Panama’s Supreme Court has declared unconstitutional a contract that gives a Canadian company the right to operate a copper mine for at least 20 years.
The announcement Tuesday by the nine-justice court, after four days of deliberations, set off cheers among demonstrators waiting outside and waving Panamanian flags.
The contract by a subsidiary of TSX-listed and Vancouver-based First Quantum signed in October has sparked widespread protests across the country for several weeks.
“This is what we had been waiting for,” demonstrator Raisa Banfield said after what she called an agonizing wait. “The president has to suspend [mine] operations today.”
The dispute over the open-pit Cobre Panama mine has led to some of Panama’s most widespread protests in recent years, including a blockade of the mine’s power plant. Protesters also blocked parts of the Pan American highway, including a stretch near the border with Costa Rica. Just before the ruling was announced, they opened the roadway so that freight trucks could get through.
First Quantum’s local subsidiary, Minera Panama, said in a statement earlier this month that small boats had blocked its port in Colon province, preventing supplies from reaching the mine. Naval police reported that a ship carrying coal decided to turn back due to “hostility from a group of protesters who from their boats threw rocks and blunt homemade objects” before being dispersed.
The protesters, a broad coalition of Panamanians, fear the mine’s impact on nature and especially on the water supply in a biodiverse jungle on the Atlantic coast west of the capital
The deal had the company agreeing to hand over at least $375 million US annually to the government of Panama for the right to operate the mine for the next 20 years. It also has a clause to extend the deal for 20 more years beyond that.
The mine was temporarily closed last year when talks between the government and First Quantum broke down over payments the government wanted. The restart of the deal in October sparked widespread opposition.
Since protests began, the government nearly passed legislation that would have revoked the contract, but it backtracked in a debate in the National Assembly on Nov. 2. Protesters’ last hope was for Panama’s courts to declare the contract unconstitutional.
That happened on Tuesday with the court saying, “We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023,” in a short statement signed by Supreme Court President Maria Eugenia Lopez.
While a setback for the company, the ruling did not strike down the contract itself, but merely the process with which it was signed, says Dalton Barretto, managing director of equity research metals and mining at Canaccord Genuity.
“It means that the process followed by the government to take the renegotiated contract and enshrine it into law did not follow constitutional process,” he said in an interview with CBC News
The mine has been idled due to blockades limiting the supply of goods in and out, and Barretto says the court ruling does not and could not change that one way or the other.
“The issue in terms of restarting is not the ruling; it is that the protesters are blockading all supply routes,” he said. “If tomorrow the protests run away and First Quantum can get a coal ship into their port, they could start up the mine immediately.”
The ruling is a setback for the company in that it extends the uncertainty over the project at least until next spring, when the results of an election in the country will likely mean a new round of negotiations and due process to get whatever deal gets signed into law.
“It hurts the company in the sense that the agreement will need to be put through the constitutional process by the next government, who will likely want to renegotiate some of the terms before they agree to do that,” he said.
Ultimately, however, he’s confident the company will prevail in one form or another. “The reality of the situation is that, likely a year from now, this mine will restart because it is too important to the Panamanian economy,” he said.
It makes up about five per cent of the country’s entire GDP and is the largest source of government revenue outside the Panama Canal.
“If it does not [restart] it will impact the country’s economy for the foreseeable future,” he said.
In a statement following the release of the court’s decision, First Quantum said it is committed making the project work for all sides.
“We want to affirm our unwavering commitment to regulatory compliance in all aspects of our operations within the country,” the company said in a statement. “We will comment further as additional details on the ruling are made public.”