Panama to hold referendum on First Quantum contract, halts new projects

Panama will hold a referendum in December to decide the fate of Canada’s First Quantum Minerals (TSX: FM) Cobre Panama copper mine, and has also announced a halt on new mining projects as the government tries to calm mass unrest triggered by the deal.

After 10 months of negotiations between the parties, the Panamanian Congress approved on October 20 a revised operating contract for First Quantum’s flagship copper mine. 

The decision, which ended years of legal uncertainty and allows the company to operate for the next 20 years, was signed into a law last week.

Locals have been up in arms ever since. They have violently taken to the streets of the capital Panama city demanding the contract’s immediate cancellation. Protestors claimed the new contract for the giant Cobre Panamá copper mine was fast-tracked with little public input or transparency. They also cited corruption allegations against lawmakers. 

According to local media, some of the demonstrations in Panama City have gathered over 50,000 attendees, with the latest one adding up to 20,000 people. Organizers are using the rallying cry “get off social media” so that people physically join these events.

In response, President Laurentino Cortizo announced the country will hold a referendum on whether to revoke the controversial contract on December 17. The head of the state has also inked a decree banning all new metal mining and said fresh restrictions will apply to those currently seeking permits.

The country’s Supreme Court has also said it will consider two lawsuits filed against the renewed contract with First Quantum. 

Shares in the miner dropped as much as 18% on Monday morning on the news to C$22.43. In the last five days the stick has lost almost 22% of its value.

First Quantum is one of the world’s top copper miners and Canada’s largest producer of the coveted metal. It churned out 816,000 tonnes of copper in 2021, its highest ever, thanks mainly to record output at Cobre Panamá.

The mine complex, located about 120 km west of Panama City and 20 km from the Atlantic coast, contributes 3.5% of the Central American country’s gross domestic product, according to government figures.

The asset, which accounts for about 1.5% of the world’s copper production, began production in 2019.  

Cobre Panamá is estimated to hold 3.1 billion tonnes in proven and probable reserves and at full capacity can produce more than 300,000 tonnes of copper per year, or about 1.5% of global production of the metal.

Currently, the complex includes two open pit mines, a processing plant, two 150MW power stations and a port.