Panama court nixes copper mine contract after weeks of protests

A Canadian mining company’s contract to operate a lucrative copper mine in Panama is unconstitutional, the country’s Supreme Court declared Tuesday following weeks of protests against the deal.

Environmentalists and others argued the deal would damage a forested coastal area and threaten water supplies, according to the Associated Press.

The announcement by the nine-justice court, after four days of deliberations, set off cheers among demonstrators waiting outside and waving Panamanian flags.

“This is what we had been waiting for,” demonstrator Raisa Banfield told the AP after what she called an agonizing wait. “The president has to suspend [mine] operations today.

Panamanians held the biggest protests in decades to have the contract scrapped. Challenges against the company’s new contract, signed on Oct. 20 by Canada’s First Quantum, piled up in court amid public anger over the deal.

Reuters reported earlier this month that the court was likely to rule against First Quantum.

First Quantum acknowledged the ruling and affirmed its “unwavering commitment to regulatory compliance in all aspects of our operations within the country.” The company will wait for the ruling to be made public before commenting more, it added.

Panamanian President Laurentino Cortizo said the country will abide by the court ruling.

The dispute over the open-pit mine led to some of Panama’s most widespread protests in recent years, including a blockade of the mine’s power plant, according to the AP. Protesters also blocked parts of the Pan American highway, including a stretch near the border with Costa Rica. Just before the ruling was announced, they opened the roadway so that freight trucks could get through.

Protester groups on social media after the ruling said they will keep demonstrating in the streets until the ruling is published in the country’s official gazette.

It is not yet clear what the ruling means for First Quantum, but a bill passed this month by Panama’s Congress that bans all new mining concessions and extensions will make it harder to continue as before.

The contract gave First Quantum a 20-year mining right with an option to extend for another 20 years in return for $375 million in annual revenue to Panama.

RBC said in a note that the ruling was largely expected, but it adds to the uncertainty.

“The path forward depends on whether the mine can resume operations while new contract negotiations take place or if it remains offline which could eventually lead to international arbitration proceedings,” it added.

First Quantum filed a notification of intent to start arbitration proceedings against Panama, the company said on Nov. 26.

Contract renegotiation

The fierce opposition toward the deal is becoming a major factor in the country’s May 2024 presidential election. Candidates are pushing for more state control of the mine as they seek to assuage public anger.

Last week, former president Ricardo Martinelli proposed that Panama renegotiate the contract with the Canadian firm, to secure higher royalties and a stake in the project. Some polls make Mr. Martinelli, a millionaire businessman, the front-runner for the presidency, though a money-laundering conviction that he has appealed might stop him.

Martin Torrijos, another former president also running for the job again, wants the mine closed.

“Panama said no to metal mining,” he said recently.

The tougher line on the mine taken by Torrijos and independent hopeful Ricardo Lombana could help them electorally, lawyer and former Panamanian diplomat Roberto Ruiz said.

Politicians have taken a hit as discontent mounts: official data shows that political parties lost over 15,000 members between Oct. 19 and Nov. 23, with the ruling party worst affected.

Three presidential hopefuls privately told Reuters that tensions are so high that the wrong remark could cost them victory, and fear protesters arriving on their doorsteps.

“Today, Panama needs this mine,” one of the presidential challengers said. “What we are doing is utter stupidity.

“Talking about a total shutdown of the mine is preaching to the choir,” the contender added. “To say what I just said in public is to ruin one’s chances of winning the election, but one also cannot overlook that a large part of the population – less organized and less vocal – understands the mine is necessary.”

The mine is a significant business for the Central American nation, contributing about 5% of Panama’s GDP. J.P. Morgan warned this month that the odds of Panama losing its investment-grade rating would rise significantly if the contract is revoked.

Panama’s top court ruled against First Quantum’s previous contract in 2017. The decision was upheld in 2021, but the current government allowed the miner to keep operating while both parties negotiated a new deal.

For First Quantum, the Panama ruling would be a repeat of its decade-old experience in the Democratic Republic of the Congo. The company exited DRC in 2012 after it filed an arbitration procedure against the African country for canceling its mining contract.

First Quantum has spent about $10 billion in developing the Cobre Panama mine in over a decade. Cobre Panama produced 112,734 tonnes of copper in the third quarter and accounted for about 46% of its overall third-quarter revenue of $2.02 billion, according to the company.

Panama, home to some of the world’s newest and biggest untapped resources, has seen unprecedented opposition to mining after First Quantum’s contract was approved by parliament last month.

In response to the protests, Panama’s government enacted a bill in November banning all new mining concessions and extensions that legal experts have said would prevent the two parties from negotiating a new deal.

Panama’s trade ministry has rejected more than 10 mining concessions and extension requests to abide by the new ban.

The government nearly passed legislation that would have revoked First Quantum's Oct. 20 contract, the AP reported, but it backtracked in a debate in the National Assembly on Nov. 2.

Protesters’ last hope was for Panama’s courts to declare the contract unconstitutional, according to the AP.

This story was reported by Reuters. Natalia Siniawski contributed reporting. Material from The Associated Press was used in this report.