After six days of continuous protests, President Laurentino Cortizo Cohen announced a referendum to decide whether to revoke the contract recently awarded to the subsidiary of First Quantum Minerals Ltd. (TSX: FM) Minera Panama.
Last Monday, the National Assembly of Panamá approved the required bill, and President Laurentino Cortizo signed Law 406, which was then published in the Official Gazette.
Following the passage of the law, a wave of thousands of protestors took to the streets to vehemently oppose the open-pit copper mine project. Protestors argued that this project posed a significant threat to the environment. As a direct consequence of these protests, road blockades were established, and classes were suspended.
Notably, President Cortizo made a pivotal announcement on Friday, where he declared a sweeping ban on all new mining projects. However, the official proclamation of the referendum did not occur until Sunday.
“To ensure that the majority’s will is expressed in the most democratic manner, I will request the Electoral Tribunal to convene a popular vote on Sunday, Dec. 17, 2023, so that the people of Panama can decide with the power of their vote whether to repeal or not repeal Law 406,” President Cortizo said via X on Sunday.
Para que la voluntad mayoritaria se exprese de la manera más democrática, solicitaré al Tribunal Electoral la convocatoria de una consulta popular el domingo 17 de diciembre de 2023, para que los panameños decidamos con el poder del voto si se deroga o no se deroga la Ley 406. pic.twitter.com/1z7L9cKN2J
— Nito Cortizo (@NitoCortizo) October 30, 2023
Economy Minister Hector Alexander told Reuters that Panama heavily relies on mining, and without the mine, the country’s economic growth would be limited compared to the 6 per cent growth expected with the open-pit mine.
According to a study by the analytics firm INDESA Capital, if the Cobre Panama mine halts operations for a year, it could stop generating up to US$4.7 billion.
On Friday, Cobre Panama said it condemns the illegal and violent attempt of unauthorized individuals entering the Punta Rincon International Port where the company operates.
“We are deeply concerned about this incident, which poses a significant threat to our operations and the safety of our personnel.”
“We call upon the relevant authorities to safeguard the well-being of our employees, protect the facilities, and preserve the integrity of our business operations.”
Minera Panamá condena el intento ilegal y violento que está ocurriendo en estos momentos, cuando embarcaciones no autorizadas con personas sin autorización están ingresando al Puerto Internacional de Punta Rincón.
Nos preocupa profundamente este incidente, que representa una… pic.twitter.com/7NHiY9ph8J
— Cobre Panamá (@Cobre_Panama) October 28, 2023
Project offers $375 million per year
Back in March, First Quantum’s subsidiary, Minera Panama, committed to a substantial financial arrangement, starting with an initial payment of US$375 million, along with an additional $20 million designated for covering taxes and royalties incurred until the conclusion of 2022.
This contribution includes various components, such as corporate taxes, withholding taxes and a profit-based mineral royalty that varies between 12 and 16 per cent, all of which have built-in downside protections.
These downside protections are designed to safeguard the annual minimum contribution in specific scenarios. They will come into play if the price of copper falls below $3.25 per pound until the end of 2025 or if the overall tax contribution for a given year dips below $300 million from 2026 onward.
Cobre Panama is 90 per cent owned by First Quantum and 10 per cent owned by Korea Mine Rehabilitation and Mineral Resources Corporation. Franco-Nevada Corporation (TSX: FNV) contributed approximately $1.4 billion to the construction of Cobre Panamá and holds two precious metals streams on the project.
The mine accounts for about 1.5 per cent of global copper output. It can process 85 million tonnes of ore annually and produce more than 300,000 tonnes of copper each year. The complex includes two open pit mines, a processing plant, two 150MW power stations and a port.