First Quantum Minerals Ltd.’s (TSX-FM) is suspending production guidance for the year for its Cobre Panama copper-gold mine in Panama, the company said in a press release, Friday.
The move comes after a Panama Supreme Court ruling found that its mining license is unconstitutional, and the Panamanian government said it will close the mine.
First Quantum also said its Minera Panama SA (MPSA) unit is seeking additional details about the ruling and its implications.
First Quantum said the Court’s decision does not take into account a planned and managed closure scenario, in which key environmental measures are required to be implemented to maintain the environmental safety of the site during this process.
Typically, this would involve the development of environmental controls to ensure the long-term physical and chemical stability of all infrastructure under current and extreme climatic conditions and to avoid long term environmental impact.
Some of these environmental requirements requiring clarification include the government’s plan for the management of tailings storage and water treatment facilities to preserve water quality, maintain safety and prevent failure.
“Furthermore, the future of Cobre Panama’s rehabilitation, reforestation and species conservation programs, as well as protection of almost 20% of Panama’s total protected areas currently funded by Cobre Panama will need to be addressed,” the company said.
On Friday, First Quantum shares eased 2.2% or 25 cents to $11.11 on volume of 7.64 million. The shares trade in a 52-week range of $39.13 and $10.89.
Cobre Panama is First Quantum’s flagship operation. It is a huge open-pit copper project located in the Panama jungle, about 120 kilometres west of Panama City and ranks as First Quantum’s key asset. Cobre Panama accounts for 1.0% of global copper output.
On March 8, 2023, First Quantum and the government of Panama reached an agreement covering terms and conditions for a refreshed concession contract at Cobre Panama. Panama’s government and the mining company agreed on a contract which would guarantee the Central American nation annual income of US$395 million while allowing First Quantum’s local unit to operate the Cobre Panama project, an open pit copper mine for at least 20 years.
However, protesters have criticized both the deal and the mine’s environmental costs, even after Panamanian President Laurentino Cortizo on October 27, 2023, rejected all new mining projects.
On November 14, 2023, First Quantum submitted to the Ministry of Commerce and Industry of Panama a notice of intention to initiate arbitration to enforce its rights under international law pursuant to the Canada-Panama Free Trade Agreement. The notice of intention facilitates consultations between the Government of Panama and MPSA under the Free Trade Agreement in order to avoid the need to file any such arbitration.
On November 29, 2023, MPSA initiated arbitration before the International Court of Arbitration to protect its rights under the 2023 concession agreement that the Government of Panama agreed to earlier this year.
The arbitration agreement provides for arbitration in Miami, Florida.
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