First Quantum shares fall 50% since Friday as Panama seeks referendum

Panama’s President Laurentino Cortizo has cleared the first hurdle to fast-track a bill that would allow the country to hold a referendum on the controversial 20-year contract with Canadian miner First Quantum Minerals (TSX: FM).

After 10 months of negotiations between the parties, the country inked in October a multi-billion dollar deal with the miner, allowing it to operate its flagship Cobre Panama copper mine for the next two decades.

The contract, which ended years of legal uncertainty, was signed into law last week, triggering a series of violent protests across Panama City, the capital.

Shares in the company have plummeted 50% this week as uncertainty over the future of its key asset prompts investors to reduce their exposure. The stock closed at $27.96 on Friday and was as low as $13.76 on Wednesday in Toronto, before settling at $14.78, down 8%, by market close. The company was valued at about $10 billion as the trading session entered its final hours. 

Protesters claim the new contract was fast-tracked with little public input or transparency. They want its immediate cancellation. They have also made corruption allegations against lawmakers. 

In response, Cortizo announced the country would hold a referendum on Dec. 17 over whether to revoke the controversial contract. The president’s intention was stopped in its tracks when Panama’s electoral court said it was unable to hold a nationwide vote on the issue because it would require congress first to pass a law.

A legislative committee approved the bill late on Tuesday, clearing the first hurdle for the proposal to become law. Bill 1110 revokes the controversial Law 406 that approved the revised contract for Cobre Panama, and also bans the granting of future mining concessions in the country.

The bill has now been sent to the plenary for general debate, where it will require a majority vote in two separate sessions for final approval.

Special sessions to fast-track bill

In its first public statement since Cortizo’s referendum announcement, First Quantum said that “unconstitutional challenges” have been brought against Law 406. The country’s Supreme Court has accepted hearing two challenges, the company said. 

“First Quantum has always been an advocate of Panama and its people and is committed to the rule of law with the objective to achieve benefits for the country,” it said in the statement.

The company said its giant copper mine contributes almost 5% of Panama’s gross domestic product, makes up three-quarters of the country’s exports and has created at least 40,000 jobs, directly and indirectly.

“We believe in this project and its potential and welcome the opportunity to have constructive dialogue with the people of Panama about its future,” First Quantum said.

Panama’s Congress has convened special sessions for today and Thursday ahead of a public holiday in Panama on Friday.