Canadian-owned Cobre Panamá mine kiboshed

Mass protest and a Supreme Court ruling resulted in the shuttering of one of the world's largest copper mines. But what comes next?

Panamanian protestors rally in November against the Cobre Panama copper mine, which is owned by Vancouver-based First Quantum Minerals. (Creative Commons/SportingVVE)

Cobre Panamá, one of the world’s largest copper mines, has been ordered closed by embattled Panamanian president Laurentino Cortizo after two months of protest focused on economic, environmental and Indigenous rights concerns with the project.

The open-pit mine, which accounts for an estimated 5% of Panama’s gross domestic product, 1% of global copper production and 75% of Panama’s exports, is owned by Vancouver-based First Quantum Minerals.

On Nov. 28, the same day Panamanians celebrate their independence from Spain, Cortizo announced the beginning of the mine’s closure process in response to a unanimous Supreme Court decision deeming the government’s contract with First Quantum unconstitutional in 25 different ways.

“Today, we are celebrating two independences,” restaurant worker Nestor Gonzalez, who was among those protesting the mine, told Al Jazeera. “Independence from Spain and independence from the mine. And no one is going to forget it.”

The protest movement began in October after Panama’s General Assembly approved a 20-year contract with First Quantum to operate the mine, with an option to keep it open for another 20 years. In return, the Panamanian state would receive $375 million US in annual revenue.

In early November, Panama’s congress passed a law banning new mining concessions in the country, but this excluded projects that are already operating.

The Panamanian Supreme Court rejected a previous contract with First Quantum in 2021, but Cobre Panamá was permitted to continue operations while a new contract was negotiated behind closed doors.

In addition to economic nationalist considerations, the Supreme Court identified a broad array of interconnected social and political concerns shared by people protesting in the streets.

“It's a massive industrial project,” Jamie Kneen of Mining Watch Canada told The Orchard. “It's basically at the height of land between the Caribbean and Pacific watersheds and is in the middle of an internationally protected area.”

The mine, which has produced copper since 2019 in Panama’s Donoso district, required building roads and Caribbean port access to a “previously pristine area on long stretches of the coast that had no development at all,” Kneen noted.

Deforestation and mining waste are major environmental considerations with any mine of Cobre Panamá’s magnitude, he added, but in this case are exacerbated by the project’s location in a biodiverse coastal jungle.

“Unfortunately, that is not a temporary alteration to the landscape. Those wastes are sitting there forever and posing a threat to downstream watersheds, with potential acid and metal leaching going on over essentially centuries,” Kneen explained.

The threats to the ecosystem posed by mining are an objection shared by environmentalists and Indigenous Peoples, which are difficult to disentangle from economic considerations.

“This is a non-renewable resource. Once it's gone, it's gone,” Kneen said.

“Anyone who claims ownership of the resource should be making sure that they're getting enough rent or return out of it to … make a difference that will last after the mine is closed and the resources gone.”

This dilemma might sound familiar to Albertans.

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Freddy Cáceres, who manages the Extractive Resource Governance Program at the University of Calgary School of Public Policy, says the mass eruption over the First Quantum contract should be regarded as a cascading effect of popular discontent brewing in Panamanian politics.

Concerns regarding public safety, high fuel prices, medicine shortages, rampant inflation, pressures on the Panamanian Social Security Fund and various corruption scandals have already made Cortizo’s government wildly unpopular.

“It was an escalating problem that the government was not able to control,” Cáceres observed.

He noted how while it took two years for the new contract to be negotiated, the General Assembly approved it in three days of debate, indicating a lack of public oversight that fed frustrations in the government’s ineptitude.

“They didn’t take the time to review all the terms and conditions. It's a very technical contract, so a lot of considerations should have been [made] before signing the contract,” Cáceres said. “But they didn't do it.”

He said there was an environmental management plan done on the site in 2008, with routine government audits conducted at the mine to ensure compliance. “That’s part of the game,” Cáceres noted.

However, open pit mining is an inherently destructive process, Cáceres cautioned.

When it rains, water with high concentrations of metals drains into natural bodies of water, creating an effect known as acid drain. This needs to be mitigated through water treatment.

The more mining operations expand, the greater the risk of water contamination.

This puts environmentalists in a bind, because the precious minerals that can only be obtained through mining are crucial towards building renewable energy infrastructure.

“There’s no way to do an energy transition without mining,” said Cáceres, who works with energy companies to facilitate the inevitable transition to a clean economy.

The energy transition necessitates a winding down of fossil fuel production combined with ramping up mining.

“The only thing that you can do … is putting in place the appropriate controls, the appropriate standards, the best possible practices that it's feasible to do for each mining project to make it workable in environmental terms and social terms,” said Cáceres.

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While the 5% of Panamanian GDP Cobre Panamá represents is no small sum, Cáceres is confident that the Panamanian state can weather the storm of its closure, because large-scale mining operations in the country were negligible before 2019.

“Panama is not a mining country,” he said. “Panama is one of the richest countries in Latin America, because of the financial sector [and] logistics sector. Of course, the Panama Canal is the biggest source of income for the country.”

Panama’s inexperience with major mining operations, Cáceres added, is the primary reason Cobre Panamá was doomed for failure.

“Because in a very short period of time, a country that was not accustomed to mining was obligated to adjust regulations to align its regulatory framework with a big project,” he said.

“They [went] from almost zero mining to be[ing] the largest in terms of expectations of copper in Central America in just this very short period of time.”

On a macroeconomic level, closing the mine will simply revert Panama to the pre-2019 status quo.

But questions remain about the 7,000 people employed at the mine, as well as 40,000 people with indirect jobs that could be at risk with the mine’s closure.

The government, Cáceres said, will have to plan “to keep them productive” in the long term.

An interrelated issue is the need to deal with the mine’s environmental impacts, such as treating acid drain and ensuring tailing ponds don’t leak.

“Those are real problems. They need to be taken into consideration even if the mine is closed,” said Cáceres.

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First Quantum has indicated it’s not going down without a fight.

The company, which also owns mines in Zambia and Australia, earned 46% of its revenue from the Cobre mine in the first nine months of 2023. Since protests and blockades began in October, the company has lost more than $10 billion in value, and before that was $6.8 billion US in debt.

On Nov. 13, the company announced it was curtailing production due to protestors’ “illegal blockade” of the mine’s Punta Rincón port, warning that it would “protect itself with all options available to it pursuant to its contractual rights and under international law.”

First Quantum has launched a two-pronged arbitration process in an effort to save the mine, challenging the mine’s closure under the Canada-Panama Free Trade Agreement, as well as at the International Court of Arbitration.

Stuart Trew, an expert in trade and investment policy at the Canadian Centre for Policy Alternatives, has written about the ability of Canadian companies operating in the Global South to strong arm governments to get their way through investor-state dispute settlement (ISDS) mechanisms in trade agreements.

Trew said that while the full details of First Quantum’s ISDS complaints are still murky, the company will be “no doubt alleging violations of their minimum standard of treatment under the treaty … and expropriation without compensation.”

“Depending on how serious the government is about shutting down the mine, they'll be looking at negotiating some kind of package for First Quantum,” Trew said.

If the arbitrators rule in First Quantum’s favour, Trew predicted the “eventual award is going to be enormous.”

“It's going to be something that they probably can't afford to pay,” he said.

In 2012, First Quantum received a $1.25-billion US payout from Eurasian Natural Resources after three First Quantum mines in the Democratic Republic of Congo were expropriated and sold to the Kazakh company.

The case of Cobre Panamá, however, is different because the company is challenging a ruling on its mine’s constitutionality, which was respected by the government, providing a case study in how international investment treaties constrain democratic decision making in the developing world.

“There's got to be other ways that Canada has to support its mining companies overseas while at the same time acknowledging public preferences and public demands for different kinds of economic development,” said Trew.

This piece has been updated to correctly spell Cobre Panamá.