In Panama City, protesters celebrate the country's Supreme Court ruling the Cobre Panama copper mine unconstitutional on Nov. 28, 2023. (Image: AnyGang/Wikimedia Commons)
The increased demand for transition minerals has led to disputes with local communities around the world. Many mining projects have caused irreparable environmental damage and human rights abuses, an issue that undermines the progress of the net-zero movement. This article focuses on transparency initiatives and is the latest installment in our investigative solutions journalism series on responsible mining in the low-carbon energy transition.
For the entire month of November, thousands of Panamanians took the streets to protest a mining contract that was approved in late October. They blocked roads and ports around the Cobre Panama copper mine and filled the streets in Panama City, calling on the government to reverse the decision.
The contract awarded the rights of the Cobre Panama mine to a subsidiary of a Canadian mining giant, First Quantum Minerals, for 20 years with an option to extend the contract for an additional 20 years.
In the largest public movement in Panama since the protests against the Noriega dictatorship in the 1980s, angry citizens criticized the impending environmental damage the mine would cause, the lack of meaningful public consultation, and the perceived conflict of interests, and corruption between government officials and the mining company.
Many concerned Panamanians feared that the government was selling the country to foreign investors. Sure, the mine would spur economic activity, but at what environmental cost, and to whose benefit? The feeling among the protestors was that the economic benefits of the mine did not outweigh the negative environmental, social and governance impacts of the project.
Eventually, on November 30, Panama’s Supreme Court ruled that the mining contract violated the constitution, citing 25 provisions as unconstitutional, and declared that the mine would be shut down.
The Cobre Panama mine had been in operation since 2019, extracting 385,000 tons of copper in 2022 alone, amounting to $2.85 billion in mineral exports that year, according to the mining company’s data. The company was given a license to explore and develop the mine in 1997, though after legal challenges that license was finally declared unconstitutional in 2017, leading to the recent attempts at renegotiating the contract.
Is corruption a real problem in mining projects?
When you combine massive amounts of investment from wealthy nations with poorer, developing countries that lack good governance and robust accountability measures, you’re setting the stage for a corrupt show.
Not helping matters is the fact that the mining approval process is becoming drastically fast-tracked in a number of countries as the demand for minerals to supply the energy transition surges. Mines can now reach approval in less than two years in some regions, something that would usually take upwards of 10 years to achieve.
Corruption is one of the main forces responsible for what is known as the resource curse, a term used to describe the phenomenon of developing countries with abundant natural resources ending up in an economically worse situation than before their resources were exploited.
Looking at the Panama case, several conflicts of interest raise suspicion, not least of which is the fact that the sitting vice president, José Gabriel Carrizo, used to be a lawyer for the subsidiary that owns the Cobre Panama copper mine, according to news reports.
According to Luis Adolfo Corró Fernández, Panamanian lawyer and president of the Fundación Latinoamericana para la Libertad y el Desarrollo (FIDES), the vice president’s mother also worked for the same mining company.
“In 1962, the Panama government published a book that showed in detail where cobalt, gold, iron, silver, oil and other resources were located,” says Corró Fernández. “Strong political families received that information and used their positions to secure the government licenses to explore those areas. Then, they sold those licenses to First Quantum Minerals and other mining companies. So, this situation has been developing for decades.”
Panama isn’t alone when it comes to corruption allegations in mining contracts. A report published by the Natural Resource Governance Institute outlines several incidents of corruption in mining for transition minerals.
Between 2010 and 2020, over $400 million disappeared from a state-owned mining company working on cobalt and copper projects in the Democratic Republic of the Congo (DRC). Those funds are presumed misappropriated. In Chile, a former economics minister allegedly received illegal payments from a mining company awarded lithium contracts. In Russia, a government official was charged with bribery after receiving payments for approving a nickel mining contract.
In Namibia, a Global Witness report uncovered accusations that a lithium mining license was obtained by a Chinese firm through bribery, where court documents show an agreement to pay $300,000 to a government advisor upon approval of the deal.
Also in the DRC, First Quantum Minerals (the same company that owns the Cobre Panama mine) “offered a down payment to the state of $100 million, cash payments and shares held in trust for government officials," according to a U.N. Security Council report. "The share offer to those officials was premised on a sharp rise in its share price once it was announced that it had secured some of the most valuable mineral concessions in the DRC,” the report reads.
How to improve transparency and combat corruption in mining
The leading transparency initiative in the mining sector is the Extractive Industries Transparency Initiative (EITI). The EITI requires both companies and governments to disclose payments, environmental and social impact assessments, and contracts and licensing, among other relevant documents. Updates in 2023 include provisions for added scrutiny on fast-tracked approvals, greenhouse gas emissions reporting, disclosures on community consultation and consent, and gender disaggregated data on benefits to communities.
So far, 57 countries have signed on to the EITI’s voluntary reporting standards. The voluntary nature of the framework means it can’t be enforced, but signatory countries are required to develop a multi-stakeholder group comprised of government, companies, and civil society that hold government actors and private companies accountable to the EITI reporting system.
Panama, in case you were wondering, is not a signatory of the EITI.
“While adherence to the EITI is voluntary, once it joins, a country needs to comply with all required aspects of the EITI standard,” the EITI International Secretariat explains. “This is tested in the validation process, which identifies corrective actions where requirements are not met.”
Studies have shown that EITI implementation makes a country more attractive for foreign investment, and in Zambia, the implementation of the EITI led to a significant decrease in corruption.
“Although the EITI is not a silver bullet against all forms of corruption, it is a very useful initiative that puts important data on mining revenues into the public domain and leads to greater transparency in the mining sector,” says Colin Robertson, senior investigator at Global Witness.
The EITI needs to be used in conjunction with other measures to achieve the best results, Robertson adds. Those measures include higher due diligence standards from downstream actors in the supply chain, stronger enforcement of corruption cases against companies, and mandatory disclosure laws.
The EITI also points to some areas where the standard encounters challenges in its implementation. “One of the more challenging areas of disclosure is beneficial ownership transparency,” the EITI International Secretariat explains. “Another area to highlight is project-level reporting, where only a minority of countries have so far fully addressed project-level reporting of relevant government revenue streams. A third area where progress has been challenging in some cases is on civil society engagement.”
EITI in the low-carbon energy transition
Had the EITI standard been implemented in Panama, it’s hard to say what difference it might have made. Perhaps the mine would not have been allowed to operate anyway, but over a month of public outrage that included violence and four deaths may have been avoided. Maybe the government and mining company could have found an honest agreement that provided tangible benefits to Panamanians and adequate environmental protection. Maybe not, but any chance of that happening has certainly been squandered now.
When the Supreme Court of Panama deemed the project unconstitutional, it ruled that the contract was not inspired by social well-being and public interest, but rather by private interests that included the preferential and priority treatment of the First Quantum subsidiary.
When considering the economic benefits that Panama would have received, the Court ruled there was nothing in the contract that represented broad economic benefits for the state.
Herein lies one of the major challenges of the energy transition. The rush to replace fossil fuels with renewable energy sources requires an abundance of minerals. Securing those minerals represents a big opportunity for mining companies and other companies involved in the mineral supply chain. Very lucrative mining contracts are up for grabs.
But this dash for minerals needs ground rules to ensure a just transition for all. It isn’t fair to disregard the well-being of others so that the developed world can continue its consumerism without interruption.
Transparency measures, like the EITI, can ensure that measures are taken to protect the well-being and interests of people in mineral-rich regions, and mitigate some of the nasty consequences of mining transition minerals.
Editor's Note: This story was updated on Jan. 9, 2024, to revise Luis Adolfo Corró Fernández's title.
Andrew Kaminsky is a freelance writer with no fixed location. He travels all corners of the globe learning about the different groups that call this planet home, seeing natural wonders, and sharing laughs with the people he finds along the way. An alum of the University of Winnipeg's International Development program, Andrew is particularly interested in international relations and sustainable development. In his spare time you are likely to find Andrew engaging in anything sport-related, or finding common ground with new friends over a craft beer.