Cobre Panamá impasse hits First Quantum copper output

First Quantum Minerals' Q1 copper production fell 33%, partially impacted by the temporary suspension of exports from Panama during a dispute with the government over a new contract for its Cobre Panamá mine.

The rainy season in Zambia also affected its Sentinel and Kansanshi operations, according to the Canadian company.

Total first quarter copper production was 138,753t, down from 206,007t in 4Q22, First Quantum said in its Q1 results report. 

“The first quarter was difficult with production impacted at our three largest operations. At Cobre Panamá, production was interrupted by a temporary suspension of exports but returned to full production rates once the suspension was lifted. Our Zambian operations experienced a seasonal impact, however, the rainy season is nearing an end,” CEO Tristan Pascall said in a statement. 

Cobre Panamá produced 65,427t in Q1, down from 89,652t in the previous quarter, as output was interrupted on February 23 for 15 days as a result of export restrictions imposed by the country’s maritime port authority (AMP) amid the dispute with the government on renegotiating the concession.

“Following a resolution issued by the AMP, concentrate loading recommenced on March 9, 2023, with a record number of vessels loaded in March. Throughput returned to full capacity on March 10, 2023, two days after the restart of operations,” the company said. 

On March 8, First Quantum and the Panamanian government agreed to draft terms of the new concession for the US$10bn Cobre Panamá mine after months of wrangling over the contract.

The new contract will have an initial 20-year term with a 20-year extension option and guarantees minimum income of US$375mn/y for the State.

“The first quarter also had important milestones, including a refreshed contract with the government of Panama and a new partnership with Rio Tinto to progress the La Granja project in northern Peru,” added Pascall.

The new contract “is expected to be presented before the national assembly of Panama in the legislative term that commences on July 1, 2023, after having gone through a public consultation process and receipt of all required prior governmental approvals,” First Quantum said.

“The process now is very clear. We've been going through this public consultation period, and the last public hearing was on the 24th of April. So, that's behind us. And we expect that to close out very imminently. And then, yes, it will go to a cabinet decision,” the CEO said during the company’s Q1 earnings call. 

“In terms of any changes in the interim, whether that comes back from public consultation, we'll just have to see… We wouldn't expect on our side any major changes of major consequence, but we'll see how that goes, and that's part of our consultation with the government,” Pascall added.

“Despite the slow start, we remain comfortable with the guidance ranges provided in January.” 

Jackie Przybylowski, an analyst at BMO, told Minería en Línea that as operations recover from disruptions and other projects move forward, First Quantum production is expected to be "more weighted" in the second half of the year. "We maintain our market perform rating," she added.

Przybylowski said the market is closely watching the results of First Quantum's public consultations in Panama.