By Divya Rajagopal
TORONTO, July 22 (Reuters) – Panama is considering creating a state-owned mining firm to partner with Canada’s First Quantum on the re-opening of the shuttered flagship Cobre Panama copper mine, two people familiar with the development told Reuters.
The mine, one of the world’s largest, was shut down in 2023 after Panama’s Supreme Court ruled First Quantum’s 20-year-old mining contract was unconstitutional, amid widespread opposition on environmental and governance grounds.
That wiped out 4.5% of Panama’s GDP, IMF data showed, as well as more than 1% of global copper production and 40% of First Quantum’s revenues.
Panama’s President Jose Mulino was elected in 2024 after intense public unrest over the mine on a pledge to finalise the shutdown after an audit. Two years later, facing unemployment around 10% and with copper prices near record levels, reopening may look more attractive.
The government has allowed the company to sell the last copper concentrate mined before the closure, restart its power plant inside the mine, and conclude an environmental audit that gave the mine a compliance score of 88%.
“It is clear that the government wants to open the mine with First Quantum,” said a person who had advised the government about the mine in the past. “But it still fears social unrest.”
First Quantum declined to comment. Panama’s Commerce Minister’s office did not respond to email and phone queries by Reuters.
DIFFERENT PROPOSALS UNDER CONSIDERATION
The possibility of a public-private partnership between a Panama-owned entity and First Quantum, giving the miner operational control of the facility, is one of a few proposals under consideration, the sources said.
Under a partnership scenario, First Quantum would have a 60% to 65% stake in the mine, with 35% to 40% owned by Panama, one of the sources said, who did not wish to be quoted as they are not authorized to speak to the media.
First Quantum would receive a higher share because of investments the company made in the mine, one of the sources said.
A revival of the mine would help First Quantum get on the road to debt recovery, as well as bringing in new sources of copper to the market that is fundamentally in short supply.
A state-owned entity could be a workaround for a Panamanian law passed in 2023 that bans new mining concessions.
The law is ambiguous regarding concessions granted to a state-owned entity, said one person familiar with Panama’s legal framework, adding that there is an option under Panamanian law for a state entity to be created for public-private partnerships.
The underlying mining concession would be owned by Panama.
LEASING OPTION ALSO ON THE TABLE
Public-private ventures are becoming a common practice in resource-rich countries that want higher control over the resources and also get social license for mining projects, with Chile and Zambia, among others, adopting such models.
A further option being weighed is leasing the mine to First Quantum, with the government receiving a royalty payment and collecting tax from revenue earned. It is not clear which of the options the government might choose.
In July, Panama’s Commerce and Industry Minister Julio Molto said the government would take its decision by the end of this year, and that Panama will have “complete sovereignty” over the mine issue.
Meanwhile First Quantum has suspended an arbitration that it had launched against Panama over the mine, where it was seeking compensation worth $20 billion from the country.
(Divya Rajagopal in Toronto; Editing by Veronica Brown and Jan Harvey)
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