Once-favorable mining jurisdictions are becoming battlegrounds, adding a new layer of risk to an already challenging business.

The most ominous example of this trend is the Cobre Panama copper mine, on which one of our portfolio’s royalty companies had bet big. See:

Just How Bad Was Franco-Nevada’s Bad News?

Franco-Nevada Takes Its Cobre Panama Hit

The mine’s stakeholders are still hoping that it can be reopened on favorable terms. But the following article makes that seem unlikely:

Site visit: One of the strangest chapters in copper mining is drawing to a close

(Northern Miner) – With so much happening in copper – from all-time highs mixed with price collapses – it’s easy to lose sight of the giant hole that exists in the industry where dynamite meets bedrock.

Cobre Panama has now been sitting idle for 18 months, ordered to shut down by a Supreme Court ruling following months of protests that rocked the Central American nation.

The massive First Quantum Minerals (TSX: FM) mine, which entered production in 2019 is an increasingly rare phenomenon in copper mining. The mine’s global porphyry peers in terms of output have histories often dating back to the 19th century.

One of the largest copper mines to come on line in decades, it contributed 1.5% of the world’s output. To put that in perspective, it’s considerably more than Venezuela’s total share of global oil production.

Brass monkey

One of my more otherworldly experiences as a veteran of the occasional mine tour was walking Cobre Panama.

I could describe the scene at the complex 120 km west of Panama City as frozen in time, but even after a couple of minutes in the jungle of central America, freezing seems the remotest of possibilities.

The quiet of the place after the helicopter blades stop whirring catches you first.

Especially considering you’re surrounded by the heaviest of heavy industry and primed, through so many safety debriefs, to listen out for a blasting siren or enjoy the mood music of giant beeping trucks.

Instead of a deafening din from a safe distance, I was able to peer into the bowels of a giant mill with steel balls lying idly at the bottom as if on a brass monkey.

Instead of sucking power equivalent to a fifth of the country’s electricity from the onsite power plant, the steel frame of the processing plant was beginning to show signs of rust in the damp jungle and the salty Caribbean sea air.

Nearby, a day and a half’s ore was heaped high, baking in the sun at the end of a conveyor belt that hasn’t carried any rock from the more than three billion tonne deposit since October 2023.

Record output

The orebody is also rich in gold, silver and molybdenum – all trading near historic highs. Franco Nevada (TSX: FNV; NYSE: FNV), which stumped up $1.4 billion for a precious metal stream with 80% at fixed prices, must’ve been the only bullion boardroom watching the $3,000 crossover with mixed emotions.

Cobre Panama would’ve become a 100 million tonnes a year operation in 2024, placing it near the top of the world’s copper throughput ranking. With more than a hint of bitterness, but also pride in the work done, the mine manager explains the mine had just hit record production numbers the month before the shutdown.

Looking out over the main pit, already well below sea level after mountains of saprolite were stripped (the worst kind of stripping I’m told), a lonely shovel sits idle next to a large pool of the bluest water – a striking reminder of the riches that are not being tapped.

Minutes drive away from the processing plant row upon row of dozers, shovels and trucks are lined up seemingly ready to fall in behind our tour bus as if to join a funeral procession.

A quip that the rock-strewn boneyard would make the perfect location for the next sci-fi blockbuster – or the ultimate paintball course – is met with a wry smile.

There’s much more. Read it here.

Bad for Some Miners, Good for Physical

Stories like this are bad for mining in general, but great for miners who operate in the dwindling number of favorable jurisdictions. They will continue to produce into a market that’s increasingly tight, where prices are higher than they would be in a mining-friendly world.

And physical ETFs, which have zero mining risk while benefitting from higher prices, will be core holdings. Speaking of which, Sprott’s physical copper ETF just started trading in the US. Consider it added to our Portfolio:

OTC Markets Group Welcomes Sprott Physical Copper Trust to OTCQX

Sprott Physical Copper Trust begins trading today on OTCQX under the symbol “SPHCF.” U.S. investors can find current financial disclosure and Real-Time Level 2 quotes for the company on www.otcmarkets.com.

“We are very pleased that the Sprott Physical Copper Trust has begun trading on OTCQX,” said John Ciampaglia, CEO of Sprott Asset Management. “We look forward to providing US investors with greater access to the world’s only physical copper fund.”

About Sprott Physical Copper Trust
Sprott Physical Copper Trust seeks to provide a secure, convenient and exchange-traded alternative for investors interested in holding physical copper without the inconvenience typical of a direct investment in copper metal.