PANAMA CITY (Reuters) - Canadian miner First Quantum’s contract to operate a lucrative copper mine in Panama is unconstitutional, the country’s Supreme Court declared on Tuesday following weeks of protests against the deal, putting the company on the long and unpredictable road of international arbitration.

Challenges against the company’s new contract, approved on Oct. 20, piled up in court amid public anger over the deal, which opponents regard as too generous. Reuters reported earlier this month that the court was likely to rule against First Quantum.

“We have decided to unanimously declare unconstitutional the entire law 406 of October 20, 2023,” Supreme Court President Maria Eugenia Lopez said.

First Quantum acknowledged the ruling and affirmed its “unwavering commitment to regulatory compliance in all aspects of our operations within the country.” The company will wait for the ruling to be made public before commenting more, it added.

Panama President Laurentino Cortizo said the country will abide by the court ruling.

Protester groups on social media after the ruling said they would keep demonstrating in the streets until the ruling is published in the country’s official gazette.

First Quantum shares fell 5%. The company’s shares have lost more than C$10 billion ($7.4 billion) of its market value since the protests started and the mine was forced to suspend production.

The ruling will have consequences for the copper market, as First Quantum’s Cobre Panama mine accounts for about 1% of global copper production. Benchmark copper on the London Metal Exchange was up 0.9% at $8,441 a metric ton.

It is an equally significant business for the Central American nation, with the mine contributing about 5% of Panama’s GDP. J.P. Morgan warned this month that the odds of Panama losing its investment-grade rating would rise significantly if the contract is revoked.

The contract gave First Quantum a 20-year mining right with an option to extend for another 20 years in return for $375 million in annual revenue to Panama.

The fierce opposition toward the deal is becoming a major factor in the country’s May 2024 presidential election. Candidates are pushing for more state control of the mine as they seek to assuage public anger.

RBC said in a note that the ruling was largely expected, but it adds to the uncertainty.

“The path forward depends on whether the mine can resume operations while new contract negotiations take place or if it remains offline which could eventually lead to international arbitration proceedings,” it added.

First Quantum filed a notification of intent to start arbitration proceedings against Panama, the company said on Sunday.

RENEGOTIATE

Former President, millionaire businessman, and leading presidential candidate Ricardo Martinelli last week proposed that Panama renegotiate the contract with the Canadian firm to secure higher royalties and a stake in the project.

The country’s top court ruled against First Quantum’s previous contract in 2017. The decision was upheld in 2021, but the current government allowed the miner to keep operating while both parties negotiated a new deal.

For First Quantum, the Panama ruling would be a repeat of its decade-old experience in the Democratic Republic Of Congo. The company exited DRC in 2012 after it filed an arbitration procedure against the African country for canceling its mining contract.

First Quantum sold its assets to Eurasian Natural Resources Corporation PLC for $1.25 billion and settled the dispute.

The company has spent about $10 billion in developing the Cobre Panama mine in over a decade.

Panama, home to some of the world’s newest and biggest untapped resources, has seen unprecedented opposition to mining after First Quantum’s contract was approved by parliament last month.

In response to the protests, Panama’s government enacted a bill in November banning all new mining concessions and extensions that legal experts have said would prevent the two parties from negotiating a new deal.

Panama’s trade ministry has rejected more than 10 mining concessions and extension requests to abide by the new ban.

The protests have received support from Hollywood actor Leonardo Di Caprio, who shared a video from an environmental group that called for the Supreme Court to cancel the contract.

Cobre Panama produced 112,734 tonnes of copper in the third quarter and accounted for about 46% of its overall third-quarter revenue of $2.02 billion, according to the company.