Panamanian President Ricardo Martinelli has sent shock waves through the global mining community with plans to repeal part of his country's mining code that allows investments from foreign governments.
The news raised questions about the future of Inmet Mining 's flagship Cobre Panama project in Panama. Currently being developed, the project has drawn investments from sovereign wealth funds in South Korea and Singapore.
Inmet's shares dropped more than 7 per cent on Friday, a day after Mr. Martinelli's announcement, closing at $64 on the Toronto Stock Exchange, down $5.12.
The Panamanian news couldn't have come at a worse time for Toronto-based Inmet, which is in the midst of a heated takeover battle for control of rival Lundin Mining Corp. Inmet's Panama project, which is expected to produce more than 250,000 tonnes of copper a year, is a core aspect of its bid.
Early Friday, Inmet released a statement saying its overall development would not be hindered if Panama went ahead with the move.
In a later interview, chief executive officer Jochen Tilk declined to speculate on whether the $500-million already invested by Singaporean wealth fund Temasek Holdings would be affected. He did say Inmet is now looking at other capital sources.
Mr. Tilk said that because Inmet is on better financial footing, he believes it is now an attractive option for private investments from other miners, adding that raising equity is a possibility.
The law that Mr. Martinelli asked legislators to repeal was passed less than a month ago and has drawn opposition from environmentalists and indigenous groups. In subsequent comments, the President declared he stands with those who oppose the controversial Cerro Colorado project that sparked the proposed repeal, adding that he is wary of miners.
If Inmet ends up having to return the $500-million from Temasek, taking on debt could supplant the lost financing. Going that route would contradict comments Mr. Tilk made earlier this week about his aversion to borrowing money. He made the remarks to contrast his bid for Lundin from that of Equinox Minerals, which plans to borrow $3.2-billion to acquire the company.
In the face of the Panama developments, and after reading that Equinox's CEO Craig Williams said it is impossible to develop a $5.5-billion project over the next five years without borrowing money, Mr. Tilk backtracked on his earlier stand, saying: "I don't disagree with Craig at all that a certain level of debt is correct."