Panama’s President blames previous gov’t for First Quantum mine crisis

Panama’s President José Raúl Mulino has strongly condemned the previous government for its mismanagement of the crisis surrounding First Quantum Minerals’ (TSX: FM) $6.5 billion Cobre Panama copper mine. 

The operation, First Quantum’s flagship mine, was shut down a year ago following a Supreme Court ruling that declared its concession contract unconstitutional.

Mulino attributed the closure to widespread public dissatisfaction with former President Laurentino Cortizo’s administration.

“The mine paid the price for accumulated national discontent, under a government with only 25% popularity and overwhelming public rejection,” stated Mulino, who took office in July, according to BNamericas. “They couldn’t manage such a critical issue, let alone in the manner they attempted.”

The decision to invalidate the mine’s permit followed mounting protests. Critics accused the Cortizo government of failing to address long standing legal and environmental concerns tied to the project, which accounted for nearly 5% of Panama’s GDP.

Mulino, now tasked with resolving the fallout, has vowed to take a more transparent approach, promising a comprehensive audit of the mine involving international experts. “This is a government with credibility and national acceptance,” Mulino said, highlighting his administration’s intention to begin addressing the mine’s future in early 2025.

Mulino has said the Cobre Panama project will be addressed as needed, but stressed that issues such as social security have higher priority. A clear timeline for this process, however, has yet to emerge.

Financial shock

As operations at Cobre Panama remain suspended, the mine has transitioned into a preservation phase, incurring significant monthly costs. First Quantum reported spending between $11 million and $13 million per month on labour, maintenance, and environmental stability measures. By the end of October, nearly 121,000 tonnes of copper concentrate remained on-site, as First Quantum continued negotiating a permit to export the stockpiled metal.

“The copper cannot lie sitting there forever. It has to be taken out, and if you are going to take it out, you might as well export it,” Finance Minister Felipe Chapman told Bloomberg earlier this year.

Chapman added that not even Panama’s most radical environmentalists have argued against exporting the copper already mined.

First Quantum has initiated two arbitration proceedings, one under the Canada-Panama Free Trade Agreement and another under the International Chamber of Commerce, citing breaches of contract and treaty obligations. The first hearing is set for September 2025 in Miami. 

Despite these legal actions, First Quantum has emphasized that arbitration is not its preferred path, expressing a commitment to dialogue and finding a resolution beneficial to Panama and its citizens.

Cobre Panamá’s shutdown has had significant economic and social repercussions. First Quantum is said to have asked its employees in Cobre Panama to choose between taking the voluntary retirement offer that would come into effect from January 2025 or work with reduced hours.

The decision may put some strain on the Mulino’s administration, which has suggested the possibility of restarting the mine for an unspecified duration to cover the expense of a permanent shutdown.