Canadian miner First Quantum Minerals (TSE:FM) is facing legal uncertainty around its massive $5.48 billion project in Panama, the largest copper mine coming to market over the next couple of years.
The Central American country’s Supreme Court ruled Monday that Law 9, which was used to grant a mining concession to Minera Petaquilla (now known as Minera Panama) in February 1997, was unconstitutional.
According to La Prensa, one of the country’s major newspapers, the ruling stated that Panama’s National Assembly approved a contract between the state and the mining company that didn’t follow the correct legal process and therefore contravened the constitution.
Minera Panama, First Quantum’s local subsidiary, said in a statement Tuesday the ruling only affected the enactment of Law 9, but not the mining concession contract itself, “which remains in effect, and therefore allows continuity of development of Cobre Panama.”
The country’s Ministry of Commerce and Industries, however, told La Prensa on Wednesday the situation was “complex” and needed to be examined.
“We are looking into whether the ruling has any impact on Minera Panama,” minister Augusto Arasomena, a lawyer by profession, said. “We don’t want to jump to conclusions.”
The news comes just ahead of the Toronto-based miner, which gained control over the Cobre Panama project in 2013 with the acquisition of rival Canadian copper miner Inmet Mining, begins ramping up towards production.
BMO Capital Markets said in a note Wednesday it expected the project to continue moving forward as the mining concession contract is still in place. “In our view, [the ruling-triggered worries] just highlight one of the challenges in building a large project in a non-mining jurisdiction,” Colin Hamilton, director of commodities research, wrote.
“We model 160,000 tonnes of copper from Cobre Panama next year, rising to 281,000 tonnes in 2020. While viewed as unlikely, were there to be any delays to the ramp-up our copper deficit over these years would be exacerbated,” Hamilton noted.
Last year, First Quantum spent close to $1 billion to advance construction at the project, located about 120 km west of Panama City, and 20 km from the Caribbean Sea coast.
The company plans to invest a further $830 million this year and $110 million in 2019, when the mine is expected to reach full capacity of 380,000 tonnes of copper annually.
Once that happens, First Quantum’s total production will surpass 900,000 tones a year, making the company one of the world’s top six copper producers.
Panama will also reap the benefit from the operating open-pit mine, as it is expected to generate around $2 billion worth of annual exports during its 34-years of life. That, according to Christie, is equivalent to around 4% of the Central American nation’s current GDP.
Cobre Panama is already generating some benefits for the country’s economy, as it currently employs over 12,600 people, 1,500 of which are from the nearby villages and towns, the company said. The project is the largest single private sector investment in Panama’s history.
First Quantum, which has operating mines in Australia, Zambia, Mauritania, Turkey, Spain and Finland, is also developing two other projects in Latin American — Haquira in Peru and Taca Taca in Argentina – but it hasn’t decided which one will develop first.
Politicians are like diapers on a baby, they must be changed often and for the same reason. They are the same everywhere and the bane of human existence.
Almost as bad as Canada. We better get mining the ocean bottom out past territorial waters – if they don’t want mines we can go offshore… only the wealthy need toasters and running water, right?
hard to get a call back, applied 5 times already, I know people with no experience that get a call back the same day they apply and get a job offer a few days later