The Panama government has caused major disruptions in the mining industry with its latest ruling – Cobre Panama’s contract to operate the world’s second-largest copper mine is deemed unconstitutional.
First Quantum Minerals Ltd. stands to lose the most after the ruling, as the Vancouver-based exploration and mining company had planned to acquire a majority stake and operate Cobre Panama, known as the world’s largest untapped copper deposit.
This is a major setback for First Quantum, as the company had been banking on the full development of Cobre Panama for growth and revenue. While Panama laws generally promote development and foreign investment, the government declared that contracts like this one, which call for labor guarantees, job training, and an infrastructure construction component, go against the country’s own internal labor laws.
The loss of the contract is alarming news for First Quantum, as the company was preparing to take over Cobre Panama’s operations for roughly $1 billion, and had already started to invest in the project. The company is now expected to take a financial hit for the money already spent on its acquisition.
Officials from First Quantum and the Panama government are still in talks, hoping to find a resolution to the issue. The ruling has taken a toll on foreign investors’ trust in Panama as a safe haven of investment and ore mining.
Though the government aims to move forward on the project eventually, the contract termination could hurt the company’s long-term prospects in the region. Investors and stakeholders in First Quantum can only hope that the matter can be resolved in a way that prevents a further financial loss.
