Corporate Knights | 27 October 2023
Why this Canadian-owned copper mine is facing fierce opposition in Panama
BY OCTAVIO GARCIA SOTO
With global demand for copper booming, the government of Panama is pushing a deal with the contentious Cobre Panamá mine and citizens are pushing back
The recent renewal of a contract for a Canadian-owned copper mine deep in the Panamanian rainforest has tested the limits of the Central American nation’s sovereignty, and triggered widespread protests.
Cobre Panamá – the country’s only active mine – has been operating in a 12-hectare area of jungle within a protected park in the coastal Donoso region, digging up 1.5% of the world’s copper. The contract has come under intense scrutiny because of the unprecedented legal powers it was slated to grant to its owner, Vancouver-headquartered First Quantum Minerals, for a mine already plagued by environmental concerns.
With demand for copper booming amid the global energy transition, the government of Panama has pinned its hopes on expanding its mining sector, arguing that the deal, the largest private sector ever in the country, will, as President Laurentino Cortizo tweeted, “significantly improve the lives of millions of Panamanians.”
But it has been deeply contentious. In September, following heavy protests in front of the National Assembly in Panama City and under threat of a lawsuit from the Panamanian Association of Constitutional Law, the government went back to negotiations with First Quantum and removed controversial clauses related to airspace rights and forced expropriation. The new contract was approved by the Congress and signed off by the president on October 20. Protests have since expanded throughout the country, resulting in violent crackdowns by police and the suspension of all classes for several days because of the social unrest.
The First Quantum case is a new chapter in Panama’s combative relationship with mining. The country has massive copper reserves, including one of the world’s biggest undeveloped copper deposits in Cerro Colorado. But out of 15 approved mining projects, First Quantum is the only one that has remained operational, despite resistance from residents, who consider mining to be a threat to their water sources and local economies. “What is at stake is the territorial development model of the country,” says Raisa Banfield, president of the non-profit Panamá Sostenible and a former vice-mayor of Panama City.
The approved contract gives First Quantum’s local subsidary, Minera Panama, rights to the territory in question for 20 years, with the option to renew for 20 more. In exchange for pouring US $375 million in royalties into Panamanian coffers – a 10-fold increase from the previously negotiated deal – the contract exempts the company from paying import and export taxes.
In its previous iteration, the contract would have expanded the concession area by 5,000 hectares; forced the state to approve concessions of future mines to the company’s affiliates without a public tender; allowed processing, refining and other essential mining activities outside the concession zone; and forced the government to expropriate private lands at First Quantum’s behest. Those clauses have been removed.
The mine’s first contract was signed in 1997 under then-owner Petaquilla Gold and was declared unconstitutional in 2017 by the Supreme Court. First Quantum acquired the mine in 2013. But even without a contract, operations have continued. “Cobre Panamá remains operational, with over 7,000 active employees,” says Keith Green, First Quantum’s manager in Panama.
Lawyer Publio Cortés, a former Panama vice-minister of finance, says that “the company was operating totally illegally.” Cortés, an opponent of the new contract, accused First Quantum of betting on a strategy of fait accompli since 2017. “It is a fact that the contract created a colonial enclave,” he says. “This brings back an unpleasant memory for Panamanians, because for almost a century we had a colonial enclave of the United States of America in the territories adjacent to the Panama Canal.”
The hermetic negotiations between Panama’s government and First Quantum have been criticized for their lack of transparency.
Under the Escazú Agreement for environmental justice, which Panama cosigned in September 2018, with 14 other Latin American, governments are required to hold binding public participation sessions as part of their decision-making processes on projects that have the potential to be environmentally damaging, as well as ensure easy access to information about those projects. The Panamanian government says they have complied with the agreement, but critics disagree.
“There wasn’t any public information during negotiations until the release of the contract,” says investigative journalist Rekha Chandiramani.
An online public consultation was held in April, but participants had to make a decision about the 55-page contract on the spot. The consultation was non-binding, meaning it would have no impact on the final decision. “Who participates in something when you know beforehand it’s going to be a waste of time?,” asked Chandiramani.
Has the mine fared well in Panama?
Proponents of the mine tout it as sustainable, with Green pointing to environmental and social projects, as well as its use of “cutting edge technology.”
“We collect and store 99% of rainwater in large ponds, taking advantage of the high rainfall in the Donoso area,” he says. “For over 10 years, we’ve invested over US$105 million in social programs for communities near to the mine. We’ve built highways, bridges and electrical networks. Our scholarship program brings opportunities to thousands of youths. We have also promoted personal gardens and helped the formation of small coffee producers.”
Cobre Panama says it is implementing a “climate change mitigation strategy” to reduce greenhouse gases in its facility by 30% by 2025, and by 50% by 2030.
"As a responsible mining company, we recognize our obligation to contribute to managing and mitigating climate change. Part of our contribution is partly through the acquisition and use of the best available technology to reduce and even eliminate - as in this case - emissions of gases,” Green said in a press release that announced the company’s acquisition of a Swedish-made drill rig that would help it reach its targets.
But Banfield says the social responsibility attributes can’t mask the environmental footprint of the operations. “You have to destroy in order to extract mineral particles from big amounts of rock,” she says. “How can that be sustainable? You could even argue for an underground mine, but an open pit just grows like a cancer.”
Since 2022, Panama’s Ministry of Environment has received reports of 200 irregularities related to existing operations. A nearby community reported colour changes in the water of a ravine essential for their basic needs. The water had turned “dark, white and milky.” A year earlier, more than 40 big bags filled with chemicals used to separate minerals were found near another ravine. First Quantum has reportedly been discharging waste in natural water bodies without permission from the ministry. Other irregularities include the unauthorized deforestation of more than 870 hectares by the mine and failure to reforest an agreed-upon 1,300 hectares. “A finding doesn’t imply a breach or a damage to the environment or public health,” Green says, referring to this report.
Of 15 open-pit metallic mining concessions in the country, Cobre Panamá is the only one currently operational. The other 14 have been suspended because of protests by local communities. Cortés, the former vice-minister, worried that approval of the other projects would carve the country up in a way that impeded other sorts of investment. “It will leave the territory of this small country like Gruyère cheese, with no development opportunities other than mining.”
Tourism, agriculture and the Panama Canal are among Panama’s biggest money earners, all of which would be affected by open-pit mining. Environmental advocates say mining’s heavy water consumption would threaten rice production and livestock farming, essential industries already suffering from water scarcity. The same crisis is affecting the Panama Canal, which has led to a slowdown of world commerce. The contract’s previous iteration would have had natural water sources originally destined for the canal going to the mine, but the latest revisions in the contract stated that the canal would have priority access.
The mine represents almost 5% of Panama’s gross domestic product, but critics say it has contributed little to the country fiscally. “Cobre Panamá has made over US$3.5 billion since it started operations in 2019,” says economist Felipe Argote, “yet it hasn’t paid a penny on income taxes. Had it paid what it does in Africa, it would have been over $500 million.” According to its shareholder reports for 2021 and 2022, Cobre Panamá was the only First Quantum project to not pay any income taxes. First Quantum operates eight mines around the world, but the project in Panama alone represents 38.8% of its income, according to Green.
Is copper mining necessary in a country like Panama?
Cortés believes Panama is too small of a territory to withstand open-pit metal mining, especially in the rainforest. And he sees the decision to proceed as setting a risky precedent.
“The state should nationalize the mine and calculate if it’s worth producing, or if it’s too much destruction,” Argote says. Cortés and others have proposed that the debate be moved to a national referendum: “It should be defined if the country wants to be a mining country or not. The change in Panama’s development model is so transcendental that this issue should go to a referendum, as was done recently in Ecuador.”
Many of the project’s previous opponents in Congress have now approved the revised bill, 44 to 5, with two abstentions. But public opposition has remained strong, with protests staged in front of the president’s residence and his party headquarters. Independent presidential candidate Ricardo Lombana, a centrist, posted on X: “Traitors. Let’s take the street to show them they don’t own the country.”
If citizen pressure were to cause the cancellation of the recently approved contract, Panama may have to plead its case in international tribunals. First Quantum notified the government of its intent to initiate arbitration under the Canada-Panama Free Trade Agreement in 2022, during the contract’s negotiation process. “The company must protect the interests of its shareholders,” says Green. “There is a clear lack of knowledge of the importance of copper for the energy transition. Minerals have been a fundamental part of the development of humanity and will continue to be so in the coming years.”