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Panama is inching closer to a resolution regarding its largest mining asset. President José Raúl Mulino noted his administration is considering "novel ideas" to resolve the dispute with First Quantum Minerals (OTCPK: FQVLF) regarding the Cobre Panama copper mine, pending the resolution of social security reforms.
"At a government institution level, we are discussing what we are going to do with the mine. It's a very, very complex topic. Have faith that, once social security is over, we are going to deal with the mine," Mulino told reporters, according to Bloomberg.
The Cobre Panama mine, which accounted for 5% of Panama's GDP and 1.5% of global copper production, was abruptly shut down in late 2023.
In October 2023, former President Laurentino Cortizo ratified a 40-year extension of the mine's operating contract, which included a minimum annual payment of $375 million.
However, the agreement sparked widespread protests, with critics arguing that it favored the company at the expense of environmental protections and national interests. Eventually, the country's Supreme Court ruled against the contract, deeming it unconstitutional and leading to a shutdown.
The mine's closure harmed both parties. It accounted for 40% of the Canadian miner's revenues while providing thousands of jobs to the local community. The fiscal strain contributed to the country's lower credit rating, as S&P Global cut it to BBB—(from BBB) in late 2024. The agency cited weakening fiscal flexibility, a high interest burden, and a lack of a lender of last resort (central bank).
Since taking office in July 2024, Mulino has faced challenges—addressing the fallout from the mine's closure and dealing with a severe drought that disrupted operations at the Panama Canal. As the critical bottleneck of global trade, the Canal saw reduced traffic due to water shortages, further straining the country's finances.
Meanwhile, First Quantum has stepped up its public relations efforts, engaging with the local community and successfully shifting public opinion. A December 2024 survey by DOXA found that 56% of Panamanians now support renegotiating the mine's contract—a significant change from January 2024, when 81% of respondents favored permanently closing the mine, according to Bnaamericas.
Still, formal negotiations between the government and First Quantum have yet to start. Mulino has made it clear that any resolution must begin with the miner dropping its arbitration claims with the International Chamber of Commerce.
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