First Quantum pursuing international arbitration in wake of Panama mine shutdown

By Amanda Stephenson, The Canadian Press on February 21, 2024.

A Canadian-headquartered mining company is seeking at least $20 billion through international arbitration in the wake of the shutdown of its copper mine in Panama.

The CEO of First Quantum Minerals Ltd. said Wednesday that arbitration is not the company’s first choice and that it continues to hope it can reach a satisfactory solution with the government of Panama regarding the future of the Cobre Panamá mine.

But Tristan Pascall told analysts on a fourth-quarter conference call that the company commenced the arbitration process under the terms of the free-trade agreement between Canada and Panama as well as through the International Chamber of Commerce’s International Court of Arbitration.

“We have provided a minimum value we saw in those proceedings of $20 billion, reflecting an estimated fair market value of the initial investments,” Pascall said.

“But in reality, with damages and interest, it could be very much higher.”

First Quantum suspended production at its open-pit Cobre Panamá mine at the end of November after Panama’s Supreme Court ruled that a 20-year contract allowing for its operation in the country was unconstitutional.

The mine had been the focus of ongoing blockades and widespread protest by nationalists and environmentalists concerned about its impact in a delicate jungle ecosystem.

The shutdown has had a devastating effect on First Quantum, which has said that it could take up to a decade for the company to implement the inspections, planning and environmental stability measures required by the country’s government.

In the meantime, the company has said it will cost between US$15 million and US$20 million per month to safely maintain the site while it is shut down.

In the fourth quarter, the blockade around the mine impacted First Quantum’s ability to ship approximately 121,000 tonnes of copper concentrate, which had been produced prior to the Supreme Court ruling. As a result, the company’s revenue declined 40 per cent in the quarter to $1.2 billion.

First Quantum Minerals Ltd. reported a net loss for the quarter of US$1.45 billion, and warned in its earnings release that the situation in Panama has impacted the company’s earnings potential to the point that its ability to continue operating could be threatened within the next 12 months.

But Pascall said the company is confident in a number of initiatives it has undertaken to bolster its finances and protect against this risk, including the signing of a US$500-million copper prepay arrangement. The company is also aiming to sell off minor assets and shares in major ones, and is working with lenders to amend and extend its loan facilities.

“We have a long relationship with our lending banks, and there’s a high degree of alignment among parties, and we expect to provide updates to the market in short order,” he said.

This report by The Canadian Press was first published Feb. 21, 2024.

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