Panama’s President Laurentino Cortizo announced the government’s decision to shut down a major copper mine operated by Canadian firm First Quantum Minerals Ltd. This declaration followed a ruling by Panama’s supreme court against the mining company. President Cortizo revealed this decision on Tuesday via a social media post, indicating that authorities would begin the process of an “orderly and safe closure” of the mine.
This shutdown is poised to have substantial financial implications for Panama, as the mine represents one of the country’s primary sources of revenue. The decision also heightens the likelihood of a legal confrontation between First Quantum and the Panamanian government, potentially leading to international arbitration. The timeline for the mine’s closure, however, remains unspecified by President Cortizo.
The court’s decision struck down a law that had approved a contract for the mine, which contributes over one percent to global copper production. The announcement led to a significant drop in the company’s share value in Toronto, although it later regained some ground. Concurrently, Panama’s dollar bonds experienced a decline, reflecting concerns over the potential loss of a key revenue source. First Quantum has not commented on the president’s statement.
Ricardo Penfold, a managing director at Seaport Global, described the fiscal consequences for Panama as “terrible.” He highlighted the potential exacerbation of the country’s fiscal deficit, which currently stands at five percent of GDP, by an estimated 0.6 percent. Moreover, Penfold noted the impending lawsuit as an additional concern.
The decision to close the mine comes in the wake of mass protests triggered by Panama’s congress approving a new contract with First Quantum last month. The contract, allowing for a 20-year operation with an option to extend for another 20 years, sparked widespread dissent. Environmentalists, labor unions, and other groups have protested since October 20, arguing that the contract undermines national sovereignty and lacked adequate public discussion before its legislative approval.
Operations at the mine began winding down last week, with disruptions including blockades by small boats at the mine’s port, hindering supply shipments, and clashes between protesters and mining personnel near the site’s entrance. The closure of this mine marks a significant chapter in Panama’s ongoing struggle to balance economic interests with environmental and social concerns.