December 28, 2022

First Quantum Minerals, the parent company of the huge Cobre Panama copper mine, says the mine is operating normally while negotiations continue with the Panamanian government, the company stated on Wednesday morning. They also stated that last week Wednesday, December 21, the government ordered First Quantum to shut down the mine and was given 10 days to comply. First Quantum’s CEO held the first in-person talks with the Panamanian government on Monday, December 26, and continued Tuesday and Wednesday. These talks come after First Quantum’s arbitration filing against the Panamanian government last Saturday, December 24. The dispute between First Quantum and Panama stems from a disagreement over royalty payments. The Cobre Panama mine began operations in 2019 and is one of the largest projects brought online in recent years. According to company estimates, the mine will produce 340,000 to 350,000 mt of copper in 2022. Based on USGS figures, this equates to approximately 1.5% of global production. (Sources: Bloomberg, Reuters, USGS)

LME copper prices are down over 13% this year mainly because of falling global demand. However, as AEGIS has commented throughout 2022, the copper market has been plagued with supply issues in Central and South America. Moreover, several analysts and producers recently quoted by Bloomberg are bullish on long-term copper demand due to the “energy transition.” This could be a good opportunity for end-users to hedge future needs into 2023 and beyond by buying swaps. Such positions are standard for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (12/28/2022)

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