Panama Backs First Quantum's Contract for Mega Copper Mine

(Bloomberg) -- The Panamanian government backed the contract governing First Quantum Minerals Ltd.’s mega copper mine in the central American nation, saying it remains in force after a Supreme Court ruling cast uncertainty on the project.

After reviewing the court ruling, Panama’s Ministry of Commerce and Industry said on Wednesday it believes the contract originally signed in February 1996 “remains in force in all its parts.”

The country’s top court ruled on Monday that Law 9 -- used to approve a mining concession contract between the state and Minera Petaquilla -- was unconstitutional. Minera Petaquilla, now known as Minera Panama SA, is majority-owned by Vancouver-based First Quantum. Company filings show it obtained the concession rights for the Cobre Panama project in 1997 under that law.

The ministry said the ruling only declared the unconstitutionality of Law 9 but didn’t rule on the contract, according to a statement on its website.

Ernesto Cedeno, an independent constitutional lawyer in Panama City not involved in the case, said the ruling isn’t retroactive. “Rulings on unconstitutionality in Panama take effect toward the future, not backward.”

Cedeno said the chances of the mine shutting down were slim as the government would be seeking a resolution that would protect a major investment in the country and the jobs it’s generated.

“I think the solution that could arise is a new contract that’s in agreement with today’s standards -- a contract that complies with the current rules,” he said. “But of course, there will be more benefits for the state.”

First Quantum said Tuesday that it was working to identify suitable legal remedies and that any such remedies would need to be analyzed by the Supreme Court.

Cobre Panama, an open-pit mine located in Colon province about 120 kilometers west of Panama City, is expected to produce around 150,000 metric tons of copper in 2019, one of the biggest new copper mines under construction. The latest legal quandary in Panama follows a setback for First Quantum in March this year in Zambia, where it’s locked in a dispute over a $7.9 billion tax bill from the local revenue agency.

--With assistance from Laura Millan Lombrana.

To contact the reporter on this story: Natalie Obiko Pearson in Vancouver at npearson7@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Luzi Ann Javier, Steven Frank

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