People participate in a protest against a new mining contract signed into law by Panama's government, in Panama City, on Nov. 9.STRINGER/Reuters
Panama’s top court started deliberations on Friday to rule on several constitutional challenges to First Quantum Minerals Ltd.’s FM-T contract for the Cobre Panama mine, an outcome keenly watched by the global copper market and investors.
First Quantum has faced massive protests since the Panama government signed a new contract for the Cobre Panama mine on Oct. 20, amid allegations of corruption and lack of transparency in the negotiations. The company has denied any wrongdoing.
Cobre Panama is one of the world’s biggest and newest copper mines, producing about 1 per cent of global copper supply.
A majority of lawyers surveyed by Reuters this month said the Supreme Court is likely to rule against the company, citing a precedent. The court has not given a timeline to release the verdict, but some lawyers and officials expect a decision in the coming days or weeks.
A ruling against First Quantum will have huge implications. The uncertainty has already wiped about $10-billion, or 50 per cent of its market value, in about a month, impacted copper prices and could be a blow to the Central American nation as the mine accounts for about 5% of its GDP.
First Quantum’s “fallback legal position is very strong,” Tristan Pascall, the company’s chief executive, said in an interview with LatAm Investor published on Thursday when asked whether the miner would receive fair compensation if the government closes the mine.
“Over the long-term we’ve invested more than $10-billion in turning the Cobre Panama into a world-class asset,” Mr. Pascall was quoted as saying.
China’s Jiangxi Copper Co. is First Quantum’s biggest shareholder.
The demonstrations have turned into an anti-government movement, with protesters demanding an end to all mining activity in the country.
A protest is expected to be held outside the court later on Friday.
The movement has also gained support from activist Greta Thunberg and Hollywood actor Leonardo DiCaprio, who last weekend shared a video from an environmental group that called for the Supreme Court to cancel the contract.
On Thursday, First Quantum said the mine is not operating at commercial levels, after blockades by protesters at a key port that have prevented the miner from receiving shipments of coal that power the site and other supplies.
The contested contract provides First Quantum a 20-year mining right with an option to extend for another 20 years, in return for US$375-million in annual revenue to Panama.
If the court deems the contract unconstitutional, Panama would be in a tricky spot, lawyers said, as the government on Nov. 3 signed a bill banning all new mining concessions and extensions. That would prevent the two parties from negotiating a new deal.
The contract was inherited by First Quantum in 2013 after it became the operator of the mine. However, Panama’s top court in 2017 deemed unconstitutional the law under which First Quantum was operating the mine.
The ruling was upheld in 2021, resulting in last month’s fresh deal with the government.