Panama legislators approved on Thursday a Bill that originally sought to revoke First Quantum Minerals’ (TSX: FM) contract with the country’s government covering the Cobre Panama copper mine, but lawmakers decided at the last minute to eliminate that part of the Bill.
The modified law, approved by 63 votes, does, however, ban all future mining concessions, including exploration, extraction and transportation of minerals, as well as contract renewals in Panama.
The move means that it will be the Supreme Court’s job to decide whether law 406, which made the contract between First Quantum and Panama official, is or not unconstitutional. The top court is considering several other challenges to the contract.
BMO Capital Markets analyst Jackie Przybylowski believes the government will try to avoid mining halts before the upcoming general election in May 2024.
“Revisions to the mining code in 2024 will not be so severe as to justify or force closure, as the country already faces drought-related disruptions to canal operations,” Przybylowski wrote. “We do see risk to temporary disruptions from protest activities at the port.”
The government and the Canadian miner reached the multi-billion dollar agreement last month and it was enacted into law by parliament. This triggered a series of violent protests that have almost paralyzed Panama City, the capital.
Demonstrators claim the new contract was fast-tracked with little public input or transparency and also made corruption allegations against lawmakers.
Locals also worry about the mine’s effects on drinking water and the Panama Canal, already driven by El Niño to its driest October since 1950, even though First Quantum has repeatedly said the operation is far from any drinking water sources.
President Laurentino Cortizo proposed to hold a referendum on whether to revoke the controversial contract, but Parliament buried that bill, moving directly to repeal the contract, before backtracking on Thursday evening.
Analysts estimate the decision to cancel the Cobre Panama mine’s contract would cut Panama’s GDP growth from a forecast 6% in 2023 to just 1%.
The Toronto-based company, which lost about 50% of its value between Monday and Wednesday, is one of the world’s top copper miners.
It is also Canada’s largest producer of the coveted metal, churning out 816,000 tonnes of copper in 2021, its highest ever, thanks mainly to record output at Cobre Panama.
First Quantum said on Friday production at the Cobre Panama mine remains uninterrupted at this time. “However, like many businesses across Panama, protests, including blockades of key roads, have caused disruptions on site as well as shortages in certain supplies,” it said.
Other companies active in Panama include Franco-Nevada (TSX, NYSE: FNV), Orla Mining (TSX: OLA), Antler Gold (TSX-V: ANTL) and A.I.S. Resources (TSX-V: AIS). It remains unclear how the new law will affect their projects and operations.
