Canadian miner First Quantum's contract to operate a lucrative copper mine in Panama is unconstitutional, Panama's Supreme Court declared on Tuesday following weeks of protests against the deal, putting the company on the long and unpredictable road of an international arbitration.
Challenges against the company's new contract, approved on Oct. 20, piled up in court amid public anger over the deal, which opponents regard as too generous. Reuters reported earlier this month that the court was likely to rule against First Quantum.
"We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023," said Supreme Court President Maria Eugenia Lopez.
The company did not immediately reply to a request for comment.
It is an equally significant business for the Central American nation, with the mine contributing about 5% of Panama's GDP. J.P. Morgan warned this month that the odds of Panama losing its investment-grade rating would rise significantly if the contract is revoked.
The contested contract gave First Quantum a 20-year mining right with an option to extend for another 20 years, in return for $375 million in annual revenue to Panama.
In Panama, fierce opposition towards a lucrative mining deal with a Canadian company is becoming a major factor in the country's May 2024 presidential election. Candidates are pushing for more state control of the mine as they seek to assuage public anger.
Panamanians have held the biggest protests since the 1980s demanding the First Quantum contract be scrapped, and urged candidates to take a tougher stance.
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Former President, millionaire businessman and leading presidential candidate Ricardo Martinelli last week proposed that Panama should renegotiate the contract with the Canadian firm to secure higher royalties and a stake in the project.
Martin Torrijos, another former president again running for the job, urged judges to strike down the contract outright. "Panama said no to metal mining," he said in a recent video.
The country's top court ruled against First Quantum's previous contract in 2017. The decision was upheld in 2021, but the current government allowed the miner to keep operating while both parties negotiated a new deal.
For First Quantum Minerals, the Panama ruling would be a repeat of its decade-old experience in the Democratic Republic Of Congo. The company exited DRC in 2012 after it filed an arbitration procedure against the African country for cancelling its mining contract.
First Quantum sold its assets to Eurasian Natural Resources Corporation PLC for $1.25 billion and settled the dispute.
The company has spent about $10 billion in developing the Cobre Panama mine in over a decade.
Protester groups said on social media after the ruling that they will keep demonstrating in the streets until the ruling is published in the country's official gazette.
Demonstrators have argued the contract terms are too generous to First Quantum and allege corrupt practices in its approval. The company denies this.
Panama, home to some of the world's newest and biggest untapped resources, has seen unprecedented opposition to mining after First Quantum's contract was approved by parliament last month.
In response to the protests, Panama's government enacted a bill in November banning all new mining concessions and extensions, which legal experts have said would prevent the two parties from negotiating a new deal.
Panama's trade ministry has rejected more than 10 mining concessions and extension requests to abide by the new ban.
Last weekend, the protests against the mine received an endorsement from Hollywood actor Leonardo Di Caprio who shared a video from an environmental group that called for the Supreme Court to cancel the contract given to First Quantum.
Cobre Panama produced 112,734 tonnes of copper in the third quarter and accounted for about 46% of its overall third quarter revenue of $2.02 billion, according to the company.
First Quantum has lost about C$10 billion ($7.36 billion) of its market value since the protests started and has been forced to suspend production.
($1 = 1.3590 Canadian dollars)
