Panama’s top court is expected to rule against Canadian mining company First Quantum in the coming weeks, leading to the revocation of its contract for the Cobre Panama copper mine. A majority of lawyers surveyed by Reuters believe that the court will follow precedent and nullify the contract. The Cobre Panama mine is a significant resource, contributing 5% to Panama’s GDP and 1% to global copper production. First Quantum’s contract, approved on Oct. 20, grants the company a 20-year mining right with an option to extend for another 20 years in exchange for $375 million in annual revenue for Panama.
The contract has been the subject of legal challenges and protests, with critics claiming that it favors the miner too much and alleging corrupt practices in its approval. The growing anti-government movement sparked by these protests has resulted in two deaths and escalated into a major issue ahead of the May 2024 Panama election. As a result, Standard & Poor’s has revised Panama’s economic outlook to negative, citing potential risks to investor confidence.
The uncertainty surrounding the contract has also had a significant impact on First Quantum’s market value, causing a loss of approximately C$8 billion ($5.80 billion). In the midst of this situation, China’s Jiangxi Copper Co Ltd, First Quantum’s largest shareholder, has increased its stake in the company to 18.5%. Two Panamanian prosecutors have already deemed the contract unconstitutional after examining the legal challenges submitted to the court.
While the final outcome remains uncertain, four out of seven lawyers polled believe that the top court will nullify the contract, with two others predicting that it will be upheld, and one lawyer remaining uncertain. The lawyers point to precedent, highlighting similarities between the contested contract and a previous First Quantum deal that was scrapped by the court in 2017.
If the court deems the contract unconstitutional, Panama would face difficulties due to a newly signed bill banning all new mining concessions and extensions. This would prevent the two parties from negotiating a new deal. The mining chamber of Panama has urged against canceling the contract, emphasizing the potential for First Quantum to sue the country for at least $50 billion. Some lawyers believe that the court could also declare certain parts of the contract unconstitutional, rather than nullifying it entirely.
As the court deliberates, the future of the First Quantum copper mine contract and its implications for Panama’s economy and mining industry remain uncertain.
Q: What is the Cobre Panama mine?
A: The Cobre Panama mine is a significant copper resource in Panama that constitutes 5% of the country’s GDP and contributes 1% to global copper production.
Q: Why is First Quantum’s contract being contested?
A: First Quantum’s contract has faced legal challenges and protests claiming that it favors the miner too much and alleges corrupt practices in its approval.
Q: What is the potential outcome of the court ruling?
A: The majority of lawyers surveyed believe that the court will likely nullify First Quantum’s contract for the Cobre Panama mine, although the final decision remains uncertain.
Q: How could the ruling impact Panama’s economy and mining industry?
A: The revocation of the contract could have significant implications for Panama’s economy and mining industry, as the Cobre Panama mine is a key resource. The uncertainty surrounding the contract has already led to a revision of Panama’s economic outlook to negative by Standard & Poor’s.
Q: What is the position of First Quantum and China’s Jiangxi Copper?
A: First Quantum has not commented on the future of the contract pending court proceedings. China’s Jiangxi Copper, First Quantum’s largest shareholder, recently increased its stake in the company to 18.5%.