Panama government shuts down one of world’s largest copper mines
Mining in the Central American country of Panama is in chaos after the government ordered the closure of one of the world’s biggest copper mines, Cobre Panama.
The $10 billion mine has only been operating since 2019, but has been shut down after the President of Panama Laurentino Cortizo backed a Supreme Court ruling against the mine’s operator, Canada’s First Quantum Minerals.
First Quantum Minerals has now initiated international arbitration over the contested contract with the country’s government.
The government’s decision to shut down operations at Cobre Panama came after First Quantum and the government agreed to a new concession agreement contract in March 2023.
Following due public consultation and regulatory signoff, the contract was approved by the National Assembly on October 20, 2023.
Contract declared unconstitutional
That contract agreement provided First Quantum a 20-year mining right to the Cobre Panama copper mine with an option to extend for another 20 years, in return for $565 million in annual payments to the Panamanian people.
However, a subsequent Supreme Court decision declared the contract unconstitutional and within hours President Cortizo announced the mine would be shut down, with the Panamanian leader declaring “the transition process for the orderly and safe closure of the mine” had commenced.
The president’s move followed major protests from Panamanians, indigenous groups, environmental campaigners, students and labour activists.
The protestors had expressed concerns about the mine’s operations in a biodiverse jungle area and the threat to local water supplies.
Transparency and compliance
Toronto Stock Exchange (TSX)-listed First Quantum (TSX: FM), which operated the mine through its local subsidiary Minera Panamá S.A. (MPSA), said that transparency and compliance with the law had always been fundamental for the development of its operations and it remains open to constructive dialogue in order to reach consensus.
It also argued that the court’s decision did not take into account a planned and managed closure scenario, in which key environmental measures are required to be implemented to maintain the environmental safety of the site during this process.
“Typically, this would involve the development of environmental controls to ensure the long-term physical and chemical stability of all infrastructure under current and extreme climatic conditions to avoid long-term environmental impact,” the company said in a statement to the TSX.
“Some of these environmental requirements requiring clarification include the Government’s plan for the management of the tailings storage and water treatment facilities to preserve water quality, maintain safety and prevent failure.”
“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.”
25 years of management
First Quantum noted that for the past 25 years, MPSA had developed and operated the Cobre Panama mine under a concession agreement contract first signed by the Republic of Panama and MPSA in February 1996 and approved by the National Assembly in February 1997.
“On the basis of that contract, Cobre Panama has invested $15 billion in the mine and associated infrastructure, including a power plant, cross-country transmission lines, roads and a port.”
Panama’s economy is likely to take a major hit with the mine responsible for about 5% of its GDP around 75% of the nation’s export goods.
With 3 billion tonnes of proven and probable reserves, Cobre Panama is one of the largest new copper mines opened globally in the past decade.
Located in Colon Province, 120km west of Panama City, the production complex includes two open pits, a processing plant, two 150 megawatt power stations and a port.
Commercial production started in June 2019, with the mine producing just over 1% of global copper production.