First Quantum’s Panama mining contract ruled unconstitutional

• Panama’s Supreme Court has ruled that First Quantum Minerals’ (TSX:FM) mining contract is unconstitutional
• In its public acknowledgement of the ruling, the company stated that its team is reviewing the ruling and “[C]ontinues to reserve all its local and international legal rights in regards to developments in Panama”
• First Quantum Minerals was ordered last December by the Panamanian government to shut down operations at the Cobre Panama mine
• First Quantum Minerals stock closed at C$12.64 per share

Panama’s Supreme Court has ruled that First Quantum Minerals’ (TSX:FM) mining contract is unconstitutional.

In its public acknowledgement of the ruling, the company stated that its team is reviewing the ruling and “[C]ontinues to reserve all its local and international legal rights in regards to developments in Panama.”

This has been ramping up uncertainty over one of world’s biggest copper mines and comes as protests continue in Panama concerning First Quantum’s Cobre Panama mine, which operates in a highly biodiverse area with significance to numerous Indigenous communities, while also accounting for about 75 per cent of Panama’s exported goods.

Protests began back in August after a government decision was made to extend the company’s of Cobre Panama mine for an additional 20 years, in return for US$375 million in annual revenue to Panama.

The Toronto-based miner had reduced operations at Cobre as it faced constitutional challenges to the new mining contract. In a news release, the mining company stated operations have been reduced to just one ore processing train because of a port blockade by protestors. Without shipments arriving at the mine’s port, the company stated it expected to run out of supply for the on-site power plant.

In early November, the mining company announced the reduction of ore processing at the mine because of the blockade. Law enforcement has also been present at the blockade and continues to monitor the situation.

Full 2022 production at Cobre Panama included more than 350,000 tonnes of copper, which is enough for more than 6 million electric vehicles (EVs).

Roughly 90 per cent of the mine’s workforce are Panamanian and have been trained and developed by First Quantum.

Cobre Panama operates in a highly biodiverse jungle and contributes approximately 5 per cent of Panama’s GDP and represents 75 per cent of the country’s exported goods.

Despite this, the demonstrations have resulted in multiple deaths and negative credit actions for the country from S&P, Moody’s and Fitch. This week, First Quantum reported two additional fatalities on company grounds in Zambia.

First Quantum Minerals was ordered last December by the Panamanian government to shut down operations at the Cobre Panama mine.

First Quantum is a global copper producer in the form of concentrate, cathode, and anode, with additional inventories of nickel, gold, and cobalt. The company has been active in Panama for the past decade. Could a cease of operation at a project of this size meaningfully hinder a key resource in global electrification?

First Quantum Minerals stock closed at C$12.64 per share. The stock has lost nearly 60 per cent year-over-year, while remaining up by a little less than 5 per cent since 2018.

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