First Quantum: 'Impossible' for Panama's next government to ignore mining's contribution

More than two months after Panama’s supreme court declared First Quantum Minerals' new contract for the Cobre Panamá mine unconstitutional amid social and economic strife not seen since the fall of dictator Manuel Noriega in 1989, CEO Tristan Pascall is seeing light at the end of the tunnel. 

Although a new deal was reached between the government and the Canadian company’s subsidiary Minera Panamá last year after the original contract for the large-scale copper mine had been declared unconstitutional in 2017, thousands of protesters demonstrated against it on environmental grounds. 

The supreme court then annulled the new contract in late November, which led to the order to close the open pit mine. 

"We see that some of the emotion [from the protests] has really dialed back," Pascall told the Financial Post. "There are significant economic challenges emerging in the country … and we believe it's impossible for the next government to ignore the contribution that a responsible mining sector can make." 

Panama will hold elections in May to renew the country's president, mayors, deputies in the national assembly and other local authorities.

Cobre Panamá was one of the world's largest copper mines to open in the past decade. The mine accounted for about 5% of Panama's GDP and represented up to 75% of exports of goods, according to the company.

As the mine is being shut down – a process that may take many years – "there's more questioning around the decision" regarding the impact the move could have on the country's economy, Pascall said.

Oxford Economics recently estimated "that suspending operations at Minera Panamá could reduce GDP growth to 1.9% from 4.2% in 2024, and to 2.9% from 4.1% in 2025, and only return to long-term growth in 2026." 

The firm also expects that "rating agencies will soon downgrade Panama's credit rating due to weaker growth fundamentals and increasing risks to the country's ability to achieve its fiscal goals."

Joana Abrego, legal manager at the Environmental Advocacy Center of Panama (CIAM), an NGO that protested against the mine, said there were concerns regarding "a potential reactivation of the mine" due to recent statements made by several presidential candidates. But she added that First Quantum would face significant legal obstacles to restart operations at the mine.

CIAM has opposed mining in Panama for nearly two decades and Abrego said people expect the Cobre Panamá mine closure process to continue.

Metallic mining "is environmentally and socially unviable in the country," she told the Financial Post.

Pascall, however, claims Cobre Panamá has a net-zero environmental impact and that a lot of the anti-mining emotion was sparked by fake news and misleading information, which he hopes to correct as the space for debate on the mine widens, the paper said.

For example, he said there were rumors that the company was taking water from the Panama Canal, which was "absolutely not the case."

Currently, Minera Panamá is more focused on the company's preservation and safe management plan, which addresses issues such as the fate of the mine's employees, ensuring there is no environmental degradation, and questions about who will pay for the work.

According to First Quantum, the process could cost between US$15mn and US$20mn a month. The company met with Panamanian ministers and submitted a draft plan in mid-January. So far, Pascall said engagement with the government has been "constructive," the report said.

First Quantum could also seek compensation through an international arbitrator, which would be legally binding. The company has publicly announced two arbitration processes, but even though Pascall said First Quantum’s legal case is "extremely strong," it would not be its preferred route.

"We would rather get to a resolution with the government of Panama in a sensible fashion," he said.

Pascall refused to speculate about a possible restart of the mine. "Obviously, it's up to the Panamanian people to decide that," he said. "We are ready to be part of a long-term solution for the country."

The Canadian government has openly supported First Quantum in its dispute over Cobre Panamá. 

Commerce minister Mary Ng told Reuters earlier this month that she has ongoing meetings with the company and that the government will do its best to support First Quantum.

Cobre Panamá produced 331,000t of copper last year, 19,000t lower than in 2022, plus some gold.