Panama Considers State-Owned Miner to Reopen Cobre Panama Mine with First Quantum

Panama's government is considering the creation of a state-owned mining company to partner with Canada's First Quantum Minerals and potentially reopen the giant Cobre Panama copper mine, according to two sources familiar with the discussions cited by Reuters. The move signals a potential resolution for the major asset, which was abruptly shuttered late last year following a court ruling and widespread protests.

Economic Pressure Drives Reassessment

The Cobre Panama mine, a globally significant copper producer, was ordered to close in 2023 after the country's Supreme Court declared its operating contract unconstitutional. The shutdown had a severe economic impact, erasing an estimated 4.5% of Panama's GDP, according to the IMF, while also removing over 1% of global copper supply and 40% of First Quantum's revenue.

While President Jose Mulino was elected on a pledge to finalize the shutdown, his administration is reportedly reconsidering its stance amid economic pressures. Factors influencing the potential pivot include an unemployment rate near 10% and near-record global copper prices, which make a restart more economically attractive.

Partnership Models Under Review

The primary option being explored is a public-private partnership, the sources said. Under this model, a new Panamanian state-owned entity would be created to hold the mining concession, while First Quantum would retain operational control and a majority stake.

Key details of the proposed partnership include:

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• A potential ownership split of 60% to 65% for First Quantum and 35% to 40% for the Panamanian state entity.
• First Quantum would receive a larger share to reflect its substantial prior investment in developing the mine.
• This structure could provide a legal workaround to a 2023 law that banned new mining concessions, as the legislation is reportedly ambiguous regarding state-owned entities.

An alternative proposal reportedly being weighed involves the government leasing the mine directly to First Quantum in exchange for royalty and tax payments.

Implications for Markets and Next Steps

A path to reopening the mine would be a major catalyst for First Quantum, which has suspended its $20 billion arbitration claim against Panama. Restarting operations would restore a critical source of revenue and significantly aid the company's debt reduction efforts. For the global copper market, the return of Cobre Panama would reintroduce a major supply source amid tight market fundamentals.

Panama's Commerce and Industry Minister, Julio Molto, has previously stated that the government will make a final decision by the end of this year. According to the original report, First Quantum declined to comment on the matter, and Panama's commerce ministry did not respond to requests for comment.