💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

Panama's top court weighs challenges to First Quantum copper mine contract

Published 24/11/2023, 11:02
© Reuters. FILE PHOTO: View of the Cobre Panama mine, of Canada's First Quantum Minerals, in Donoso, Panama, December 6, 2022. REUTERS/Aris Martínez/File Photo
HG
-
FM
-

By Valentine Hilaire and Divya Rajagopal

(Reuters) -Panama's top court started deliberations on Friday to rule on several constitutional challenges to First Quantum Minerals' contract for the Cobre Panama mine, an outcome keenly watched by the global copper market and investors.

First Quantum has faced massive protests since the Panama government signed a new contract for the Cobre Panama mine on Oct. 20, amid allegations of corruption and lack of transparency in the negotiations. The company has denied any wrongdoing.

Cobre Panama is one of the world's biggest and newest copper mines, producing about 1% of global copper supply.

A majority of lawyers surveyed by Reuters this month said the Supreme Court is likely to rule against the company, citing a precedent. The court has not given a timeline to release the verdict, but some lawyers and officials expect a decision in the coming days or weeks.

A ruling against First Quantum will have huge implications. The uncertainty has already wiped about C$10 billion ($7.3 billion), or 50% of its market value, in about a month, impacted copper prices and could be a blow to the Central American nation as the mine accounts for about 5% of its GDP.

First Quantum's "fall-back legal position is very strong," Tristan Pascall, the company's CEO, said in an interview with LatAm Investor published on Thursday when asked whether the miner would receive fair compensation if the government closes the mine.

"Over the long-term we've invested more than $10 billion in turning the Cobre Panama into a world-class asset," Pascall was quoted as saying.

China's Jiangxi Copper Co is First Quantum's biggest shareholder.

The demonstrations have turned into an anti-government movement, with protesters demanding an end to all mining activity in the country.

A protest is expected to be held outside the court later on Friday.

The movement has also gained support from activist Greta Thunberg and Hollywood actor Leonardo Di Caprio, who last weekend shared a video from an environmental group that called for the Supreme Court to cancel the contract.

On Thursday, First Quantum said the mine is not operating at commercial levels, following blockades by protesters at a key port that have prevented the miner from receiving shipments of coal that power the site and other supplies.

The contested contract provides First Quantum a 20-year mining right with an option to extend for another 20 years, in return for $375 million in annual revenue to Panama.

If the court deems the contract unconstitutional, Panama would be in a tricky spot, lawyers said, as the government on Nov. 3 signed a bill banning all new mining concessions and extensions. That would prevent the two parties from negotiating a new deal.

The contract was inherited by First Quantum in 2013 after it became the operator of the mine. However, Panama's top court in 2017 deemed unconstitutional the law under which First Quantum was operating the mine.

© Reuters. FILE PHOTO: View of the Cobre Panama mine, of Canada's First Quantum Minerals, in Donoso, Panama, December 6, 2022. REUTERS/Aris Martínez/File Photo

The ruling was upheld in 2021, resulting in last month's fresh deal with the government.

($1 = 1.3718 Canadian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.