Panama Bars First Quantum From Mining Copper During Cobre Panama Shutdown

The Panamanian government has banned Canadian minerFirst Quantumfrom extracting copper during the shutdown of the Cobre Panama mine, which was ordered to close last year due to a Supreme Court ruling that declared the contract unconstitutional. This decision, announced by Panama's Trade Minister Jorge Rivera Staff, goes against the common practice of miners continuing to extract resources during shutdowns to finance the closure process.

Why this matters: The shutdown of the Cobre Panama mine and the ban on copper extraction have significant implications for the global copper market and the Panamanian economy. The outcome of the arbitration proceedings and the presidential election will determine the financial burden of the closure, which could have far-reaching consequences for both First Quantum and the Panamanian government.

The Cobre Panama mine accounted for about 40% of First Quantum's sales last year and 1% of global copper production. The shutdown process is expected to last at least eight years and cost an estimated $800 million. The Panamanian government is currently in talks with First Quantum to draw up a plan to put the mine into 'care and maintenance mode' while details of its final closure are ironed out. The plan is expected to be made public in the next two weeks.

Trade Minister Rivera Staff explained, "There are two alternatives to finance the closing process. One is that the company will pay for it if it continues to handle the shutdown, and another is that the government will have to pay for it. Where should the funds come from? That's part of the discussions we're having." The government is also trying to determine who owns the 121,000 tons of copper concentrate stored at the mine, worth about $200 million.

The decision to ban First Quantum from mining copper during the shutdown comes amid nationwide protests that led to authorities banning all metal mining operations. The Panamanian presidential election is set to take place on May 5, and the next government will likely decide who will pay for the mine's closure. Rating agencies have warned that the Panamanian economy could be seriously hit if the country loses one or more of the arbitrations and has to pay hefty fines.

First Quantum has opened one commercial arbitration proceeding against Panama over the void contract, and another four arbitrations are in the first phase. Mandatory pre-arbitration discussions have ended in at least two of the cases, but First Quantum has yet to go further. Rivera Staff commented on the company's decision to delay further arbitration, saying, "I imagine they are waiting to see what happens in Sunday's election."

The closure of the Cobre Panama mine and the ban on First Quantum extracting copper during the shutdown process highlight the complex challenges faced by mining companies operating in foreign jurisdictions. The outcome of the upcoming Panamanian presidential election and the ongoing arbitration proceedings will play a crucial role in determining the future of the mine and the financial implications for bothFirst, mining, closure and the Panamanian government.

Key Takeaways

• Panama bans First Quantum from extracting copper during Cobre Panama mine shutdown.
• Mine closure expected to last 8 years, cost $800 million, and impact global copper market.
• Government and First Quantum in talks to determine who pays for closure and copper concentrate ownership.
• Presidential election on May 5 will impact who pays for mine closure and arbitration proceedings.
• Rating agencies warn of potential economic hit to Panama if it loses arbitrations and pays fines.