A Panamanian government commission has recommended President José Raúl Mulino order the final but orderly closure of First Quantum Minerals’ (TSX: FM) Cobre Panama mine, reversing expectations that officials were moving towards reviving one of the world’s largest copper operations.
The three-minister commission recommended first exploring a new arrangement with First Quantum that would allow Cobre Panama to resume operations while setting out a path toward its eventual closure.
The proposal follows a review of an audit conducted by independent Swiss consultants, along with an assessment of the mine’s economic, environmental and legal implications. The commission stressed that its recommendation was not a final decision, which rests with the president.
The document offers a potential route through the economic, legal and environmental problems surrounding Cobre Panama: generate revenue from renewed operations to finance a controlled shutdown rather than leave Panama responsible for the cost. The mine produced about 1.5% of global copper before mining stopped in 2023 and was one of the country’s largest private investments.
Any agreement should prevent an extension of the mine’s operating period and resolve outstanding international arbitration proceedings, according to the committee. Mulino has not made a final decision on the mine’s future.
The commission also laid out eight principles for any new arrangement. It said Panama, as owner of the mineral deposit, should act as more than a state collecting royalties from a mining concession. The government should independently verify financial flows from the operation rather than rely solely on figures reported by the operator, while exercising effective oversight and requiring transparency over both the mine and the use of revenue it generates.
The framework also calls for a definitive closure date with no renewal or extension, prohibits further expansion of the mine site and requires operations to adapt to a progressive shutdown. A clear mechanism would also have to be established to restore and rehabilitate the site, while the use of mining revenues would be subject to transparent mechanisms open to public scrutiny.
“A closure isn’t done in one year, nor in five years,” Commerce and Industries Minister Julio Moltó said in a press conference.
Moltó said the committee’s proposals were based on visits to communities surrounding the mine rather than assessments conducted solely from government offices. He and his team toured Donoso, Omar Torrijos Herrera and La Pintada, where they met mine workers, local authorities and suppliers before presenting their findings as part of the government’s review of Cobre Panama’s future.
First Quantum declined to comment on the matter.
Closure costs
Economy and Finance Minister Felipe Chapman backed an orderly closure while arguing that Panama should not bear its financial cost. The abrupt shutdown inflicted a substantial economic blow to the nation, he said, eliminating thousands of direct and indirect jobs while cutting government tax and royalty revenue.
The recommendation is in line with President Mulino’s previous statements framing a mine reactivation as “open to close” plan. The giant Cobre Panama mine, which produced as much as 1.5% of global copper before mining stopped in 2023, accounted for about 5% of Panama’s gross domestic product that year, according to First Quantum.
First Quantum shares plunged as much as 37% as the market reacted to the government’s framing of renewed operations as a mechanism for eventually shutting Cobre Panama, before paring the decline.
What comes next
The commission’s deliberations follow months of study into the consequences of shutting one of Panama’s largest private investments. A government study published in September found the closure eliminated close to 36,000 jobs and reduced taxes and royalties flowing to the state by nearly $1.4 billion.
Environment Minister Juan Carlos Navarro argued the mine should never have been built and characterized the problem of closing it as one inherited from the previous administration.
Cobre Panama was First Quantum’s largest revenue generator before its shutdown, accounting for about 40% of company revenue. Its closure followed nationwide protests over environmental concerns and the terms of the mining concession.
First Quantum resumed processing in July previously mined stockpiled ore with government authorization, an activity that does not amount to reopening the mine for new extraction. The company restarted one of three milling circuits during the second quarter and continues to forecast production of 30,000 to 40,000 tonnes of copper from stockpiles this year.
The stockpile program forms part of the government-approved preservation and safe-management plan. Panamanian authorities have said processing the material can reduce environmental risks associated with leaving mineralized ore exposed to rainfall.
President Mulino must now determine whether negotiations with First Quantum can produce an arrangement that addresses the commission’s recommendation while generating enough economic value to cover a permanent closure plan.
This is a developing story. More to come…
Source: https://www.mining.com/panama-commission-urges-orderly-closure-of-first-quantums-cobre-mine/
