First Quantum To Launch Arbitration Against Panama Over Cobre Panama Mine Closure

Canadian miner First Quantum Minerals (OTC:FQVL) will initiate formal arbitration proceedings against Panama in July over the closure of the Cobre Panama mine last November.

With 3.0 billion tons of proven and probable reserves, Cobre Panama is one of the largest new copper mines opened globally in the past decade.

Two sources familiar with the matter revealed the news to Reuters, remaining anonymous as they were unauthorized to speak to the media.

“First Quantum will meet the July 30 deadline of launching formal arbitration against Panama as it has a fiduciary duty to do so,” stated one of the informed individuals.

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First Quantum declined to comment on the arbitration but directed inquiries to a previous statement expressing hope for dialogue with the new Panamanian government.

The closure of Cobre Panama significantly impacted the company, causing a major drop in its market value. Panama’s economy also suffered, with the International Monetary Fund (IMF) estimating a 2.5% GDP decline in 2024 due to the closure. Outgoing Trade and Industry Minister Jorge Rivera estimated expenses at around $800 million.

Meanwhile, his successor, Julio Molto, emphasized the priority of resolving the dispute: “What I can tell you is that whatever solution we agree on, it is most likely that this issue will not be resolved with another contract.”

The mine's shutdown also trapped 130,000 tons of copper concentrate, which First Quantum has been negotiating to sell. The financial impact extended beyond operational costs, erasing approximately C$9 billion ($6.57 billion) from the company's market capitalization and necessitating capital restructuring to stabilize its balance sheet.

Despite the company's efforts, the arbitration process is set to proceed as missing the July deadline would require filing a new intent to arbitrate and engaging in another six months of negotiations. Industry experts note that such arbitration against governments typically spans four years.

Further complicating the situation, Panama’s president-elect, Jose Raul Mulino, refused talks with FQM unless the company drops its arbitration claims. The new administration will take office on July 1.

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