First Quantum to use 'all available legal means' against Panamanian govt
Canada’s First Quantum Minerals said on Friday that it is doing everything possible to defend itself and its stakeholders from the Panama government’s “unnecessary actions, including through all available legal means,” after President Laurentino Cortizo ordered operations at its flagship Cobre Panamá copper-gold mine halted.
The government had issued local subsidiary Minera Panamá a December 14 deadline to sign a new concession agreement that would see the miner pay US$375mn a year to the State from the mine's proceeds.
The Vancouver-based company added that its goal remains to find a "win-win" resolution with the government that will safeguard 40,000 jobs and protect the investment of US$6.5bn. It has a projected mine life of 34 years after starting commercial operations in 2019.
“We are doing everything possible to support the Cobre Panamá workforce, preserve the value and integrity of the mine and defend First Quantum and its stakeholders from the government’s unnecessary actions, including through all available legal means,” the company said a statement.
Authorities and the company began negotiating a new concession contract at the end of 2021 after Cortizo promised to reap additional benefits for the State from Panama's most significant private investment.
“The national government will seek the best options for the sustained operation of the mine, through a contract with fair benefits,” Cortizo said via Twitter on Thursday.
“We are disappointed by the government’s actions. The government seeks a refreshed concession contract that does right by the country, its people, and its economy, and we believe our proposal achieves just that,” First Quantum said in its statement. “Our most recent proposal would make Cobre Panamá one of the highest payers of royalties amongst copper-producing nations in the Americas.”
In January 2022, First Quantum had agreed to increase its royalty payments for the Cobre Panamá mine to US$375mn a year. The government's proposal also included raising royalty payments to between 12% and 16% from 2% and paying income tax (ISLR) at a rate of 25%, something from which the miner had been exempted up until now.
Legal debate
The government said that all the administrative measures adopted at Cobre Panamá seek to comply with the supreme court, which found law No. 9 from 1997 unconstitutional. That law protected the contract signed between the State and the company, then known as Minera Petaquilla (today Minera Panamá).
First Quantum argued that “the Minera Panamá contract was renewed in 2017 and remains in legal standing for a period until 2037. Since 1997, the mine was developed with invested capital of more than US$10bn and has been in operation since 2019 on a legal basis at all times.”
Lawyer Guillermo Cochez, who specializes in conciliation and arbitration and has experience defending transnational companies in Panama, said the national assembly rejected the contract signed between Minera Panamá and the government of Juan Carlos Varela in 2017.
"President Varela, trying to support the mining company, sent a draft contract to replace the one that the court had declared unconstitutional, and the assembly said that ‘there is no way we are going to discuss a new contract’," Cochez, a former Panamanian ambassador to the OAS, told BNamericas.
Pedro Meilán, a partner at the Panama-based law firm Meilán y Asociados, believes Minera Panamá's concession is legally still in force and has not been canceled because Panamanian law on unconstitutionality states that if a regulation (law No. 9) is declared unconstitutional, it cannot be applied retroactively.
"The only thing that can cancel that contract is a lawsuit in the third administrative court requesting that it be declared void, and that hasn't happened," he told BNamericas on Thursday.
Meilán said the whole situation with Minera Panamá is undermining legal certainty for investors, adding that the resolution announced by the government on Thursday "is not understood."
National Bank analyst Shane Nagle downgraded First Quantum Minerals to sector perform from outperform with an unchanged price target of Cdn$30. The analyst cited uncertainty in ongoing law No. 9 negotiations in Panama and recent share price outperformance for the downgrade.
Cobre Panamá is one of Latin America’s largest copper producers, with output guidance of 330,000-360,000t for 2022.
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News in: Political Risk & Macro (Canada)
Govt gives First Quantum 10 business days to present care and maintenance plan for Cobre Panamá
The move follows the order by Panama's President Laurentino Cortizo to close the copper-gold operation last Friday after failing to reach an agreem...
First Quantum to use 'all available legal means' against Panamanian govt
The government ordered local subsidiary Minera Panamá to halt operations after failing to sign a new concession agreement by the December 14 deadline.
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