Panama mulls state miner to revive Cobre Panama

Panama is considering creating a government mining company to partner with First Quantum Minerals (TSX: FM) in a move that could reopen the shuttered Cobre Panama copper mine, Reuters reported on Wednesday, citing people familiar with the discussions.

One proposal would give First Quantum a 60% to 65% stake, with the Panamanian state holding the balance and owning the mining concession. Another option would see the government lease the operation to the Canadian miner in exchange for royalties and taxes.

The mine, one of the world’s largest copper operations, was closed in late 2023 after Panama’s Supreme Court ruled First Quantum’s concession contract unconstitutional following nationwide protests over environmental and governance concerns. The shutdown erased about 4.5% of Panama’s GDP, removed more than 1% of global copper supply and wiped out roughly 40% of First Quantum’s revenue.

Shares in First Quantum Minerals initially gained 2.3% on Wednesday morning in Toronto before closing 0.7% down at $39.20 apiece, valuing the company at $32.9 billion (US$23.4 billion).

Law detour

The proposed state-owned structure could provide a legal path around a 2023 law banning new mining concessions. President José Raúl Mulino’s government has already allowed First Quantum to export stockpiled copper concentrate, restart the mine’s power plant and complete an environmental audit, which found the site met 88% of its environmental obligations.

Officials are expected to decide on a long-term solution before year-end. First Quantum has paused its US$20-billion arbitration claim against Panama while negotiations continue.

Analysts tapped by Reuters say a reopening would boost Panama’s economy, help ease a structurally tight global copper market and strengthen First Quantum’s balance sheet, though the government remains wary of renewed public opposition to the project.

“The discussions come as copper prices remain near record highs,” BMO Capital Markets said in note on Thursday.