People Power and Pushback: First Quantum’s Stock Price Plummets Amidst Massive Protests in Panama
Tweet above: The organization Panamá Vale Más Sin Minería speaks out against the announced referendum, saying that it’s merely a trick to buy time and demobilize strong organizing efforts that have been clear in their demands. “The consultation is in the streets! The people are in the streets! We don’t want a mining contract.”
Panama’s electoral college has since said conditions are not ripe to hold a fair referendum in December, leaving the issue in a legal standoff as the Minister of the Interior presents a bill before Congress to mandate the referendum. Uncertainty over the mine’s future sent First Quantum Minerals’ stock price plummeting by 39% this week.
The government has since declared a moratorium on all future mining activity, but has done nothing to address the strong demands from civil society that the contract for the Cobre Panamá copper mine be cancelled.
Efforts to open up Panama to transnational mining
The current government has made mining a priority, promoting it as a pillar of the country’s post-pandemic economic recovery. Even during the COVID-19 pandemic, the government awarded special privileges to the mine to keep operating in spite of clear health risks and the deaths of several workers. The country has been working to create an institutional framework to allow for large-scale, transnational mining projects, while also opening up several tracts of protected land to mining concessions without meaningful consultation.
For its part, First Quantum Minerals is strongly promoting the massive open-pit copper mine within the context of the energy transition, arguing that it is needed to serve the market for electric vehicles and renewable energy infrastructure. Communities say this framing is part of a larger “greenwashing” of the energy transition. Keith Green, country manager for Cobre Panama, claimed in an interview following the 2021 UN Climate Change Conference in Glasgow (COP26), “Panama can make a significant contribution to meet this global demand for cleaner energy through the Cobre Panamá mine.”
But as protests continue this week, Panamanians across diverse sectors are stating clearly: “Panama is Worth More without Mining.”
BLOG ENTRY
1 November 2023
Val Croft
1 November 2023
Val Croft
MINING WATCH CANADA
Communications Lead
A deal to allow operations to continue at one of the world’s biggest copper mines, high in the Panamanian mountain rainforest, is in limbo. Country-wide protests erupted last week in response to the announced deal and now the government says it’ll put the issue to a national referendum. Is this a new form of democratic accountability, or a government ruse to defuse massive public opposition?
Panama’s rainforests play a central role in the health of the Mesoamerican Biological Corridor, a cluster of protected areas and biodiversity hotspots stretching from southern Mexico to Panama. Smack in the middle of that protected area in Panama, however, is a massive open-pit copper mine owned by the Canadian company First Quantum Minerals.
The Cobre Panamá mine, run by First Quantum’s subsidiary Minera Panamá in the Donoso protected area, has long faced strong opposition locally and across the country. Communities have denounced widespread environmental harm and water contamination from mining operations at the country’s only active industrial mine site. Demands for clean-up and a cessation of activities have the strong backing of social movements organizing to protect the country’s rich biodiversity and prevent Panama from becoming “another mining country.”
Panama’s topography and its narrow, megadiverse territory – which includes more than 500 rivers – makes it highly vulnerable to the tremendous environmental and social harms of industrial mining.
President Laurentino Cortizo’s government is trying to change that, however. In spite of a 2017 Supreme Court ruling finding the Cobre Panamá mining concession unconstitutional – but allowing it to continue operating in legal limbo – the government entered into contract negotiations with the Canadian company to increase royalty payments and extend the life of the open-pit copper mine. Last week, the government announced that a deal had been finalized to extend the mine’s life for another 20 years, sending Panamanians into the streets in record numbers, in the face of violent police repression, to denounce the contract and demand it be annulled. Multiple court challenges have since been filed on the basis that the law that authorized the contract is unconstitutional.
Organizations like the Centro de Incidencia Ambiental - CIAM (the Centre for Environmental Advocacy) and Panama Vale Más Sin Minería (Panama is Worth More without Mining) – a coalition of conservation and environmental organizations, along with educators, workers, health care professionals, youth groups, Indigenous and small farmer communities – are in the streets denouncing the contract. For several years, they have called for a moratorium on all concessions and permits for metal mining throughout the country and the immediate cancellation of the 103 mining applications currently on file.
Despite facing police repression including dozens of arrests and tear gas attacks, demonstrations continue this week throughout the country.
Amidst this impressive display of citizen pushback, several things have happened in quick succession. The Panamanian government announced on October 20 that it would put the issue to a vote in a binding referendum scheduled for December 17. Immediately, organizations like Panamá Vale Más Sin Minería and CIAM denounced the move, arguing the referendum is a political tactic to punt the issue ahead a few months in the hopes that people aren’t so organized.
Communications Lead
A deal to allow operations to continue at one of the world’s biggest copper mines, high in the Panamanian mountain rainforest, is in limbo. Country-wide protests erupted last week in response to the announced deal and now the government says it’ll put the issue to a national referendum. Is this a new form of democratic accountability, or a government ruse to defuse massive public opposition?
Panama’s rainforests play a central role in the health of the Mesoamerican Biological Corridor, a cluster of protected areas and biodiversity hotspots stretching from southern Mexico to Panama. Smack in the middle of that protected area in Panama, however, is a massive open-pit copper mine owned by the Canadian company First Quantum Minerals.
The Cobre Panamá mine, run by First Quantum’s subsidiary Minera Panamá in the Donoso protected area, has long faced strong opposition locally and across the country. Communities have denounced widespread environmental harm and water contamination from mining operations at the country’s only active industrial mine site. Demands for clean-up and a cessation of activities have the strong backing of social movements organizing to protect the country’s rich biodiversity and prevent Panama from becoming “another mining country.”
Panama’s topography and its narrow, megadiverse territory – which includes more than 500 rivers – makes it highly vulnerable to the tremendous environmental and social harms of industrial mining.
President Laurentino Cortizo’s government is trying to change that, however. In spite of a 2017 Supreme Court ruling finding the Cobre Panamá mining concession unconstitutional – but allowing it to continue operating in legal limbo – the government entered into contract negotiations with the Canadian company to increase royalty payments and extend the life of the open-pit copper mine. Last week, the government announced that a deal had been finalized to extend the mine’s life for another 20 years, sending Panamanians into the streets in record numbers, in the face of violent police repression, to denounce the contract and demand it be annulled. Multiple court challenges have since been filed on the basis that the law that authorized the contract is unconstitutional.
Organizations like the Centro de Incidencia Ambiental - CIAM (the Centre for Environmental Advocacy) and Panama Vale Más Sin Minería (Panama is Worth More without Mining) – a coalition of conservation and environmental organizations, along with educators, workers, health care professionals, youth groups, Indigenous and small farmer communities – are in the streets denouncing the contract. For several years, they have called for a moratorium on all concessions and permits for metal mining throughout the country and the immediate cancellation of the 103 mining applications currently on file.
Despite facing police repression including dozens of arrests and tear gas attacks, demonstrations continue this week throughout the country.
Amidst this impressive display of citizen pushback, several things have happened in quick succession. The Panamanian government announced on October 20 that it would put the issue to a vote in a binding referendum scheduled for December 17. Immediately, organizations like Panamá Vale Más Sin Minería and CIAM denounced the move, arguing the referendum is a political tactic to punt the issue ahead a few months in the hopes that people aren’t so organized.
Ese referéndum de Nito es una trampa. Quiere desmotivar a la gente hasta el 17/12/23. Pareciera que quiere un mes para descansar y ponerse galano. El pueblo está en la calle. Él busca tiempo y salirse con la suya. EL PUEBLO HA SIDO CLARO. ¡NO AL CONTRATO MINERO! #PanamáSinMinería pic.twitter.com/Dt2L4tP6ea
— Panamá Vale Más Sin Minería (@sinmineria) October 30, 2023
Tweet above: The organization Panamá Vale Más Sin Minería speaks out against the announced referendum, saying that it’s merely a trick to buy time and demobilize strong organizing efforts that have been clear in their demands. “The consultation is in the streets! The people are in the streets! We don’t want a mining contract.”
Panama’s electoral college has since said conditions are not ripe to hold a fair referendum in December, leaving the issue in a legal standoff as the Minister of the Interior presents a bill before Congress to mandate the referendum. Uncertainty over the mine’s future sent First Quantum Minerals’ stock price plummeting by 39% this week.
The government has since declared a moratorium on all future mining activity, but has done nothing to address the strong demands from civil society that the contract for the Cobre Panamá copper mine be cancelled.
Efforts to open up Panama to transnational mining
The current government has made mining a priority, promoting it as a pillar of the country’s post-pandemic economic recovery. Even during the COVID-19 pandemic, the government awarded special privileges to the mine to keep operating in spite of clear health risks and the deaths of several workers. The country has been working to create an institutional framework to allow for large-scale, transnational mining projects, while also opening up several tracts of protected land to mining concessions without meaningful consultation.
For its part, First Quantum Minerals is strongly promoting the massive open-pit copper mine within the context of the energy transition, arguing that it is needed to serve the market for electric vehicles and renewable energy infrastructure. Communities say this framing is part of a larger “greenwashing” of the energy transition. Keith Green, country manager for Cobre Panama, claimed in an interview following the 2021 UN Climate Change Conference in Glasgow (COP26), “Panama can make a significant contribution to meet this global demand for cleaner energy through the Cobre Panamá mine.”
But as protests continue this week, Panamanians across diverse sectors are stating clearly: “Panama is Worth More without Mining.”
Miner First Quantum faces rocky road as Panama protesters dig in
By Valentine Hilaire and Divya Rajagopal
View of the Cobre Panama mine, of Canadian First Quantum Minerals, in Donoso, Panama
President Laurentino Cortizo's decision to call the referendum followed days of protests by thousands of people over concerns the contract is too favorable to First Quantum, involved corruption, and that the mine is harmful to the environment.
First Quantum on Tuesday reaffirmed its commitment to the rule of law with the objective of benefiting Panama. First Quantum and its local unit Minera Panama declined to comment further.
The government is also promoting a bill in Congress to overrule the law enacting the contract and ban all future concessions. Panama's top court has also agreed to consider six lawsuits challenging the contract.
The stakes are high for both First Quantum and Panama's economy. A decision to cancel the Cobre Panama mine's contract could slow Panama's GDP growth from an anticipated 6% in 2023 to just 1% without the mine in operation on an annualized basis
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The mine, which accounts for approximately 5% of the country's GDP and supports more than 49,000 direct and indirect jobs, is Panama's second-largest revenue source after the Panama Canal.
The odds of Panama losing its investment-grade rating would rise significantly if the contract is revoked, J.P Morgan warned on Tuesday. Despite that risk, protests calling for the contract's termination persist.
Panama should not be "sold for a few cents," said protester Adriana Linares. "People on the street have a very clear objective, which is to strike down the approved contract."
The government has not commented on whether the mine must cease production if the contract is rejected.
A spokesperson for Canada's Global Affairs department, in an email to Reuters, said Canada has consistently advocated for a resolution that benefits all Panamanians and is monitoring the situation.
The mine, which opened in 2019, accounts for 1% of global copper production and cost $11 billion to build. It is considered important to the global energy transition because of its long life of at least 20 years, with copper being an important metal in making electric-vehicle batteries.
NOT FOLLOWING ANY PLAYBOOK
At least half a dozen analysts downgraded the stock this week.
"This process is not following any playbook that we have seen before." said Jackie Przybylowski, a mining analyst with Bank of Montreal.
The number of workers per shift has been reduced at the mine due to food shortages prompted by road blockades and protests, Michael Camacho, a leader of the mine's workers union told Reuters.
Panamanians are set to elect a new president and renew the seats of Congress and local governments in May 2024.
"The timing has been highly unfavorable," former Finance and Economy Minister Frank De Lima told Reuters, adding the scenario could be different if it was not for the upcoming election.
Most presidential candidates backed the approval of a contract during its negotiations. Members of the ruling party currently hold the majority of the seats in Congress, and backed the new contract.
Independent lawmaker Juan Diego Vasquez, who did not support the contract, told Reuters the ongoing demonstrations show "Panamanians have understood well the damage that having bad lawmakers can do," adding the protests will influence the outcome of next election.
Another independent lawmaker, Edison Broce, told Reuters that open-pit metal mining is damaging to Panama's environment, and it should focus on boosting its tourism industry.
Broce is vouching for an orderly and gradual complete shutdown of the mine, as "costs of mining outweigh its benefits."
($1 = 1.3875 Canadian dollars)
By Valentine Hilaire and Divya Rajagopal
November 1, 2023
View of the Cobre Panama mine, of Canadian First Quantum Minerals, in Donoso, Panama
REUTERS/Aris Martínez/File Photo
Nov 1 (Reuters) - Battered Canadian mining company First Quantum Minerals (FM.TO) is bracing for a rocky road ahead as Panama moves to strike down its contract to operate one of the world's largest copper mines.
Panama's shock decision on Sunday to call a binding vote on whether to scrap the mine's recently struck 20-year contract sparked a sell-off in Vancouver-based First Quantum shares. Investors wiped out about C$8.35 billion ($6 billion), or 48%, from the company's market value this week, registering doubts about First Quantum's ability to operate its crown jewel.
Nov 1 (Reuters) - Battered Canadian mining company First Quantum Minerals (FM.TO) is bracing for a rocky road ahead as Panama moves to strike down its contract to operate one of the world's largest copper mines.
Panama's shock decision on Sunday to call a binding vote on whether to scrap the mine's recently struck 20-year contract sparked a sell-off in Vancouver-based First Quantum shares. Investors wiped out about C$8.35 billion ($6 billion), or 48%, from the company's market value this week, registering doubts about First Quantum's ability to operate its crown jewel.
President Laurentino Cortizo's decision to call the referendum followed days of protests by thousands of people over concerns the contract is too favorable to First Quantum, involved corruption, and that the mine is harmful to the environment.
First Quantum on Tuesday reaffirmed its commitment to the rule of law with the objective of benefiting Panama. First Quantum and its local unit Minera Panama declined to comment further.
The government is also promoting a bill in Congress to overrule the law enacting the contract and ban all future concessions. Panama's top court has also agreed to consider six lawsuits challenging the contract.
The stakes are high for both First Quantum and Panama's economy. A decision to cancel the Cobre Panama mine's contract could slow Panama's GDP growth from an anticipated 6% in 2023 to just 1% without the mine in operation on an annualized basis
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The mine, which accounts for approximately 5% of the country's GDP and supports more than 49,000 direct and indirect jobs, is Panama's second-largest revenue source after the Panama Canal.
The odds of Panama losing its investment-grade rating would rise significantly if the contract is revoked, J.P Morgan warned on Tuesday. Despite that risk, protests calling for the contract's termination persist.
Panama should not be "sold for a few cents," said protester Adriana Linares. "People on the street have a very clear objective, which is to strike down the approved contract."
The government has not commented on whether the mine must cease production if the contract is rejected.
A spokesperson for Canada's Global Affairs department, in an email to Reuters, said Canada has consistently advocated for a resolution that benefits all Panamanians and is monitoring the situation.
The mine, which opened in 2019, accounts for 1% of global copper production and cost $11 billion to build. It is considered important to the global energy transition because of its long life of at least 20 years, with copper being an important metal in making electric-vehicle batteries.
NOT FOLLOWING ANY PLAYBOOK
At least half a dozen analysts downgraded the stock this week.
"This process is not following any playbook that we have seen before." said Jackie Przybylowski, a mining analyst with Bank of Montreal.
The number of workers per shift has been reduced at the mine due to food shortages prompted by road blockades and protests, Michael Camacho, a leader of the mine's workers union told Reuters.
Panamanians are set to elect a new president and renew the seats of Congress and local governments in May 2024.
"The timing has been highly unfavorable," former Finance and Economy Minister Frank De Lima told Reuters, adding the scenario could be different if it was not for the upcoming election.
Most presidential candidates backed the approval of a contract during its negotiations. Members of the ruling party currently hold the majority of the seats in Congress, and backed the new contract.
Independent lawmaker Juan Diego Vasquez, who did not support the contract, told Reuters the ongoing demonstrations show "Panamanians have understood well the damage that having bad lawmakers can do," adding the protests will influence the outcome of next election.
Another independent lawmaker, Edison Broce, told Reuters that open-pit metal mining is damaging to Panama's environment, and it should focus on boosting its tourism industry.
Broce is vouching for an orderly and gradual complete shutdown of the mine, as "costs of mining outweigh its benefits."
($1 = 1.3875 Canadian dollars)
Panama’s investor-friendly image at risk from anti-mining rage
Bloomberg News | October 31, 2023 |
Since Monday, protests against the contract have led to clashes between protesters and the police and the closure of major roads across the country.
Tear gas and rocks
First Quantum’s troubles are playing out in a country led by one of the most pro-business governments in the region. But faced with growing disorder and with a general election half a year away, President Laurentino Cortizo was pressured into calling for a referendum.
It failed to quell the protests. On Monday evening, demonstrators in the capital launched rocks and fireworks toward congress and ripped down barricades, while police fired tear gas back. Some businesses boarded up their windows, while graffiti tags such as “no to mining” and “Panama is not for sale” were sprayed on walls throughout the city.
Demonstrator Patricia Miranda, 30, held a sign saying “without water there is no beer”, and explained that her biggest concern is water contamination.
“We’ve been living years of corruption, lockdowns and pandemic mismanagement. This is about the mine, but also all the corruption,” she said.
Oil and mining projects face increased hostility across Latin America, a major source of commodities producer from iron ore to soybeans, over concerns about environmental damage. In August, Ecuador’s voters backed referendums to close a major oil project in the Amazon and also restrict gold and copper mining.
Gustavo Petro won Colombia’s 2022 election on a pledge to halt new oil exploration contracts, while Mexico nationalized its lithium deposits and froze new hydrocarbon licenses for private investors. In Brazil, mining has come under greater scrutiny from environmental authorities and has been met with public opposition after two deadly dam disasters since 2015.
Loss of faith
Panama’s economy has expanded at an average annual rate of more than 6% over the last two decades, one of the fastest rates in the Americas, led by public works projects and real estate. But the loss of faith in the country over its treatment of the mine may make those growth rates harder to sustain, according to JPMorgan Chase & Co.
“If the contract is revoked we think that the probability that Panama loses its investment grade rating in the short term rises significantly, as lower trust in the country’s institutional framework would likely drive in lower investment and lower medium-term growth,” JPMorgan strategist Steven Palacio wrote in a note.
Panamanians were already angry about corruption, rising living costs and high unemployment. The mine deal was “the straw that broke the camel’s back”, according to former finance minister de Lima, who is an opponent of the government.
The protests have been backed by labor unions, environmental campaigners and students, among others.
Opposition lawmaker Walkiria Chandler D’Orcy said the call for a referendum isn’t enough to stop the protests. She said the deal is unconstitutional and demanded its repeal.
On Monday, the electoral court said it couldn’t hold the referendum until congress passed a law. The government then said it planned to introduce a bill to enable the vote.
In the meantime, the Supreme Court is considering two suits to declare the First Quantum deal unconstitutional.
Panama holds general elections on May 5, with Cortizo ineligible for a second term due to a rule against consecutive terms. Cortizo’s Revolutionary Democratic Party is likely to do poorly, according to polls.
Former President Ricardo Martinelli, another pro-business politician who presided over soaring growth when he led the country from 2009 to 2014, is ahead with more than 40% support, even though he spent time in jail on corruption charges.
Deficit ceiling
If the country does vote to revoke the mining contract in the Dec. 17 referendum, the government will need to figure out how to fill a large hole in its fiscal accounts.
First Quantum’s mine produces about 1.5% of all the world’s copper output, and provides the government with revenue equivalent to about 0.9% of gross domestic product. Without those funds, Panama will likely breach its deficit ceiling of 3% of GDP, said Ramiro Blazquez, head of research and strategy at BancTrust & Co. in Buenos Aires.
First Quantum’s CEO Tristan Pascall said on a call with investors last week that the company is aware of the protests and will work harder at communicating the benefits that mining can provide to communities in Panama.
Earlier this year, Fitch Ratings said a deal between the government and First Quantum over royalty and tax payments would make the mine the nation’s largest tax contributor after the Panama canal.
Fitch rates the county BBB-, one notch above junk, while Moody’s Investors Service and S&P Global Ratings rate it two notches above.
The vote threatens “permanent lost revenues” and the government doesn’t appear to have a plan B for its budget in that event, said Siobhan Morden, head of Latin America Fixed Income Strategy at Banco Santander SA.
That puts the nation’s investment grade credit rating “at serious risk”, she said.
(By Michael McDonald and Zijia Song)
Reuters | October 31, 2023 |
Cobre Panamá operation. (Image by First Quantum Minerals).
Shares in Canadian miner First Quantum Minerals fell 17% on Tuesday, adding to the previous day’s steep fall, as the uncertainty over the future of its key Panama copper mine encouraged investors to cut their exposure.
President Laurentino Cortizo said on Sunday Panama would hold a referendum to decide whether to scrap a contract with First Quantum’s local unit following days of protests by thousands of people opposed to the open pit copper mine project.
In its first public statement, First Quantum said on Tuesday that “unconstitutionality challenges” have been brought against Law 406, which approves the refreshed mining concession contract for the company’s Cobre Panama mine.
The company said currently two such challenges have been admitted to be heard by the Supreme Court of Justice in the country.
“First Quantum has always been an advocate of Panama and its people and is committed to the rule of law with the objective to achieve benefits the country,” the company said in the statement.
In early trades, First Quantum shares were down 17.3% at C$16.6, while the broader Canadian share index was flat.
First Quantum said last week the enactment of Law 406 marks the final step in revising the legal framework for the Cobre Panama mine.
(By Arunima Kumar, Mrinalika Roy and Divya Rajagopal; Editing by Shilpi Majumdar and Jonathan Oatis)
Panama electoral court says it can’t hold a mine referendum
Bloomberg News | October 30, 2023 |
The Cobre Panama mining complex includes two open pits, a processing facility, two power plants and a port. (Image courtesy of Cobre Panama.)
Panama’s electoral court said it can’t organize a referendum over a flagship copper mine owned by First Quantum Minerals Ltd., as requested by President Laurentino Cortizo on Sunday, because that would require congress to first pass a law.
“At this moment, there are no conditions to organize the intended popular consultation,” the electoral authority said in a statement Monday, also citing logistics and other legal reasons that prevent the organization of a referendum.
The government on Monday afternoon said it planned to introduce a bill to congress on the referendum.
In its statement, the authority highlighted that preparing the referendum would imply an additional effort to organizing the May 5 general election, when the country will elect its president and legislators.
Panama’s dollar bonds pared losses, with notes due in 2036 slumping 1.4 cents to 95.7 cents on the dollar after trading lower early in the day, according to indicative pricing compiled by Bloomberg. The debt was the worst performer in emerging markets Monday.
First Quantum shares closed 28% lower, the biggest drop in 26 years, a day after Cortizo said that a national vote on the mine will be held Dec. 17 in an effort to quell mass civil unrest over the project.
The call for a referendum cast into doubt the future of one of the world’s biggest and newest copper mines. Cobre Panama has become the center of political debate as the future supply of copper has become a hot topic worldwide.
The electoral court’s statement put in question whether there will be a referendum. That prompted Roger Tejada, a high-ranking official, to prepare legislation that would allow the referendum to take place on December 17, according to a post by the government on X.
The mining contract was going to have a major impact on fiscal accounts, producing the equivalent of 0.9% of GDP in revenues for the government. Without those funds, Panama will likely breach its deficit ceiling of 3% of GDP, said Ramiro Blazquez, head of research and strategy at BancTrust & Co. in Buenos Aires.
(By Michael McDonald)
Bloomberg News | October 31, 2023 |
Since Monday, protests against the contract have led to clashes between protesters and the police and the closure of major roads across the country.
(Reference image courtesy of Time)
Panama’s reputation as an investor-friendly haven is at risk from attempts to shut a giant Canadian-owned copper mine, the latest case of a commodities project triggering social unrest in Latin America.
Faced with an explosion of popular rage that paralyzed the country last week, the government caved to protesters’ demands for a referendum on whether to scrap a multibillion dollar deal with First Quantum Minerals Ltd., which it had approved just days earlier.
Panama has been one of Latin America’s biggest success stories this century, transformed by a economic boom that has given it a standard of living similar to Poland’s, and a financial center whose glass skyscrapers resemble Miami’s.
Foreign investors were drawn by its dollarized economy, English-speaking business elite and, until recently, by its predictable rules. But that may change.
“This definitely affects us as a safe place for investment,” said Frank de Lima, a former finance minister. “We are talking about the biggest private investment ever in Panama, and almost at the level of the Panama canal expansion. There’s not legal security or investment security.”
First Quantum shares plunged 28% on Monday, as investors priced in the possibility that the company might lose its biggest source of revenue. Panama’s dollar bonds due in 2036 fell 1.4 cents on the dollar to 95.7 cents, according to indicative pricing data by Bloomberg.
Panama’s reputation as an investor-friendly haven is at risk from attempts to shut a giant Canadian-owned copper mine, the latest case of a commodities project triggering social unrest in Latin America.
Faced with an explosion of popular rage that paralyzed the country last week, the government caved to protesters’ demands for a referendum on whether to scrap a multibillion dollar deal with First Quantum Minerals Ltd., which it had approved just days earlier.
Panama has been one of Latin America’s biggest success stories this century, transformed by a economic boom that has given it a standard of living similar to Poland’s, and a financial center whose glass skyscrapers resemble Miami’s.
Foreign investors were drawn by its dollarized economy, English-speaking business elite and, until recently, by its predictable rules. But that may change.
“This definitely affects us as a safe place for investment,” said Frank de Lima, a former finance minister. “We are talking about the biggest private investment ever in Panama, and almost at the level of the Panama canal expansion. There’s not legal security or investment security.”
First Quantum shares plunged 28% on Monday, as investors priced in the possibility that the company might lose its biggest source of revenue. Panama’s dollar bonds due in 2036 fell 1.4 cents on the dollar to 95.7 cents, according to indicative pricing data by Bloomberg.
Tear gas and rocks
First Quantum’s troubles are playing out in a country led by one of the most pro-business governments in the region. But faced with growing disorder and with a general election half a year away, President Laurentino Cortizo was pressured into calling for a referendum.
It failed to quell the protests. On Monday evening, demonstrators in the capital launched rocks and fireworks toward congress and ripped down barricades, while police fired tear gas back. Some businesses boarded up their windows, while graffiti tags such as “no to mining” and “Panama is not for sale” were sprayed on walls throughout the city.
Demonstrator Patricia Miranda, 30, held a sign saying “without water there is no beer”, and explained that her biggest concern is water contamination.
“We’ve been living years of corruption, lockdowns and pandemic mismanagement. This is about the mine, but also all the corruption,” she said.
Oil and mining projects face increased hostility across Latin America, a major source of commodities producer from iron ore to soybeans, over concerns about environmental damage. In August, Ecuador’s voters backed referendums to close a major oil project in the Amazon and also restrict gold and copper mining.
Gustavo Petro won Colombia’s 2022 election on a pledge to halt new oil exploration contracts, while Mexico nationalized its lithium deposits and froze new hydrocarbon licenses for private investors. In Brazil, mining has come under greater scrutiny from environmental authorities and has been met with public opposition after two deadly dam disasters since 2015.
Loss of faith
Panama’s economy has expanded at an average annual rate of more than 6% over the last two decades, one of the fastest rates in the Americas, led by public works projects and real estate. But the loss of faith in the country over its treatment of the mine may make those growth rates harder to sustain, according to JPMorgan Chase & Co.
“If the contract is revoked we think that the probability that Panama loses its investment grade rating in the short term rises significantly, as lower trust in the country’s institutional framework would likely drive in lower investment and lower medium-term growth,” JPMorgan strategist Steven Palacio wrote in a note.
Panamanians were already angry about corruption, rising living costs and high unemployment. The mine deal was “the straw that broke the camel’s back”, according to former finance minister de Lima, who is an opponent of the government.
The protests have been backed by labor unions, environmental campaigners and students, among others.
Opposition lawmaker Walkiria Chandler D’Orcy said the call for a referendum isn’t enough to stop the protests. She said the deal is unconstitutional and demanded its repeal.
On Monday, the electoral court said it couldn’t hold the referendum until congress passed a law. The government then said it planned to introduce a bill to enable the vote.
In the meantime, the Supreme Court is considering two suits to declare the First Quantum deal unconstitutional.
Panama holds general elections on May 5, with Cortizo ineligible for a second term due to a rule against consecutive terms. Cortizo’s Revolutionary Democratic Party is likely to do poorly, according to polls.
Former President Ricardo Martinelli, another pro-business politician who presided over soaring growth when he led the country from 2009 to 2014, is ahead with more than 40% support, even though he spent time in jail on corruption charges.
Deficit ceiling
If the country does vote to revoke the mining contract in the Dec. 17 referendum, the government will need to figure out how to fill a large hole in its fiscal accounts.
First Quantum’s mine produces about 1.5% of all the world’s copper output, and provides the government with revenue equivalent to about 0.9% of gross domestic product. Without those funds, Panama will likely breach its deficit ceiling of 3% of GDP, said Ramiro Blazquez, head of research and strategy at BancTrust & Co. in Buenos Aires.
First Quantum’s CEO Tristan Pascall said on a call with investors last week that the company is aware of the protests and will work harder at communicating the benefits that mining can provide to communities in Panama.
Earlier this year, Fitch Ratings said a deal between the government and First Quantum over royalty and tax payments would make the mine the nation’s largest tax contributor after the Panama canal.
Fitch rates the county BBB-, one notch above junk, while Moody’s Investors Service and S&P Global Ratings rate it two notches above.
The vote threatens “permanent lost revenues” and the government doesn’t appear to have a plan B for its budget in that event, said Siobhan Morden, head of Latin America Fixed Income Strategy at Banco Santander SA.
That puts the nation’s investment grade credit rating “at serious risk”, she said.
(By Michael McDonald and Zijia Song)
First Quantum shares down 50% as Panama Congress committee OKs referendum
Cecilia Jamasmie | November 1, 2023 |
Cobre Panama is the biggest foreign investment in the Central American nation, supporting over 40,000 jobs. (Image courtesy of Minera Panama.)
Panama’s President Laurentino Cortizo has cleared the first hurdle to fast-track a bill that would allow the country to hold a referendum on the controversial 20-year contract with Canadian miner First Quantum Minerals (TSX: FM).
After 10 months of negotiations between the parties, the country inked in October a multi-billion dollar deal with the miner, letting it operate its flagship Cobre Panama copper mine for the next 20 years.
The decision, which ended years of legal uncertainty was signed into a law last week, triggering a series of violent protests across Panama City, the capital.
Shares in the company have fallen a shocking 50% this week as uncertainty over the future of its key asset prompts investors to reduce their exposure. The stock closed at C$16.07 on Tuesday and was last changing hands at C$13.89 on Wednesday morning in Toronto.
First Quantum shares extend slide, company says committed to rule of law
Cecilia Jamasmie | November 1, 2023 |
Cobre Panama is the biggest foreign investment in the Central American nation, supporting over 40,000 jobs. (Image courtesy of Minera Panama.)
Panama’s President Laurentino Cortizo has cleared the first hurdle to fast-track a bill that would allow the country to hold a referendum on the controversial 20-year contract with Canadian miner First Quantum Minerals (TSX: FM).
After 10 months of negotiations between the parties, the country inked in October a multi-billion dollar deal with the miner, letting it operate its flagship Cobre Panama copper mine for the next 20 years.
The decision, which ended years of legal uncertainty was signed into a law last week, triggering a series of violent protests across Panama City, the capital.
Shares in the company have fallen a shocking 50% this week as uncertainty over the future of its key asset prompts investors to reduce their exposure. The stock closed at C$16.07 on Tuesday and was last changing hands at C$13.89 on Wednesday morning in Toronto.
Source: Google Finance.
Protestors claim the new contract was fast-tracked with little public input or transparency and want its immediate cancellation. They have also made corruption allegations against lawmakers.
In response, Cortizo announced the country would hold a referendum on whether to revoke the controversial contract on December 17. The President’s move was stopped in its tracks, with Panama’s electoral court saying it was unable to hold a nation-wide vote on the issue, because that would require congress to first pass a law.
A legislative committee approved the bill late on Tuesday, clearing the first hurdle for the proposal to become a law. Bill 1110 revokes the controversial Law 406 between and also bans the granting of future mining concessions in Panama.
The bill has now been sent to the plenary for general debate, where it will require a majority vote in two separate sessions for definitive approval.
Special sessions to fast-track bill
In its first public statement since Cortizo’s referendum announcement, First Quantum said that “unconstitutionality challenges” have been brought against Law 406, which approves the revised mining concession contract for the Cobre Panama mine.
The Toronto-based company noted that the Supreme Court of Justice agreed to hear two of such challenges.
“First Quantum has always been an advocate of Panama and its people and is committed to the rule of law with the objective to achieve benefits the country,” it said in the statement.
The company said its giant copper mine contributes almost 5% of Panama’s GDP, makes up 75% of the country’s export of goods and has created at least 40,000 jobs, directly and indirectly.
“We believe in this project and its potential and welcome the opportunity to have constructive dialogue with the people of Panama about its future,” First Quantum said.
Panama’s Congress has convened special sessions for today and Thursday, ahead of a public holiday in the Central American country on Friday.
Protestors claim the new contract was fast-tracked with little public input or transparency and want its immediate cancellation. They have also made corruption allegations against lawmakers.
In response, Cortizo announced the country would hold a referendum on whether to revoke the controversial contract on December 17. The President’s move was stopped in its tracks, with Panama’s electoral court saying it was unable to hold a nation-wide vote on the issue, because that would require congress to first pass a law.
A legislative committee approved the bill late on Tuesday, clearing the first hurdle for the proposal to become a law. Bill 1110 revokes the controversial Law 406 between and also bans the granting of future mining concessions in Panama.
The bill has now been sent to the plenary for general debate, where it will require a majority vote in two separate sessions for definitive approval.
Special sessions to fast-track bill
In its first public statement since Cortizo’s referendum announcement, First Quantum said that “unconstitutionality challenges” have been brought against Law 406, which approves the revised mining concession contract for the Cobre Panama mine.
The Toronto-based company noted that the Supreme Court of Justice agreed to hear two of such challenges.
“First Quantum has always been an advocate of Panama and its people and is committed to the rule of law with the objective to achieve benefits the country,” it said in the statement.
The company said its giant copper mine contributes almost 5% of Panama’s GDP, makes up 75% of the country’s export of goods and has created at least 40,000 jobs, directly and indirectly.
“We believe in this project and its potential and welcome the opportunity to have constructive dialogue with the people of Panama about its future,” First Quantum said.
Panama’s Congress has convened special sessions for today and Thursday, ahead of a public holiday in the Central American country on Friday.
First Quantum shares extend slide, company says committed to rule of law
Reuters | October 31, 2023 |
Cobre Panamá operation. (Image by First Quantum Minerals).
Shares in Canadian miner First Quantum Minerals fell 17% on Tuesday, adding to the previous day’s steep fall, as the uncertainty over the future of its key Panama copper mine encouraged investors to cut their exposure.
President Laurentino Cortizo said on Sunday Panama would hold a referendum to decide whether to scrap a contract with First Quantum’s local unit following days of protests by thousands of people opposed to the open pit copper mine project.
In its first public statement, First Quantum said on Tuesday that “unconstitutionality challenges” have been brought against Law 406, which approves the refreshed mining concession contract for the company’s Cobre Panama mine.
The company said currently two such challenges have been admitted to be heard by the Supreme Court of Justice in the country.
“First Quantum has always been an advocate of Panama and its people and is committed to the rule of law with the objective to achieve benefits the country,” the company said in the statement.
In early trades, First Quantum shares were down 17.3% at C$16.6, while the broader Canadian share index was flat.
First Quantum said last week the enactment of Law 406 marks the final step in revising the legal framework for the Cobre Panama mine.
(By Arunima Kumar, Mrinalika Roy and Divya Rajagopal; Editing by Shilpi Majumdar and Jonathan Oatis)
Panama electoral court says it can’t hold a mine referendum
Bloomberg News | October 30, 2023 |
The Cobre Panama mining complex includes two open pits, a processing facility, two power plants and a port. (Image courtesy of Cobre Panama.)
Panama’s electoral court said it can’t organize a referendum over a flagship copper mine owned by First Quantum Minerals Ltd., as requested by President Laurentino Cortizo on Sunday, because that would require congress to first pass a law.
“At this moment, there are no conditions to organize the intended popular consultation,” the electoral authority said in a statement Monday, also citing logistics and other legal reasons that prevent the organization of a referendum.
The government on Monday afternoon said it planned to introduce a bill to congress on the referendum.
In its statement, the authority highlighted that preparing the referendum would imply an additional effort to organizing the May 5 general election, when the country will elect its president and legislators.
Panama’s dollar bonds pared losses, with notes due in 2036 slumping 1.4 cents to 95.7 cents on the dollar after trading lower early in the day, according to indicative pricing compiled by Bloomberg. The debt was the worst performer in emerging markets Monday.
First Quantum shares closed 28% lower, the biggest drop in 26 years, a day after Cortizo said that a national vote on the mine will be held Dec. 17 in an effort to quell mass civil unrest over the project.
The call for a referendum cast into doubt the future of one of the world’s biggest and newest copper mines. Cobre Panama has become the center of political debate as the future supply of copper has become a hot topic worldwide.
The electoral court’s statement put in question whether there will be a referendum. That prompted Roger Tejada, a high-ranking official, to prepare legislation that would allow the referendum to take place on December 17, according to a post by the government on X.
The mining contract was going to have a major impact on fiscal accounts, producing the equivalent of 0.9% of GDP in revenues for the government. Without those funds, Panama will likely breach its deficit ceiling of 3% of GDP, said Ramiro Blazquez, head of research and strategy at BancTrust & Co. in Buenos Aires.
(By Michael McDonald)
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