PANAMA CITY, (Reuters) – Canadian miner First Quantum’s contract to operate a lucrative copper mine in Panama is unconstitutional, Panama’s Supreme Court declared today following weeks of protests against the deal.
The ruling could potentially put First Quantum on a long road to an international arbitration, about which the company has already notified the Panama government.
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.
“We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023,” said Supreme Court President Maria Eugenia Lopez.
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.
The company did not immediately reply to a request for comment.
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.
The ruling will have consequences for the copper market, as First Quantum’s Cobre Panama mine accounts for about 1% of global copper production. 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.
Demonstrators have argued the contract terms are too generous to First Quantum and allege corrupt practices in its approval. The company denies this.
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.
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.
