With the commission’s report in hand, next steps and final decisions around Cobre Panama’s fate is up to the country's president

First Quantum Minerals Ltd.’s share price dropped more than 30 per cent on Wednesday before recovering some losses on news that its Cobre Panama mine may get a second life on its way to winding down operations for good.

In a report released Wednesday, a Panamanian commission recommended that President José Raúl Mulino’s government negotiate with the Canadian mining company to restart production at its open-pit copper mine under a framework that would self-finance the site’s future closure and rehabilitation.

Cobre Panama, located about 120 kilometres outside of Panama City, was a key piece of the country’s economy before it closed in November 2023. The mine contributed around five per cent to Panama’s gross domestic product (GDP) and employed more than two per cent of the country’s total workforce, according to First Quantum’s website.

The mine was also a moneymaker for First Quantum and previously accounted for 40 per cent of the company’s revenue.

Cobre Panama closed after local protests and a ruling from the country’s Supreme Court declaring that a 20-year operating concession granted to First Quantum was unconstitutional. Its shutdown delivered a negative shock to Panama’s exports, government revenue and GDP growth, and the commission’s report said 6,000 direct jobs and 30,000 indirect jobs were lost.

Since then, the mine has sat in a state of temporary “reservation and safe management.”

This means we are working with a smaller team to implement environmental stability and asset integrity measures as we continue to manage the mine safely and responsibly,” First Quantum says on its website.

With the commission’s report in hand, next steps and final decisions around Cobre Panama’s fate is up to President Mulino.

In a statement, First Quantum acknowledged the commission’s recommendations and said it is awaiting guidance on next steps from Panama’s government.

“First Quantum recognizes that a new agreement must respect Panama’s sovereignty, democratic institutions and the Government-led process,” the company said.

“First Quantum will engage constructively and in good faith with the objective of establishing a legal framework for Cobre Panamá that is fair, transparent, durable, and aligned with Panama’s Constitution and laws.”

While the company’s Toronto-listed shares closed 15 per cent lower on Tuesday, Bank of Nova Scotia analyst Orest Wowkodaw said in a note that his team believes the “knee-jerk interpretation by the market of a near-term mine closure is incorrect.”

“We believe the comments pertaining to an ‘orderly closure’ of (Cobre Panama) refer to the long-term permanent closure of the asset once the current mine life is exhausted as originally designed, rather than a near-term shutdown,” he said.

Wowkodaw added that while more clarity is required based on public comments from Panamanian ministers on Wednesday, “we see the massive sell-off in (First Quantum) shares as a buying opportunity for investors.”

BMO Capital Markets analyst Matthew Murphy said in a note that the mine will need to operate for an extended period to resolve arbitration and fund the closure at no cost to Panama.

He referenced the Panama government commission’s report, which states that decommissioning the site could take around 60 years and includes an illustrative example of a 25-year active mine life with progressive closure followed by periods of active closure, post-closure and monitoring and the final handover.

Murphy said that while risks remain elevated and the market’s immediate response focused on the closure, “we believe the full report details offer a more promising frame of reference and believe a mutually agreeable negotiated outcome is possible that would preserve substantial asset value for (First Quantum) and satisfy all of Panama’s objectives.”