Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
First Quantum Minerals Ltd. says it remains committed to Panama and its flagship mine, even as the company follows orders from the government to indefinitely shutter the $10 billion operation.
First Quantum received an initial “framework” from Panamanian authorities on Tuesday for closing the mine by June of next year, and will follow up with the government to discuss the details of executing the shutdown, chief executive officer Tristan Pascall said in an interview.
Panama’s decision to close the massive mine in the wake of countrywide protests has sent shockwaves through the mining industry and helped wipe out more than half of First Quantum’s market value.
In an interview at Bloomberg’s London office on Wednesday, Pascall and chief financial officer Ryan Macwilliam declined to comment on potential longer-term solutions for the mine, emphasizing that the focus for now is on ensuring the closure is managed responsibly. The company has warned that a shutdown of the mine’s water treatment plant could impact water quality in the area surrounding Cobre Panama if not planned carefully.
“We want to be part of the solution in the long run in Panama,” Pascall said. “In the immediate term, that means dealing responsibly with the environmental issues that are imminent and need to be addressed.”
The Cobre Panama mine — one of the world’s largest and newest copper projects — has been the focus of widespread protests after the government approved a new multidecade operating contract. Panama’s Supreme Court in November ruled that the law governing the operating license was invalid, prompting President Laurentino Cortizo to order that the mine be closed.
The move threatens to deprive Panama of one of its biggest sources of revenue and tighten the world’s copper supply at a time when industry and governments are pushing for access to metals needed for a global energy transition.
First Quantum has filed two notices of arbitration over the closure of the mine, which has not been operating since protesters blocked access to its shipping port in November. However, arbitration would not be the company’s preferred outcome, said Pascall.
In the aftermath of the unrest, First Quantum has said it should have better communicated the value of the mine to the wider public, and will now spend more time engaging with Panamanians ahead of a national election next year.
“We’ve changed gears, and we’re much more in what is a broad-based, almost an election-cycle kind of campaign,” said Pascall.
The sudden closure of First Quantum’s biggest profit generator has raised questions about its balance sheet, with billions of dollars of debt maturing in the coming years. Bank of Nova Scotia analysts have suggested the company sell assets, including part of its Zambian operations.
First Quantum will release a plan in the new year outlining how it intends to manage without Cobre Panama, said CFO Macwilliam.
“We’ll do that in mid-January and talk about the levers that we can pull,” he said.
(By Jacob Lorinc and Thomas Biesheuvel)
3 Comments
Diego
“The move threatens to deprive Panama of one of its biggest sources of revenue” yeah right. It wasn’t even the 5% of Panama’s revenue while they were making a ton more money from their extraction, not caring about Panama’s environment. They are just taking advantage of under-developed countries.
MTONGA ISAAC
That’s a wonderful thing in our nation
Juan
First Quantum running a campaign on social media low key telling us theyre gonna ruin Panama with their lawsuit…..You kept extracting copper without a legal contract and paid the country pennies . You should be ashamed of the Youtube ads youre running. Panama doesnt care for you. Good luck at your next investors meeting.