-year contract, prompting the government to suggest a referendum. Nevertheless, the miner received some relief as the Panamanian Congress approved the modified mining bill.
During the legislative debate, opposition member Juan Diego Vasquez insisted that the annulment of First Quantum’s contract is a decision for the judiciary, not Congress. This issue has also become entangled in the country’s pre-election climate, with elections scheduled for May 5.
The resistance highlights the mining sector’s struggle for acceptance amid increasing social, environmental, and nationalistic pressures. The Cobre Panama mine is a significant contributor to First Quantum’s finances and a major player in global copper mining, representing 1.5% of the world’s copper production. Protest groups are calling on the supreme court to rule the contract unconstitutional, and the court is currently considering six suits alleging sovereignty and environmental treaty violations.
The saga began with a 2018 court decision that led to an extended renegotiation period as Panama pushed for more advantageous terms. Congress ratified a new contract on October 20, obligating First Quantum to contribute at least $375 million annually to the state. Yet, renewed protests by various social groups have cast fresh doubts over the contract’s stability.
Despite past upheavals, such as the 2018 cancellation of a law supporting an earlier contract, precedents suggest the mine might maintain operations amidst the present unrest. As Panama approaches elections during a drought that’s already affecting canal operations, the government is likely to sidestep any mining halts. BMO Capital Markets warns of possible short-term disruptions due to protests but expects no drastic changes in the 2024 mining code revisions that would necessitate a mine shutdown, as per BMO analyst Jackie Przybylowski’s remarks on Thursday.