Canada's First Quantum intends to start arbitration against Panama, the Central American nation's trade ministry and the company said on Sunday, as Panama's top court considers annulling a copper contract that opponents call unfair.
On Oct. 20, Panama's government approved a contract for First Quantum to operate the copper Cobre Panama mine. It included a 20-year mining right with an option to extend for another 20 years. In return the miner agreed to pay Panama $375 million a year.
Opponents claim the contract favors the miner too much as the mine represents about 5% of the country's GDP and some 1% of global copper output. Protesters have demonstrated over the mine's environmental and economic impacts and allege corrupt practices in its approval.
A spokesperson for First Quantum confirmed to Reuters the company sent one notification of intent to start arbitration proceedings.
Panama's trade ministry said in a statement that First Quantum, the miner's local unit Minera Panama and Franco-Nevada Corp sent two notifications to an international arbitration center, adding it was ready to defend the country's interests. Arbitration is a way of resolving disputes by an impartial person or panel deciding the outcome.
Challenges against the contract's validity have piled up in Panama's top court, which on Friday started deliberations to rule on several constitutional challenges to it and is expected to issue a ruling in the coming days.
"People seem to think that the supreme court decision will be the end of the matter, but it won't... Panama's exposure in international arbitration is massive," Damien Nyer, expert in international arbitrations, said in a statement to BNamericas this week.
Panama's actions will be subject to review and scrutiny, he added.
The country's mining chamber head Zorel Morales set at a minimum $50 billion what the country would pay if it loses arbitration, and said uncertainty around First Quantum's project could also spook investors.
J.P Morgan warned this month that the odds of Panama losing its investment-grade rating would rise significantly if the contract is revoked.
First Quantum was forced to shut down commercial production this week, following blockades by protesters at a key port that prevented the miner from receiving shipments of essential supplies.
Tensions have been rising around the mine and eight Panama workers of Canadian miner First Quantum were injured when protesters hurled rocks at a bus transporting them, a union leader said earlier on Sunday.
Reuters was not immediately able to contact the protesters.
