Panama's Search for Solutions for Cobre Panama Mine Dispute with First Quantum Minerals

Panama is approaching a potential solution for its major mining asset, the Cobre Panama mine. President José Raúl Mulino has indicated that the government is considering "novel ideas" to settle the ongoing disputes with First Quantum Minerals regarding the mine's operations. However, Mulino has emphasized that any potential agreement will require First Quantum to withdraw its arbitration claims first.

The Cobre Panama mine is critically important to the Panamanian economy, contributing around 5% to the nation’s GDP and 1.5% of global copper production. Unfortunately, the mine was forced to close in late 2023 due to legal battles surrounding its operational contract.

In October 2023, former President Laurentino Cortizo approved a controversial 40-year extension of the mine's operating contract, which mandated a minimum annual payment of $375 million. Despite this, the contract met with significant backlash from the public, with many opponents arguing that it prioritized corporate interests over environmental integrity and national welfare. Following these protests, Panama's Supreme Court ruled the contract unconstitutional, leading to the mine's shutdown.

The closure has adversely affected both First Quantum and the local populace. The mine accounted for approximately 40% of First Quantum's revenue while providing thousands of jobs to residents. This economic setback has also led to a downgrade in the country's credit rating, with S&P Global lowering it to BBB— in late 2024, citing deteriorating fiscal flexibility and a high debt burden.

Since beginning his term in July 2024, Mulino has faced the dual challenge of managing the implications of the mine’s closure and coping with a severe drought that has disrupted operations at the Panama Canal. This vital shipping route has seen reduced activity due to water shortages, further complicating the nation’s economic situation.

Meanwhile, First Quantum has increased its efforts to improve its public image and engage with local communities. A survey conducted in December 2024 by DOXA revealed a shift in public sentiment, with 56% of Panamanians now supportive of renegotiating the mine's contract. This marks a significant change from January 2024, when as many as 81% preferred the mine be permanently shut down.

Nevertheless, formal negotiations between the Panamanian government and First Quantum have yet to commence. President Mulino has reiterated that any discussions will have to start with the company dropping its international arbitration claims.

Panama, Mining, Arbitration