Panama Considers New Solutions for Cobre Panama Mine

Panama is making progress in resolving issues surrounding its largest mining asset, the Cobre Panama copper mine. President José Raúl Mulino has indicated that his administration is exploring "novel ideas" to settle the dispute with First Quantum Minerals (OTC:FQVLF) concerning the mine, with discussions contingent on the completion of social security reforms.

During a press briefing, President Mulino stated, "At a government institution level, we are discussing what we are going to do with the mine. It's a very, very complex topic. Have faith that once social security is over, we are going to deal with the mine." This statement reflects the government's commitment to addressing the mine's future after the recent turmoil.

The Cobre Panama mine plays a significant role in the country’s economy, contributing about 5% to Panama's GDP and 1.5% of global copper production. However, the mine was abruptly closed in late 2023, causing major disruptions.

In October 2023, former President Laurentino Cortizo had approved a 40-year extension for the mine's operational contract, which included a minimum annual payment of $375 million. Nevertheless, this contract faced backlash, leading to widespread protests that claimed it prioritized company profits over environmental concerns and national interests. The situation escalated when Panama's Supreme Court ruled the contract unconstitutional, resulting in the mine's closure.

The shutdown has had adverse effects on both First Quantum and the local economy. The mine accounted for approximately 40% of First Quantum's revenues and provided thousands of jobs in the region. Additionally, the fiscal challenges resulting from the mine's closure prompted S&P Global to downgrade Panama's credit rating from BBB to BBB— in late 2024, citing concerns over fiscal flexibility and high debt burdens.

Since his inauguration in July 2024, Mulino has faced significant hurdles in managing the fallout from the mine's closure while also addressing a severe drought that has negatively impacted operations at the Panama Canal. This critical trade corridor has experienced reduced traffic due to water shortages, further straining the nation’s financial stability.

In the meantime, First Quantum has proactively enhanced its public relations efforts and engaged with local communities to shift perceptions. A December 2024 survey by DOXA indicated a notable shift in public opinion, with 56% of Panamanians now supporting the renegotiation of the mine's contract, compared to 81% in January 2024 who favored a permanent closure.

Despite these changing sentiments, formal negotiations between the Panamanian government and First Quantum have not yet commenced. President Mulino has indicated that any resolution will depend on First Quantum withdrawing its arbitration claims filed with the International Chamber of Commerce.

Panama, Mining, Arbitration