, they were ushered past the ornate, wood-paneled ceremonial rooms and straight to the private office of the president.
The stakes were high. The mine was set to be the centerpiece of Panama’s economy, generating between 4% and 5% 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.
The firm launched a $5.5 billion takeover of the deposit’s owner, Inmet Mining Corp., that quickly turned hostile after the smaller firm twice rejected First Quantum’s approaches. Varela was eager to see Cobre Panama built. He kept a piece of the first ore rock mined from Cobre Panama in his office. The night before, he joined First Quantum staffers at a luxury resort on Panama’s southern coast to dine on sushi and toast the project’s completion.
The disparities were enough to draw the ire of a new government. When Varela’s business-friendly administration was replaced by the centre-left party of Laurentino Cortizo, the new administration moved to secure a better tax deal for the country. After long delays and standoffs and over four years of negotiations, the government and company reached a tentative agreement in March last year. First Quantum acquiesced to the bulk of Panama’s demands in exchange for a 20-year extension on the mine’s operating contract.To the outside world, it looked like the crisis had been averted. Months passed in relative calm, and the mine kept churning out huge amounts of copper.
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