(Includes correction)
Panama's government announced plans to repeal a new mining law following an uproar from indigenous groups and environmentalists, raising concerns about the stability of the country's mining regime just as Inmet Mining develops its major copper project.
Inmet says it is unaffected by the proposed change because its Cobre Panama project is governed by Law 9, whereas Law 8 is being contested. Analysts agree that Inmet is likely in the clear for now, but the action raises questions about what the company could face over the next 5 or 6 years as it develops its big project.
Groups opposed to Panamanian mining are so hostile right now that president Ricardo Martinelli felt compelled to address them at a church on Thursday. His words were quite cautious and he insisted that he is not advocating for mining developments. (For those who can read Spanish, his comments can be found here.)
Equinox Minerals chief executive officer Craig Williams raised this instability in an interview with The Globe and Mail on Thursday. Panama's mining laws and culture are still being developed, he said, which means Inmet will have to be the pioneer and spend a lot of time developing the mining code and appeasing environmentalists.
The topic came up when he was asked whether a three-way deal between Equinox, Lundin and Inmet was possible. He said 'no' because of the uncertainty around Inmet.
The affected law, Law 8, allows foreign governmental bodies or authorities to acquire stakes in Panama's mines. Yet Inmet assured investors that its Cobre Panama project is governed under a different law that was enacted in 1997, whereas Law 8 directly affects the Cerro Colorado project.
However, BMO Nesbitt Burns points out that Inmet's press release doesn't clarify the repeal's impact on the Singapore soverign wealth fund Temasek's $500-million private placement in Inmet. Looking back through its own records, BMO found that according to the terms of the agreement, the investment could be cancelled.
Editor's note: An earlier version of this blog post incorrectly stated that the contested mining law has already been appealed. In fact, the government has only announced its intention to appeal. This version has been corrected.
Tim Kiladze