Panama City — The controversial Mina de Cobre Panamá copper mining project - in which Canadian company First Quantum Minerals has invested $10 billion over the last 10 years - is on hold after having become embroiled in problems since December, when the deadline for signing a contract with the Panamanian government expired, which is demanding higher royalties for the exploitation of the mineral.
First Quantum ceased operations at the mine on February 22.
But the problems for the mine go beyond the royalty issue. Since 2019, when it began operations, the project has come under investigation for alleged breaches of environmental laws. The mining project, which operates across a sprawling area of almost 30,000 acres and is the largest copper mining operation in Central America, is located in the middle of a protected forest in the district of Donoso, in Panama’s Caribbean-coast province of Colón.
Bloomberg Línea has reviewed more than a hundred documents concerning the investigations into the project’s environmental impact, compiled by Panama’s Environment Ministry (MiAmbiente) and the Panamanian Public Prosecutor’s Office.
The project contributes 4.8% to the Panamanian GDP and has created 40,000 direct and indirect jobs.
The Public Prosecutor’s Office currently has six ongoing investigations into possible damage to the environment, as well as the area’s historical heritage, in addition to investigations into the project’s public administration, and has received 11 complaints about the mining operation and involved parties, the most recent, filed on February 1 by the Centro de Incidencia Ambiental, cites former ministers Federico Alfaro and Ramón Martínez, respectively, for allowing copper extraction at the site despite a ruling by the country’s Supreme Court of Justice that declared the unconstitutionality of the government’s contract with the mining company.
In 2020, 10 administrative processes against the project, brought by the Ministry of Environment, resulted in sanctions totaling $21,000, while five other processes are underway, one of which is being heard in the Supreme Court.
On December 15, 2022, the government ordered First Quantum Minerals to cease operations at the mine following the the failure in the negotiation of a new contract, following the previous contract having been declared unconstitutional in 2017.
The government is demanding that the mining company make an annual royalty payment of $375 million, compared to the current payment of 2% on profits, but which First Quantum has rejected. The company has seven mines in production globally, and is engaged in two arbitration cased with the government of Panama.
“The government insists on a renegotiation of the contract. We insist that if the project was environmentally unsustainable before, it continues to be today, and the destruction and environmental degradation of 29,650 acres cannot be tolerated,” Isaías Ramos, a biologist of the Centro de Incidencia Ambiental (Ciam), a pro-environmental protection NGO, said.
Complaints of water pollution
In December 2022, the residents of San Benito, a community located 5km from the mine, saw, once again, said that river they use for their basic needs changed color, but that no inspection had taken place during the year due to the environment ministry’s lack of resources.
“It is a creek that comes out near the mining area, and we submitted a report to the company that [the water] looked dark, white and milky during eight days,” local farmer Gregorio González told Bloomberg Línea.
A 2021 environment ministry report stated that the mine had discharged wastewater without a permit to do so, and that tires from heavy machinery had been disposed of in the area without prior authorization, since 2016. The ministry said the mine’s detrimental effects are particularly harmful because the mine is located in the so-called Mesoamerican Biological Corridor, a protected area.
The mining company, for its part, responded that it has the necessary permits for its operations, and that the disposal of tires is not a breach of regulations but rather a mitigation measure accepted by the environment ministry.
In 2021, a second spillage of liquids from the operation, which ended up in the mine’s tailing pools, and which allegedly affected the tributary that serves the population living adjacent to the mine.
During inspections carried out after that incident, more than 40 “large” bags of chemicals used in the process to separate the minerals were found to be affecting the Chicheme River.
“Accidental discharges are a constant risk due to the high levels of rainfall,” the environment ministry’s report states.
The bridges that should have been put in place from the beginning of the project’s operations had not been installed, despite the fact that 10 years had passed since construction began, and which affected the local fauna. However, the mining company responded that the bridges were put in place.
Financial and auditing anomalies
In 2021, the environment ministry recommended that an audit be carried out of “all the financial commitments” of the company, but to date this has not been done, while there is no paperwork corresponding to the 4,900 acres of land that First Quantum occupies for its tailings dam, outside the perimeter of its concession.
Environment Minister Milciades Concepción said in an interview with Bloomberg Línea that such land was being used by the mining company however.
The company also allegedly owes $11.6 million that it agreed to pay for the ecological parks in the area.
Environmental inspections were carried out in the area in 2021, an area in which the biodiversity “is of transcendental importance”, and where the forests “provide refuge to more than 650 species of flora and fauna, most of them threatened, rare, regional and endemic species, and in danger of extinction”, according to the resolution that created the Donoso protected area in 2009.
According to the the Miambiente reportI, the situation is “very worrying”.
What does First Quantum Minerals say?
First Quantum Minerals responded that the allegations are “false”, and that the flora and fauna rescue plan has been modified, while the company is focusing efforts on “species of interest” because of their restricted population, relocating more than 47,000 animals of 600 different species.
The environment ministry has not responded to questions from Bloomberg Linea about why there were changes to the biodiversity protection plan.
First Quantum says that the monitoring program of the rivers around the project show “normal” conditions, and that Mina de Cobre Panamá is part of the community monitoring program carried out with independent organizations and involving 11 communities.
“Our commitment to biodiversity conservation is constant,” and is manifested in the investment of resources in a micropropagation laboratory for species of the native flora of Panama that will be part of the restoration program,” the company said.
Local newspaper La Prensa reported that some 200 incidents of non-compliance have been reported in 13 official environmental monitoring reports, from the construction phase to that of copper exports, between 2012 and 2019, including a lack of erosion control, and discharges of waste water without permits, which has affected water and soil in the area.
For its part, the mining company emphasizes that a finding does not imply non-compliance, and that “there have been no repeated non-compliances”, and that the rehabilitation of the mine area complies with Panamanian legislation and the environmental, health and mining safety guidelines of the International Finance Corporation (IFC).
In its statement announcing the suspension of ore-processing operations at the mine on February 23, First Quantum Minerals stated that it is “taking a systematic approach to reducing operations to ensure the safety of its workforce, prevent damage and degradation of equipment, and preserve the integrity of the mine”.
“In the short term, certain planned maintenance work will be scheduled earlier where possible along with commissioning work on the CP100 expansion and waste stripping in the mine. Essential safety and environmental work will continue, including care of the tailings management facility. Excess power generated by the power plant will be offered for dispatch to the national grid.
Negotiations with the Government of Panamá on a refreshed contract are continuing. The company remains committed to achieving an outcome that will be to the benefit of all stakeholders and support the long-term operations of the Cobre Panamá mine. The Company considers that the suspension of ore processing operations as a consequence of the government of Panamá's actions is unnecessary given ongoing progress in this regard.”
Translated from the Spanish by Adam Critchley