First Quantum to suspend Panama arbitration battle

First Quantum Minerals’ (TSX: FM) Panamanian unit says it’s asked its lawyers to halt legal proceedings against Panama in a bid to end a 16-month-old feud with the Central American country’s government.

The announcement comes a day after Panama asked First Quantum to immediately suspend arbitration efforts against the government if the company was serious about negotiating a restart of its shuttered Cobre Panama mine.

Panama President Jose Raul Mulino on Thursday authorized the export of stockpiled copper concentrate from Cobre Panama while approving a restart of the mine’s power plant. First Quantum will need to reimburse Panama because the raw material will be processed abroad, he said.

“We have listened carefully to the statements of the President of the Republic, Jose Raul Mulino, regarding the authorization to restart the power plant and export copper concentrate,” Cobre Panama general manager Manuel Aizpurua said Friday in a letter posted on social media.

“These actions provide immediate stability for the well-being of the country: They preserve jobs, ensure responsible site management and safeguard the environment. With these measures in place, we now move to the next step. We have instructed our lawyers to meet with the government’s legal team to work on suspending the arbitrations.”

Such a move “is part of a transparent and constructive process leading to a solution for the benefit of workers, communities, suppliers and all Panamanians,” Aizpurua added.

Mulino’s predecessor ordered First Quantum to shut down Cobre Panama in 2023 following a Supreme Court ruling that declared the operation’s mining contract unconstitutional. At the time, Cobre Panama accounted for about 5% of the country’s gross domestic product and 75% of its exports. First Quantum has kept the copper concentrate stockpiled at the site since the closure.

The concentrate “is being wasted, and Panama has invested a ton of money in it,” Mulino said Thursday at a press conference in Panama City. “The issue of the mine will be handled with great responsibility and by taking into consideration the national interest we need to protect.”

Cobre Panama holds about 3 billion tonnes of proven and probable copper reserves. Located about 120 km west of Panama City, the site includes two open pits, a processing plant, a 300-megawatt power station and an international port.

“Since the beginning of the administration, we have stated that no progress will be made or constructive dialogue established with the mining company as long as the arbitrations against the Panamanian state are ongoing,” Panama’s Commerce and Industry Ministry said in a statement issued Thursday. “Any possible rapprochement will depend on the immediate suspension of these proceedings. Panama will not accept pressure or imposed conditions that compromise its sovereignty.”

“Once this action required by the government is completed, we will be able to move forward in authorizing, in an open and public manner, the fate of the copper concentrate mined” at Cobre Panama, the ministry added. “We will consider the environmental aspects and the best benefit for the country. Any decision will be taken with responsibility, transparency and in compliance with the law.”

First Quantum has been seeking billions of dollars in damages from Panama due to the mine’s closure. A final hearing for the case was recently postponed until 2026 to leave room for negotiations with the government. The company says it has invested more than US$10 billion to build Cobre Panama, the port and the power station. 

Panama is analyzing options to authorize the eventual use of the power plant “for the benefit of the national electrical system, with the guarantee that this decision does not imply a reactivation of the mining activity,” the ministry said Thursday. “The sole purpose is to increase the supply to guarantee the provision of electricity service at a competitive price for residential and commercial users throughout the country.”

All future decisions related to Cobre Panama “will be rigorously evaluated, ensuring that any measure taken responds exclusively to the interests of the country and its people,” the Commerce Ministry’s statement concluded.

CEO Tristan Pascall said in February that the company was looking forward to “constructive discussions with the government and people of Panama for resolution of the situation” at Cobre Panama. “Arbitration is not the preferred outcome for the situation in Panama,” First Quantum said in its fourth-quarter report to shareholders.

First Quantum didn’t immediately respond Friday to an e-mail seeking comment on the matter.