How a US$10 billion mine became a cautionary tale for the energy transition

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The stakes were high. The mine was set to be the centerpiece of Panama’s economy, generating between four and five per cent of its gross domestic product and employing one in every 50 workers in the country. For First Quantum, which had borrowed heavily to construct a mine in the dense Panamanian jungle, it simply had to succeed.

It is in part a tale of First Quantum’s hubris, as the company’s bosses sought to build the mine fast and keep costs low, despite unsettled tax disputes and legal issues. Pascall dismissed private warnings not only from Panama’s government but also from his own advisors that the tax deal put his company in a vulnerable position.

“If the sector is risk-averse, they don’t invest. And if they don’t invest, we don’t have what we need for an energy transition.”Trailblazing projects like Cobre Panama have long been a hallmark of First Quantum’s business. Headquartered in Canada, the company was founded in 1996 by Philip Pascall and his brother Matt.

Their boldness was rewarded in the 2000s, as demand from China supercharged the price of copper. By the early 2010s, First Quantum had become a multibillion-dollar success story. With cash to spend and growing ambitions, Philip set his sights on a deposit in Panama, a country until then little touched by the mining industry.

And the timing seemed fortuitous. China’s industrialization was being supplanted as the major driver of projected copper demand by a new juggernaut — the energy transition. The electric vehicles, charging stations and high-voltage cables needed to electrify the world’s transportation will all require lots of copper. Mining executives started talking about the gap between the amount of copper that would be needed to reach net zero and the anticipated supply from the world’s existing mines.

The tax benefits became hard to ignore once the mine opened. In 2019, Cobre Panama’s first full year of operation, the mine's royalty payments to Panama were a sixth of what First Quantum paid to Zambia for its Kansanshi mine. .

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