The Cobre Panama copper mine has been controversial since 2017 when Panama’s Supreme Court ruled the operating contract with Canadian miner First Quantum unconstitutional. First Quantum had taken over the $10 billion mine in 2013 from previous operator Petaquilla Gold. Despite legal challenges being rejected in 2021, First Quantum negotiated a fresh 20-year deal with Panama’s government effective October 2022, with option to extend for 20 more years. In return for $375 million annual payments, Panama granted First Quantum mining rights till 2042 potentially.
Protester Demands and Environmental Concerns
However, protesters led by Panama’s labor union Suntracs allege the new contract still unduly favors First Quantum compared to economic benefits for Panama. Demonstrators argue the mine poses environmental hazards and demand annulling First Quantum’s contract, banning all new mines. Intense protests forced temporary closure of the Cobre Panama copper mine, which accounts for 1% of global output, sending First Quantum’s shares plunging over 50% since October.
Court Ruling Against the Contract
Responding to public anger, Panama’s President announced they will respect the Supreme Court’s November 2022 judgement once again deeming First Quantum’s latest contract unconstitutional. Meanwhile, lawmakers have approved banning further mining concessions amidst clamor for more state control over Cobre Panama. This fierce anti-mining sentiment is becoming a pivotal issue for 2024 Presidential polls, with candidates pushing nationalization proposals to assuage public rage.
Potential Scenarios
Going Forward Panama earlier allowed First Quantum interim operations during contract negotiations. After the latest court ruling, the government has three options – indefinitely closing Cobre Panama, nationalizing the asset, or constitutionally redrafting the agreement if the miner avoids arbitration. While First Quantum hopes to avoid arbitration and resolve disputes within 90 days, Panama insists it will strongly defend rights if arbitration proceeds. Local experts estimate First Quantum could potentially claim over $50 billion in damages through global arbitration.
Economic Setback for Panama
Apart from legal and political turmoil, cancellation of Cobre Panama’s contract signifies severe economic losses for Panama. As the country’s largest foreign investment, the mine represents nearly 3.5% of Panama’s GDP. Over 10,000 direct and indirect jobs are at stake, alongside copper exports worth nearly $2 billion annually. Losing First Quantum’s capital flows and operational expertise in copper mining will undermine Panama’s finances and economic growth for years.
Environmental Impact
However, indigenous communities near the mine location have long protested against deforestation, dust, noise, vibrations and water contamination associated with its operations. Repeated pipeline leaks have also drawn ire from environmentalists despite the company’s containment efforts. Hence, concerns over sustainability and conservation of forests have partly fueled resentment against Cobre Panama apart from nationalism regarding mineral wealth.
While contract cancellation severely impacts Panama’s economy and First Quantum’s prospects, it highlights the government’s accountability toward environmental issues and responding to people’s voices against unchecked mining.
