First Quantum Minerals' (TSX:FM) contract to operate a copper mine in Panama was deemed unconstitutional by the country’s Supreme Court following weeks of protests against the deal.
The Canadian miner’s 20-year deal, approved in October, faced significant public outcry, including a blockade of an on-site power plant, along with legal challenges on the grounds that it favored the miner too much and was approved via a corrupt process.
Now, Panama’s highest court said it agrees, nixing a contract that provided First Quantum with a 20-year mining right plus an option to extend for another 20 years in exchange for $375 million in annual revenue.
"We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023," Supreme Court President Maria Eugenia Lopez said.
In response, First Quantum reiterated its "unwavering commitment to regulatory compliance in all aspects of our operations within the country,” according to reports. The miner said it plans to wait for the ruling to be made public before commenting further.
Protest groups have similarly said they will keep demonstrating until the ruling is official, according to reports.
Shares of First Quantum are down more than 50% since protests began in October, and the stock lost another 0.4% Tuesday afternoon to trade at $12.68
The decision has major implications for Panama and for the copper market at large since First Quantum's Cobre Panama mine generates roughly 5% of the country’s GDP and 1% of global copper production.
There are also political implications. The country’s stake in, and control over, Cobre Panama has become a hot button issue ahead of a 2024 election.
Last week, former Panama President and current presidential candidate Ricardo Martinelli proposed the contract be renegotiated with higher stake and greater royalties.
Cobre Panama produced 112,734 tonnes of copper in the third quarter, which was 46% of First Quantum’s revenue in the period. Over the past decade, the company has invested roughly $10 billion in developing the mine.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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