First Quantum Plunges as Panama Copper Mine Faces Referendum
ca.finance.yahoo.com
Michael McDonald and Thomas Biesheuvel
Mon, October 30, 2023 at 6:39 a.m. PDT·3 min read
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(Bloomberg) -- The future of one of the worlds biggest and newest copper mines has been cast into doubt after Panama’s government said it will hold a referendum on the project as it attempts to quell mass unrest. Shares of mine owner First Quantum Minerals Ltd. plunged as much as 20%.
The Cobre Panama mine, built and operated by Canada’s First Quantum, has become a political flash-point in the Central American country. President Laurentino Cortizo, seeking to appease opponents of the mine, said Sunday that a national vote would be held on Dec. 17 on whether to revoke the company’s license.
Shares of First Quantum fell 20% as of 9:39 a.m. in Toronto, its biggest intraday drop since March 2020.
The latest uncertainty around what lies ahead for the mine comes as the future supply of copper has become a hot topic among global policymakers and business executives. The long-term supply of the metal is constrained, with demand forecast to surge as the global economy decarbonizes.
A new contract awarding a 20-year extension to First Quantum’s mining license was signed into law by Cortizo this month, sparking fury in the country and leading protesters to block highways and clash with police, demanding a referendum. Last week, Cortizo also banned building new mines in the country.
Panama’s dollar bonds fell on Monday trading, leading losses in emerging markets. Notes due 2036, some of the country’s more liquid, are approaching the lowest level in 14 years on mounting speculation that the Central American nation is heading for a downgrade.
Fitch Ratings assigned a negative outlook on the debt in late September citing fiscal pressures — from subsidies to costlier debt service — and uncertainty over the government’s ability to address the issues. The debate around the First Quantum mine and a massive drought that forced the government to cut traffic through the Panama Canal have further fanned worries.
Massive Mine
First Quantum spent years and billions of dollars building the mine and has caught the attention of rivals who are also looking to grow their exposure to the metal, used in everything from electrical wiring to water pipes.
It’s also seen as a future flash-point between the West and China, with the Biden administration pushing to diversify the US’s sources of important materials and to reduce dependency on Beijing.
Many Panamanians say the revised operating contract is overly generous to the Canadian miner, and violates the nation’s sovereignty over its mineral resources. The contract gives First Quantum the right to produce copper at its site for 20 years, with the option to extend that for a further 20 years after that.
The country’s Supreme Court has also said it will consider two lawsuits filed against the renewed contract with the company.
First Quantum has faced multiple hurdles for its flagship mine. The company was forced to halt processing copper earlier this year after it failed to settle a tax dispute with the government.
The mine is First Quantum’s biggest asset, an economic engine for Panama and accounts for about 1.5% of global copper production.
The Vancouver-based company didn’t immediately reply to a request for comment sent outside normal business hours. |
