Several hours after the Supreme Court of Panama ruled that the Copper Mine Cobre Panama contract violated the country’s constitution, the President of Panama announced that the profitable copper mine owned by Canadian miner First Quantum would be shut down.

In a televised address on Tuesday evening, President Laurentino Cortizo stated that “the orderly and safe closure of the mine” would commence as soon as the Supreme Court’s verdict was officially published in the official gazette.

Protests in the streets have broken out due to the outrage that the Cobre Panama scandal has created in the country. The rallies against the mine started as relatively minor environmental protests. Still, they have expanded to include larger demonstrations against the government in response to allegations that the contract was excessively generous.

On Tuesday, First Quantum said it had completed putting the mine into care and maintenance after suspending commercial production.

While the corporation has indicated that it would want to avoid the process of international arbitration if it were feasible to do so through pre-arbitration negotiations with the government of Panama, the verdict places the company on the path of international arbitration, which is a lengthy and uncertain procedure.

In exchange for $375 million in yearly revenue to Panama, Panama’s government agreed upon the deal that is currently under dispute a month ago. This contract granted First Quantum a mining right for twenty years, with the option to extend it for another twenty years.

“We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023,” stated Supreme Court President Maria Eugenia Lopez on Tuesday. “We have decided to declare it unconstitutional.”

First, Quantum accepted the decision, and the company reaffirmed its “unwavering commitment to regulatory compliance in all aspects of our operations within the country.” Several groups of protesters on social media have stated that they want to continue their demonstrations until the verdict is published in the official gazette.

First Quantum (FM.TO) stock finished the day with a loss of 0.8%. Since the demonstrations began in late October, the marketplace worth of the corporation has decreased by more than ten billion Canadian dollars, equivalent to seven and a half billion dollars. The mine was eventually compelled to halt operations.

Additionally, the decision will have repercussions for the copper market, given that Cobre Panama is responsible for around one percent of the world’s copper production. On the London Metal Exchange, the benchmark price of copper was $8,441 per metric ton, representing a 0.9% increase.

Analysts believe that the worldwide excess of copper might be eliminated in 2024 due to the diminishing supply of copper from Panama and Peru.

FACTOR OF ELECTION

Panama contributes 5% of the Central American country’s gross domestic product, making it an equally significant industry. At the beginning of this month, J.P. Morgan issued a warning that the likelihood of Panama losing its investment-grade rating would dramatically increase if the contract were rescinded.

The vehement resistance to the agreement was becoming a key element in the presidential election that was going to take place in the country in May of 2024. Candidates were advocating for more state control of the mine throughout the race.

Following the release of a statement on Tuesday, the Panama division of the corporation stated that it would “remain attentive to constructive dialogue” over the mining contract before choosing what course of action to take.

According to a representative of the Canadian Ministry of Foreign Affairs, Canada respects the decision of Panama’s Supreme Court of Justice and is closely monitoring the contract negotiations.

Last Monday, Ricardo Martinelli, a former president, a billionaire businessman, and a strong presidential candidate, requested that Panama renegotiate the contract with the Canadian company to get more significant royalties and a part in the project.

However, in reaction to the demonstrations, the government of Panama passed a measure in November that prohibited any new mining concessions or renewals. According to legal experts, this would make it impossible for the two sides to negotiate a new agreement.

In 2017, the highest court in the nation rejected the prior contract that First Quantum had entered into. Even though the ruling was affirmed in 2021, the current administration permitted the miner to continue operations while both sides negotiated a new agreement.

It would be a replay of First Quantum’s experience in the Democratic Republic of the Congo, where it left in 2012 after pursuing an arbitration procedure against the African nation for canceling its mining contract. The verdict in Panama would be a duplicate of that experience.

To resolve the lawsuit, First Quantum sold its assets to Eurasian Natural Resources Corporation PLC for $1.25 billion ($1.25 billion).

The business has invested around ten billion dollars in developing the Cobre Panama mine for the past ten years. According to the corporation, the mine was responsible for around 46 percent of its total income during the third quarter, which was $2.02 billion. During that period, the mine produced 112,734 metric tons of copper.