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Panama court ruling puts Canada mining project in doubt

Indigenous Panamanians have protested against mining projects in the country, claiming they damage the environment

Panama City (AFP)

A ruling this week by Panama's Supreme Court has left a $6.3 billion copper and gold exploration project by Canada's First Quantum Minerals in limbo after it was deemed unconstitutional.

First Quantum is hoping to mine the metals in Colon province on the Caribbean coast.

"This ruling is hugely important for Panama," Sonia Montenegro, executive director at the environmental defense non-governmental organization CIAM, told AFP.

In 2009, CIAM contested a contract signed between the government and Canadian company Minera Petaquilla.

CIAM claimed the deal was damaging to the state and its natural resources, saying it would result in the erosion of soil and vegetation, as well as the contamination of water and air.

Minera Petaquilla traded the project to Minera Panama, a subsidiary of First Quantum, and it is that contract the Supreme Court has declared unconstitutional.

Since Monday, when the court ruling was issued, First Quantum's stock has dropped about 13 percent on the Toronto Stock Exchange.

"No doubt they will look for mechanisms to continue (mining) and not suspend their activities or their investment," said Montenegro.

Operations at the mine had been expected to begin in the coming months, with eventual exports of 320,000 tons of copper a year.

Panamanian authorities have said it is the most important project in the country, involving 12,000 workers.

Labor and Development Minister Luis Ernesto Carles said exploration would continue.

"We're not worried -- we're very clear that the contract is valid," Carles told Telemetro television channel.

But Carles admitted that the ruling needed "clarification."

Minera Panama, the First Quantum subsidiary, insists their investment is "the biggest in the history" of the country and would help add 4.0 percent to Panama's gross domestic product as soon as next year.

Panama's Chamber of Mining, which represents the sector's businesses, expressed its "deep concern" about the court's ruling, insisting its underlying argument "has no validity."

The Chamber said arguments regarding "future environmental, social and public interest damages" -- submitted 10 years ago -- were out of sync with "the current reality."

It said such cases would hurt the country's ability to attract investment.

But Montenegro said the country must decide whether to protect its finances or its natural resources.

"Open-air metal mining generates a lot of negative impacts. Responsible mining doesn't exist," she said.

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