First Quantum (TSX: FM) is finally facing the music and suspending production guidance for its Cobre Panama mine for 2023, following a ruling by the Supreme Court of Panama. That ruling, which determined Law 406, which governs the mine, is unconstitutional, is said to be unclear by First Quantum, whom is seeking further details on the implication of the ruling.
One of the key issues raised by First Quantum is that the ruling does not take into account a planned and managed closure of the mine, which is needed for environmental safety reasons. Environmental controls are required for the management of tailings storage, and facilities to manage water treatment to reduce the long-term environmental impact of the facility.
The company also notes that the future of its rehabilitation, reforestation and species conservation programs will need to be addressed. Under an Environmental and Social Impact Assessment that was approved in relation to the construction of the mine, First Quantum has 371 obligations in regards to mine stewardship.
READ: First Quantum’s Concession Contract At Cobre Panama Ruled Unconstitutional, Mining Suspended
One such item is the reforestation of 11,175 hectares of forest. To date, 4,200 hectares have been reforested, while only 3,000 hectares have been impacted by mining activities. The company meanwhile provides support for approximately 20% of all protected areas in the country.
From a regulatory perspective, the company has already moved to force arbitration on the matter, with a notice of intent to initiate arbitration send to the Ministry of Commerce and Industry in mid-November, which falls under a free trade agreement between Canada and Panama. Arbitration has also been initiated with the International Court of Arbitration, which requires arbitration to occur in Miami, Florida.
Cobre Panama was originally guided to produce 350,000 – 380,000 tonnes of copper, and 140,000 – 160,000 ounces of gold for 2023, prior to being impacted by the closures.
First Quantum last traded at $11.11 on the TSX.
Information for this briefing was found via Sedar, Bloomberg, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
