View of the Cobre Panama mine, of Canadian First Quantum Minerals, in Donoso, Panama, December 6, 2022.
REUTERS/Aris MartÃnez/File Photo© Thomson Reuters
By Divya Rajagopal and Valentine Hilaire
TORONTO (Reuters) -Shares in First Quantum Minerals closed down 28% on Monday after Panama's government said it will hold a referendum on whether to scrap a mining contract awarded to the Canadian mining company on Oct. 20.
The sell-off wiped C$5.6 billion ($4.1 billion) from the market value of Toronto-listed shares in First Quantum, which operates one the biggest and the newest copper mine in the Central American country.
Shares of First Quantum closed at C$20 after falling as much as 30% earlier in the trading session.
President Laurentino Cortizo's decision to hold a binding referendum on Dec. 17 comes after 10 months of disputes regarding First Quantum's open pit mine at Cobre Panama. Thousands of people hit the streets over last weekend after the government approved the new contract with the company. Protests against the mine continued on Monday.
Panama's electoral board said on Monday that the conditions for a referendum were not favorable amid factors including lack of legal provisions and the short time frame for arranging the vote, adding further complexity to the process. Shortly after, the Panama government said it authorized the interior minister to present a law to mandate the vote.
The company's operations were also disrupted as protesters stormed a port used by the company on Sunday.
First Quantum said on its website that it condemned the "illegal and violent" attempt to disrupt operations at the port, adding that the incident represents a significant threat to its local unit's operations and the safety of its staff. It did not immediately respond to a request for further comment.
Panama's government and the company had agreed to a contract that would guarantee Panama annual income of $375 million while allowing First Quantum's local unit to operate the Cobre Panama mine for at least 20 years.
Cobre Panama represents nearly 5% of Panama's gross domestic product and 1.5% of global copper production, according to RBC Capital Markets.
"While it may be tempting to buy these shares on (Monday's) weakness, we do not see a clear path to a resolution of this issue aside from either significantly higher royalties or international arbitration," Jefferies said in a note to clients.
The issue is likely to be an "overhang" on First Quantam's shares until the outcome of elections in Panama next May, it added.
($1 = 1.3844 Canadian dollars)
(Reporting by Divya Rajagopal in Toronto; Additional reporting Eli Moreno in Panama City and Valentine Hilarie; Editing by Tomasz Janowski, Will Dunham and Jan Harvey)
By Divya Rajagopal and Valentine Hilaire
TORONTO (Reuters) -Shares in First Quantum Minerals closed down 28% on Monday after Panama's government said it will hold a referendum on whether to scrap a mining contract awarded to the Canadian mining company on Oct. 20.
The sell-off wiped C$5.6 billion ($4.1 billion) from the market value of Toronto-listed shares in First Quantum, which operates one the biggest and the newest copper mine in the Central American country.
Shares of First Quantum closed at C$20 after falling as much as 30% earlier in the trading session.
President Laurentino Cortizo's decision to hold a binding referendum on Dec. 17 comes after 10 months of disputes regarding First Quantum's open pit mine at Cobre Panama. Thousands of people hit the streets over last weekend after the government approved the new contract with the company. Protests against the mine continued on Monday.
Panama's electoral board said on Monday that the conditions for a referendum were not favorable amid factors including lack of legal provisions and the short time frame for arranging the vote, adding further complexity to the process. Shortly after, the Panama government said it authorized the interior minister to present a law to mandate the vote.
The company's operations were also disrupted as protesters stormed a port used by the company on Sunday.
First Quantum said on its website that it condemned the "illegal and violent" attempt to disrupt operations at the port, adding that the incident represents a significant threat to its local unit's operations and the safety of its staff. It did not immediately respond to a request for further comment.
Panama's government and the company had agreed to a contract that would guarantee Panama annual income of $375 million while allowing First Quantum's local unit to operate the Cobre Panama mine for at least 20 years.
Cobre Panama represents nearly 5% of Panama's gross domestic product and 1.5% of global copper production, according to RBC Capital Markets.
"While it may be tempting to buy these shares on (Monday's) weakness, we do not see a clear path to a resolution of this issue aside from either significantly higher royalties or international arbitration," Jefferies said in a note to clients.
The issue is likely to be an "overhang" on First Quantam's shares until the outcome of elections in Panama next May, it added.
($1 = 1.3844 Canadian dollars)
(Reporting by Divya Rajagopal in Toronto; Additional reporting Eli Moreno in Panama City and Valentine Hilarie; Editing by Tomasz Janowski, Will Dunham and Jan Harvey)
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