Deep in a Panama Rainforest, First Quantum Bondholders Spy Prize – by Paula Sambo and Danielle Bochove (Bloomberg News – January 8, 2019)

First Quantum Minerals Ltd. is poised to fire up a giant copper project in Panama, thousands of miles from its beleaguered mines in Zambia. For bondholders, that’s a welcome distance.

The Canadian copper company is ramping up production at the Cobre Panama plant this year, even as a mining tax hike forces it to shed jobs and cut production at its Zambian facilities. With Panama slated to become a more prominent place of operations, bondholders should benefit as Panama’s stronger credit rating feeds into the debt’s prices, First Quantum President Clive Newall said in an interview.

Where First Quantum does significant business matters to bondholders who closely follow risks associated with lending to companies operating in that particular country. Panama has an investment-grade rating, while Zambia is ranked more deeply into junk.

Any subsequent boost to the bonds from a shift would be a reprieve for First Quantum’s lenders, who’ve seen their notes post significant losses in recent months. The firm, and producers like it, also faced pressures as the copper price tumbled, amid trade tensions and fears of slowing global growth.

“Panama is investment grade and Zambia isn’t, so there should definitely be an improvement in the bonds as the ramp up of Cobre Panama progresses,” Newall said in the interview in December.

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