First Quantum faces Panama copper referendum

First Quantum Minerals Ltd. (TSX-FM) shares fell sharply Monday after Panamanian President Laurentino Cortizo said his country will hold a referendum to decide whether to scrap a contract with the Canadian miner following days of protests by thousands of people opposed to First Quantum’s open pit copper mine.

The vote will take place on December 17, 2023, and the result would be binding, Cortizo said in a video message.

“I’ve respectfully listened to those who oppose the contract with Minera Panama,’’ Cortizo said, using the name of First Quantum’s local unit.

First Quantum shares were down by almost 20% or $5.54 to $22.42 on early trading Monday on volume of 598,670. The shares are currently trading in a 52-week range of $39.13 and $23.38.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania. The company’s portfolio of assets includes the Kansanshi mine in Zambia, which ranks as the largest copper mine in Africa.

Cobre Panama is First Quantum’s flagship operation. It is a huge open-pit copper project located in the Panama jungle, about 120 kilometres west of Panama City and ranks as First Quantum’s key asset.

On March 8, 2023, First Quantum and the government of Panama reached an agreement covering terms and conditions for a refreshed concession contract at Cobre Panama. Panama’s government and the mining company agreed on a contract which would guarantee the Central American nation annual income of US$395 million while allowing First Quantum’s local unit to operate the Cobre Panama project, an open pit copper mine for at least 20 years.

Cobre Panama contributes to approximately 5.0% of Panama’s GDP, makes up 75% of the country’s export goods and has created at least 40,000 jobs, directly and indirectly, that supports an estimated 100,000 or more Panamanians.

However, protesters have criticized both the deal and the mine’s environmental costs, even after Cortizo on October 27, 2023, rejected all new mining projects.

Franco Nevada Mining Corp. [TSX, NYSE-FNV] will be affected by any decision to scrap the contract as the Toronto based royalty and streaming company, recently garnered 15% of its revenue in a single quarter from Cobre Panama. Franco-Nevada bears no cost for the production that isn’t delivered the company has said.

First Quantum reported total copper production of 221,550 tonnes in the third quarter of 2023, an increase of 18% from the second quarter of 2023.

Cobre Panama produced 112,734 tonnes of copper in the third quarter, an increase of 22,648 tonnes from the previous quarter.

However, First Quantum has reduced its company wide copper production target this year to 745,000 to 775,000 tonnes from the previous target of 770,000 to 840,000 tonnes.

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