In recent years, First Quantum Minerals (“FQM”) has navigated a complex and challenging landscape with its flagship Cobre Panama mine, a critical asset that produces approximately 1% of global copper output. FQM initially invested over USD 10 billion into developing the mine, which has since become a significant contributor to Panama’s economy, supporting nearly 7,000 direct jobs and generating approximately USD 2 billion annually in exports, substantially boosting the country’s GDP.  

However, the company has faced ongoing political and social challenges that have cast uncertainty over the mine’s future. A construction and real estate entrepreneur voiced the people’s widespread dissatisfaction and asked, “Why should a project that was shut down for violating 25 articles of the Panamanian constitution and was overwhelmingly rejected by the public be reopened?” 

The operations at Cobre Panama have been contentious, particularly due to the public opposition and legislative fragmentation within Panama. The original mining contract, approved hastily and controversially, has fuelled widespread discontentment. The construction entrepreneur continued, “The biggest challenge for the [new] government will be convincing the population to reopen the mine.” 

“Why should a project that was shut down for violating 25 articles of the Panamanian constitution and was overwhelmingly rejected by the public be reopened?” 

Construction and real estate entrepreneur, Panama 

This frustration is rooted in broader grievances with past government actions, including corruption scandals, particularly those involving the previous administration and a perceived lack of transparency. According to the former Comptroller General of Panama, President José Raul Mulino’s recent election has introduced a new dynamic, as his team is largely composed of private sector professionals who support the reopening of mining operations. 

One of the primary conditions set by President-elect Mulino’s government is that FQM withdraws its lawsuits against the Panamanian state, which are currently pending in international courts. These lawsuits could result in Panama paying billions in damages if FQM prevails. So far, FQM has not responded to this demand, creating a significant roadblock in negotiations. Additionally, Panama’s credit rating has already been negatively impacted, with “the risk rating agencies immediately lowering the country’s risk rating outlook and calling into question the investment grade that Panama has enjoyed for more than a decade,” exclaimed the entrepreneur. 

The market has responded to these uncertainties with significant concern. FQM’s stock has dropped 50% from its 52-week high, erasing billions of dollars in market value and reflecting the heightened uncertainty surrounding the mine’s future. Despite this, the Cobre Panama mine remains a critical asset, having increased its copper production to approximately 400,000 tonnes in 2023, up from 350,000 tonnes the previous year.  

This production boost underscores the mine’s importance to FQM’s overall portfolio, making the outcome of these negotiations even more critical for the company. If operations continue without disruption, the mine is projected to generate an additional USD 2.5 billion in revenue for FQM in the coming year. 

If the Panamanian government permits FQM to resume operations, negotiations must address environmental concerns like water usage, deforestation, waste management and public opposition. These discussions will likely focus on creating a more transparent and socially responsible framework, including higher royalties, stricter environmental regulations and better community benefits.

The former Comptroller General noted, “If the new government and the mining company manage to agree on the reopening of mining operations and reach an agreement that is beneficial for the country, it is likely that within five years, many Panamanians will change their minds about whether it is in the country’s economic interest to continue mining operations.” 

“If [they] manage to agree on the reopening of mining operations and reach an agreement that is beneficial for the country, it is likely that within five years, many Panamanians will change their minds about whether it is in the country’s economic interest to continue mining operations.” 

Former Comptroller General of Panama 

However, should the decision be made to close the mine, Panama could face a protracted legal battle with FQM, which would likely seek substantial reparations, potentially amounting to several billion dollars. This legal standoff could further strain Panama’s economy and international relations and deter future foreign investment. The real estate entrepreneur added, “I think the issue is important for the government and the decision to postpone it to 2025 is probably a strategy that gives itself time to put together a multidisciplinary negotiating team that can comprehensively address the issue.” 

Given the current political and social climate, the government might also hesitate to jointly partner with other companies to manage the Cobre Panama mine alongside FQM. While such a partnership could theoretically help improve the mine’s reputation and operational standards, environmental impact and public opposition to mining remain formidable obstacles.  

The possibility of involving a third party, such as Barrick Gold, has been floated, with some estimates suggesting that a new partnership could inject an additional USD 1 billion into the project. “The CEO Mark Bristow has said that this would be once the current situation is defined,” informed the entrepreneur. However, the government “is maintaining a cautious silence on this possibility,” preferring to resolve the ongoing disputes with FQM first. The entrepreneur expanded, “I don’t think they will oppose it, given that if the project does well, the government could also have greater economic income.” 

The future of Cobre Panama and FQM’s operations in Panama remains uncertain. The next steps will depend heavily on the negotiations between FQM and the new government, the resolution of ongoing legal disputes and the broader public sentiment towards mining in the country. The former Comptroller believed “the entry of a third party into the scenario could perhaps help to find a way for a medium and even long term settlement.” 

The outcome of these discussions will have significant implications for FQM, Panama’s economy and the global copper market, which relies heavily on the output from this key operation. The former Comptroller General of Panama boldly concluded, “I believe that despite the massive rejection of the mining contract, this does not mean that Panama is an anti-mining country.”