First Quantum shares up as Panama Congress leaves contract intact

Aerial view of Cobre Panama mine. (Screenshot from First Quantum video | YouTube.)

First Quantum Minerals’ (TSX: FM) shares recovered some of the loses from the week on Friday after Panama’s congress eliminated an article in a mining Bill which would have voided the company’s multi-billion dollar copper mining contract.

Lawmakers on Thursday passed a revised Bill that blocks all future mining concessions, including exploration, extraction and transportation of minerals as well as contract renewals in the Central American country. 

The provision to revoke First Quantum’s contract was eliminated and the National Assembly referred the agreement, enshrined in Law 406, to the country’s Supreme Court for a ruling.

Shares jumped more than 12% to C$17.64 in early morning trading in Toronto and were changing hands at C$17.13 in the afternoon. It means the stock has recovered half the value it had a week ago and the loss for the week is down to 27% versus 50% on Wednesday.

Amid the turmoil, characterized by violent protests that brought Panama’s capital city almost to a halt, First Quantum’s Cobre Panama copper mine has not stopped production, the company said on Friday.

“However, like many businesses across Panama, protests, including blockades of key roads, have caused disruptions on site as well as shortages in certain supplies,” First Quantum noted.

BMO Capital Markets said the country would be unlikely to pass a new mining code before a national election next May if the court ruled Law 406 is unconstitutional.

“We do not expect that either First Quantum or the government intends to disrupt mining operations (as it likely didn’t intend to cause temporary mine closure in February), especially into an election when Panama is already facing drought-related disruptions to canal operations,” BMO mining analyst Jackie Przybylowski wrote late Thursday. 

“We expect the mine will continue to operate through this period of uncertainty; revisions to the mining code in 2024 will not be so severe as to justify or force closure. We do see risk to temporary disruptions from protest activities at the port,” Przybylowski said.

First Quantum is Canada’s largest copper producer and its Cobre Panama mine, in production since 2019, contributes almost 5% of the country’s GDP. It also makes up 75% of Panama’s export of goods and has created at least 40,000 jobs, directly and indirectly.