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Panama to shut down First Quantum mine after ruling, President says

29th November 2023

By: Bloomberg

  

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Panama’s government said it will shut a giant copper mine owned by First Quantum Minerals, damping hopes that the company might be able to reach a new deal to keep operating.

Authorities will start “the transition process for the orderly and safe closure of the mine,” President Laurentino Cortizo said in a post on X Tuesday, after the nation’s supreme court ruled against the miner.

The move will deprive the government of one of its biggest sources of revenue and increases the chances of a legal battle between the Canadian miner and Panama in international arbitration. Cortizo didn’t say how long the process might take.

On Tuesday, the court ruled against a law approving a contract, sealing the doom of an operation that produces more than 1% of global copper output.

The event looks set to tighten global mine supply further next year, although there’s uncertainty about how long the shutdown will last, Fan Rui, an analyst at Guoyuan Futures Co., said by phone from Beijing.

First Quantum’s shares fell as much as 8.3% in Toronto on Tuesday, before paring most of that decline, while Panama’s dollar bonds dropped as the government faces the prospect of losing a large source of revenue. On commodity markets, copper hit $8,500 a ton on the London Metal Exchange on Wednesday, the highest since September 15, before trading little changed.

The company declined to comment on Cortizo’s statement.

‘TERRIBLE’ OUTLOOK

The implications of the mine closure for Panama’s fiscal outlook are “terrible,” said Ricardo Penfold, a managing director at Seaport Global.

“The country is running a fiscal deficit of 5% of GDP and this will increase it by about 0.6%,” Penfold said, in a written reply to questions. “And then you have the lawsuit.”

Mass protests erupted last month after Panama’s congress approved a new contract with First Quantum, which has since been forced to suspend production due to protesters’ blockades.

Environmentalists, labor unions and others have held protests since October 20 when congress passed a contract that gives First Quantum the right to produce copper for 20 years, with the option another 20-year extension.

Demonstrators argue that the contract violates national sovereignty and didn’t receive sufficient public debate prior to its approval in the legislature.

First Quantum began to wind down operations last week as small boats blocked the mine’s port, preventing the company from shipping supplies to the mine, while protesters and mining personnel clashed have clashed along the road to the site’s entrance.

--With assistance from Winnie Zhu.

(Updates to add analyst’s comment, prices in 5th, 6th paragraphs)

More stories like this are available on [bloomberg.com](https://www.bloomberg.com)

©2023 Bloomberg L.P.

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Canonical Link:https://www.bloomberg.com/news/articles/2023-11-28/panama-to-shut-down-first-quantum-mine-after-ruling-president

©2022 Bloomberg L.P. All Rights Reserved

Edited by Bloomberg

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