The top court’s ruling capped six weeks of protests and official announcements over a contract that gave First Quantum 20 years of mining rights over the giant copper asset, with an option to extend the deal for another 20 years in return for $375 million in annual revenue to the Central American nation.

Challenges against the contract piled up in court following massive protests against the contract, which almost paralyzed the country.

Public figures including climate activist Greta Thunberg and Hollywood actor Leonardo Di Caprio backed the protests and shared a video calling for the “mega mine” to cease operations, which quickly went viral.

First Quantum’s local unit Minera Panama said in a statement on Wednesday that is interested in pursuing dialogue with the country’s government. It warned the court’s decision doesn’t touch several important points, such as how the government plans to prevent the arrival of illegal miners or what is going to happen to the more than 40,000 people directly and indirectly employed by Cobre Panama.

Panama’s decision will have consequences for the copper market, as Cobre Panama mine accounts for about 1.5% of global production of the metal.

It will also affect the government’s coffers. The mine accounts for about 5% of its GDP and makes up 75% of Panama’s export of goods.

It is also likely to lead to international arbitration. First Quantum on Sunday sent Panamanian authorities a notification of intent to start arbitration proceedings.

It later clarified the move was not the beginning of a legal procedure, but rather “a formality required by international treaties, with the purpose of opening a dialogue period of at least 90 days between the parties.”

“Pursuing international arbitration to recoup the massive financial loss of Cobre Panama would likely take years to resolve,” Orest Wowkodaw, analyst with Scotia Capital Inc. wrote in a note to clients. “However, we believe this course of action could ultimately bear fruit.”

Cobre Panama, in production since 2019, generated 112,734 tonnes of copper in the third quarter of 2023, contributing $930 million to First Quantum’s overall third-quarter revenue of $2.02 billion.

Analysts at BMO Capital Markets believe that First Quantum is in a financial position that allows it to weather the storm in the short term.

“Under our base-case scenario which assumes Cobre Panama mine closure through 2023 year-end, First Quantum has sufficient liquidity,” BMO analyst Jackie Przybylowski wrote.

Challenges, she added, would arise if Cobre Panama remained halted for 80 days in 2024, as this would draw First Quantum’s cash down to zero at the bank’s current commodity and cash outflow assumptions.

“Tricky” spot

A closure for the first half of the year, beyond the May 2024 presidential election, would result in a $267 million cash shortfall, Przybylowski said. This estimation doesn’t including cash reserves required for working capital.

“The primary goal of the government and courts today appears to be calming the protests,” Przybylowski wrote on Tuesday. “We are optimistic that this approach will be successful, and that protests around the Cobre Panama port will subside, with mining operations likely to resume relatively quickly if protests are lifted.”

Lawyers contacted by MINING.COM said both the Panamanian government and First Quantum are now in a “tricky spot” since Cortizo’s administration passed a bill on Nov. 2 banning all new mining concessions and extensions. That could prevent the two parties from negotiating a new deal.