Arbitration proceedings over the temporarily shuttered USD$10 billion Cobre Panama copper mine are progressing due to a tribunal which said in December it would hear the case in October 2026.
Canada’s Franco-Nevada Corporation (TSE: FNV) (NYSE: FNV) had a gold-copper agreement with First Quantum (TSE: FM), which originally owned the mine. The mine closed in 2023, and forced Franco-Nevada to take a $1 billion impairment charge.
Investor optimism drove Franco-Nevada’s stock to a new 52-week high of CAD$212 per share on Monday. By mid-afternoon in Toronto, the stock had risen 2.1 per cent, lifting the company’s market capitalization to nearly CAD$41 billion.
“We are encouraged that President Mulino has indicated a willingness to discuss Cobre Panama this year and that sentiment in Panama now appears more supportive of restarting the mine,” chief executive Paul Brink said on Monday, delivering the company’s 2024 full-year results.
First Quantum has also filed a separate legal claim against Panama, seeking at least USD$20 billion in damages. The court recently postponed the final hearing for that case until 2026 to allow time for negotiations with the country’s government.
President José Raúl Mulino has become increasingly open to restarting the mine, which generated about 5 per cent of Panama’s GDP before its closure. During a visit to the site in February, he acknowledged the mine’s economic importance. Additionally, he suggested he would explore “novel ideas” for its future. However, he has refused to negotiate with First Quantum unless the company drops its arbitration claim against Panama.
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Deal in 2023 sparked mass protests
Significant hurdles remain before the mine, which previously generated 40 per cent of First Quantum’s revenue, can reopen. Mulino has prioritized passing controversial social security reforms, now in their final stage in Congress, before addressing the issue.
Additionally, reversing the open-pit mining moratorium imposed by the previous administration would require legislative support. Mulino’s government may struggle to secure that backing in the opposition-controlled National Assembly.
Cobre Panama shut down in late 2023 after Panama’s Supreme Court ruled its operating contract unconstitutional. The court’s decision came amid widespread public backlash over the government’s deal with First Quantum Minerals, the mine’s operator.Many Panamanians viewed the contract as overly favourable to the company. The protests raised concerns about environmental risks, corruption, and national sovereignty.
The controversy erupted in October 2023 when Panama’s legislature approved a new contract allowing First Quantum to continue operating the mine for 20 years. The deal sparked mass protests, with citizens blocking roads and demanding its repeal. Facing mounting pressure, the Supreme Court invalidated the contract, leaving the mine without a legal basis to operate.
In response, the government ordered Cobre Panama’s closure, halting production at a site that had accounted for nearly 5 per cent of the country’s GDP and 40 per cent of First Quantum’s revenue. The shutdown triggered economic uncertainty and a legal dispute, and First Quantum looked for USD$20 billion in damages through arbitration. While Mulino has signalled openness to reopening the mine, he refuses to negotiate unless First Quantum drops its legal claim.
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Franco-Nevada extends far past copper
Franco-Nevada has far more holdings than just its meagre interest in copper.
For example, the company holds a 3 per cent royalty interest in Calibre Mining Corp.’s (TSE: CXB) (OTCMKTS: CXBMF) Valentine Gold Mine. This fully funded, multi-million-ounce open-pit gold project is located in Atlantic Canada. The company expects production to begin in the second quarter of 2025.
Beyond the Valentine Gold Mine, Franco-Nevada holds significant interests in major mining operations worldwide. One notable asset is the Candelaria mining complex in Chile’s Atacama Region.
Franco-Nevada acquired a gold and silver stream from Lundin Mining (TSE: LUN) (OTCMKTS: LUNMF) in 2014 for USD$648 million. Initially estimated to support a 14-year mine life, continued exploration has extended its expected operational life to at least 25 years.
Another major asset in Franco-Nevada’s portfolio is the Antamina mine in Peru, one of the world’s largest copper mines. In 2015, Franco-Nevada paid USD$610 million to Teck Resources (TSE: TECK.A) (TSE: TECK.B), (NYSE: TECK) for a silver stream on Teck’s 22.5 per cent share of the mine’s silver production. Antamina is co-owned by BHP Group (ASX: BHP) (NYSE: BHP), Glencore (LON: GLEN), and Mitsubishi Corporation (TYO: 8058). The mine’s vast reserves and potential underground expansions suggest it could operate for more than 40 years.
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