Canada’s largest copper producer, First Quantum, operates the Cobre Panama mine, which has recently been at the center of mass protests in Panama. Last month, Panama’s government agreed to a 20-year mining contract renewal with First Quantum, promising $375 million in annual revenue and a significant contribution to Panama’s GDP.
However, the Supreme Court of Panama ruled this contract unconstitutional, citing violations of 25 articles of Panama’s constitution. These concerns include environmental issues and the rights of indigenous and rural communities. This ruling was celebrated by thousands of Panamanians who had been protesting against the mine.
Supreme Court President Maria Eugenia stated, “We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023.” The court emphasized concerns about pollution, health of minors, and economic and political engagement of indigenous and rural communities.
Following the court’s decision, Panama’s President, Laurentino Cortizo, announced on X (formerly Twitter) and in a televised address that the mine will begin an orderly and safe closure. This decision is significant for the copper market, as Cobre Panama accounts for about 1.5% of global copper production and 5% of Panama’s GDP.
Analysts, like Orest Wowkodaw of Scotia Capital Inc., suggest that resolving this through international arbitration could take years. Environmentalists, students, indigenous groups, and labor activists have welcomed the court’s decision. They opposed the mine due to its potential destruction of a biodiversity-rich jungle area and water depletion.
First Quantum stated their respect for Panamanian law and their intent to review the ruling’s details. They emphasized that their contract resulted from a transparent negotiation process, aimed at mutual economic benefits and environmental protection.
The Panama court had previously ruled against First Quantum’s contract in 2017, with the decision upheld in 2021. While negotiating a new deal, the government allowed the mine to operate. First Quantum’s experience in Panama mirrors their situation in the Democratic Republic of Congo, where they filed for arbitration after their contract was canceled in 2012.
Analyst Alice Fox from Macquarie speculated on the global market impact. A permanent shutdown of the Cobre Panama mine could lead to a deficit in the copper market in 2024. However, if the closure lasts only until Panama’s May 2024 presidential election, it could result in a significant loss of copper production in the interim.