Arbitration Proceedings Over Cobre Panama Mine Escalate as Investors Await Panama’s Decision
Arbitration proceedings between Canadian miner Franco-Nevada and the government of Panama over the Cobre Panama copper mine entered a new phase this week with the formation of a tribunal to hear the case, according to legal filings.
Investors are awaiting a crucial decision from Panama’s President, Jose Raul Mulino, regarding the future of the Cobre Panama mine, which was shut down last year due to public unrest.
Cobre Panama is the flagship operation of Canadian miner First Quantum Minerals, which is also seeking damages from Panama.
Franco-Nevada, which had a streaming agreement with First Quantum to purchase gold and copper from Cobre Panama in exchange for financing mine operations, is pursuing $5 billion in damages from Panama under the Canada-Panama free trade agreement.
In 2023, Franco-Nevada recorded a $1 billion charge due to the mine’s closure. First Quantum is seeking at least $20 billion in damages, while Orla Mining, whose separate contract was canceled last year, is claiming $400 million from the Panamanian government. The next phase involves formal arbitration proceedings, where the parties will present their respective arguments.
The closure of Cobre Panama has become a contentious issue in the mining sector, removing 1% of global copper supply from the market.
Mulino has stated that his government will make a decision on the mine’s future early next year, even as the arbitration cases continue.
In November, rating agency Moody’s downgraded Panama’s outlook to negative, citing potential credit risks from the ongoing litigation. “Absent measures to address this risk, including reopening negotiations with the mine’s operators, the government’s credit profile could face a severe financial shock in case of an adverse ruling,” Moody’s warned.
Neither Franco-Nevada nor First Quantum responded to requests for comment. Following the news, shares of Franco-Nevada fell 1.7% in Toronto, and First Quantum’s shares dipped 0.5%.
