Quick Pitch: Montero Mining and Exploration (MON:V)



This idea was shared by Sara. MON is litigating against Tanzania and trades at a 90% discount to the claim value. Two very similar but more advanced peer litigations suggest that positive developments in the litigation are quite likely and could lead to significant share price appreciation in the short term. This is a very similar opportunity to the recently highlighted Idea Elsewhere: WINS.V.

The whole setup turns around 3 public junior miners that have been litigating against Tanzania for expropriating their mining licenses – Indiana Resources (IDA.AX), Winshear Gold (WINS.V) and Montero Mining and Exploration (MON.V). Though separate litigations, the cases are very similar:

  • The litigations are based on the same legal theory (retention license expropriation) within the same geography.
  • All three companies also share an identical hearing arbitration agency (ICSID) and location (Washington, DC).
  • All of the companies have been represented by the same legal team (Boies Schiller Flexner), including the same lead attorney.

Here’s a quick overview of each legal case:

  • Indiana Resources (IDA.AX) – had a claim size of US$95m. In July, the company won arbitration against Tanzania and was awarded US$114m or 120% of its requested damages. Tanzania is currently appealing the decision. IDA currently trades at 80% discount to its original claim size and 83% discount to the award size.
  • Winshear Gold (WINS.V) – claim size of C$130m. In September, WINS announced that it reached a settlement with the Tanzanian government, yet no further details have been published so far. The company trades at 85% discount to its requested damages.
  • Montero Mining and Exploration (MON.V) – claim size of C$90m. MON’s hearing at ICSID arbitrage agency is scheduled for December 4-8. The company trades at 90% discount to its claim value.

All three companies trade at massive discounts to claim values, which is understandable given recoverability and capital allocation concerns. Even if the companies manage to win litigations or reach settlements, it will probably not be easy to squeeze out cash from the Tanzanian government. There is also some uncertainty on how the recovered proceeds would be used by companies and if shareholders would ever see any of it.

However, I believe the market is signaling where the price of MON shares would move if the company was to receive a settlement award like WINS or win arbitration like IDA. Given the similarity of these cases, either of these outcomes seems very likely for MON and would result in a significant upside. If MON’s discount to claim value shrinks from the current 90% to 85% (in line with WINS), the stock would appreciate by 45%. At an 80% discount to claim value, the upside would be close to 2x. Hearings for both IDA and WINS were held in February 2023. Assuming a similar timeline, a potential catalyst for MON (settlement or court decision) could be expected by mid-2024.

The outcome of MON’s litigation will not be determined solely by the developments in its own case. MON’s discount and share price will also be strongly correlated to any news in peer litigation cases. All eyes are now on the anticipated release of WINS settlement details. The announcement of the settlement came out relatively soon after the IDA’s court win, but it is quite peculiar that the terms haven’t been announced yet with nearly a month having passed by. This might be an indication that settlement terms are worse than what the market is expecting or that Tanzania’s government is still negotiating with the other parties, or anything else. Basically, no one knows why there is a delay, but the market does not seem to be excited by this uncertainty.

Similarly, any positive developments with the IDA case appeal would also be great news from MON (and WINS). ICSID is now expected to form the Panel to hear the award annulment proceedings. IDA’s management sounds very confident it can win the appeal:
It is pleasing that Tanzania has moved swiftly to lodge their request to annul the Award instead of waiting the full 120 days which was available. Indiana remains extremely confident of its position and an initial review by our legal representation suggests Tanzania will not be able to meet the requirements for the annulment

Interestingly, IDA shares trading was halted yesterday upon some kind of pending announcement to be released on or before Monday (October 16). Thus, we might hear something regarding the appeal or potential settlement in the next few days.

Overall, there are multiple potential catalysts and ways to win here and the potential upside can be massive. However, in the worst-case scenario, where all companies lose their litigations, MON would likely drop close to zero, where it was trading earlier this year before positive news on IDA’s court decision. Besides the litigation claim, MON only has one very early-stage copper-molybdenum exploration project that is likely not worth much.

So this is a short-term bet that we will see some positive turn of events with any of the three litigation cases and this would in turn positively impact MON’s share price. The latest developments suggest it’s likely.


20 thoughts on “Quick Pitch: Montero Mining and Exploration (MON:V)”

  1. 16-Oct-23 – IDA was halted because they are conducting a capital raise (indianaresources.com.au/wp-content/uploads/2023/10/Suspension-from-Quotation.pdf)

  2. It appears this quick pitch aged really well with Montero stock down 37% on Monday. All the price action was driven by the disclosed terms of the related WIN litigation case. I am really glad no one had a chance to jump on this setup at Friday’s prices. But at least the pitch was correct on this:

    The outcome of MON’s litigation will not be determined solely by the developments in its own case. MON’s discount and share price will also be strongly correlated to any news in peer litigation cases. All eyes are now on the anticipated release of WINS settlement details. The announcement of the settlement came out relatively soon after the IDA’s court win, but it is quite peculiar that the terms haven’t been announced yet with nearly a month having passed by. This might be an indication that settlement terms are worse than what the market is expecting.

    With this new information and with the stock down materially, I am sharing calculations on today’s MON setup.
    – Winshear settled for the gross amount of US$30m or US$18.5m after funding/legal costs. Gross proceeds are equivalent to 32% of the claim value with legal/funding costs consuming 40% of the award. The whole amount has already been paid.
    – WINS currently trades at a 27% discount to net proceeds while management is looking “at various options available to it before deciding on what to do with the funds”. The market clearly does not expect these funds to be distributed to shareholders.
    – I do not think MON can expect better settlement terms than WINS. And I also do not think that the stock will trade any better following the settlement.
    – MON has a claim of C$90m, at similar terms to WINS this might result in C$28m gross settlement amount or C$17m after funding and legal costs.
    – Deducting C$1m in liabilities and assuming a similar discount to net proceeds, would result in MON market cap of C$11.7m or C$0.30/share.

    While this figure is materially above the current MON share price of C$0.145, it is not yet clear:
    – When and if MON will reach a settlement – might happen before the Dec hearing dates or by mid 2024 if similar timeline as for WINS is followed.
    – Whether it will be done at the same discount to the claim value – but this should still be a good reference point.
    – Whether funding and legal costs split will be the same as for WINS – but as both companies are represented by the same lawyers and claim/settlement amount is comparable, it is probably fair to assume the same 60%-40% split. Both companies are using third party funders (different ones) to finance the litigation.
    – Whether MON will trade at the same discount as WINS after the settlement. WINS has a market cap of only C$5.5m, hard to see the company continuing to trade at these levels if the net proceeds of C$24m are announced. Even if the whole amount will eventually be wasted by management, the market is likely to react positively to settlement announcements.

    Overall, the uncertainty for this case is now slightly lower (as we now know WINS settlement amount) and the share price is also 37% lower. So IMHO the situation became a bit more attractive than last week. However, the risk of a donut remains.

    • What I read is WINS only got 18mm USD after fees, but for some reason the announcement includes an after-fee figure in CDN as well.

    • I’m struggling to pull the trigger on this. If I understand it correctly if they settle they will probably be worth 30 cents, and if they go through with the hearing they could be awarded up to $1.50/share. The problem is that if they settle we don’t know if they will return any capital to shareholders at all. And if they win big in arbitration Tanzania will appeal and it might take a very long time for them to get paid, and they still might have to settle at a discount. And there is a chance they lose in arbitration.

      Its mostly a bet on price action, which I abhor, but this seems like the most certain situations I’ve seen to make that type of bet. But still I sit on my hands.

  3. Positive update on IDA’s litigation (which is also positive for MON).

    Litigation for the award annulment still continues, however, ICSID has recently issued a highly favorable decision on the continuation of stay of enforcement. If Tanzania wants to keep the stay of enforced and continue the litigation, within 45 days it must provide a written government-backed undertaking to IDA that in case the award annulment is not granted, Tanzania will comply with the award terms and will be able to make the payment. Tanzania must also undertake that it will not attempt to hijack the award payment by further scrutinizing it in the domestic courts, etc.

    If the undertaking is not given, Tanzania must at least provide financial security for the Award payment via a bank funding guarantee or a funded escrow account with a reputable international bank with no principal establishment in Tanzania. If these conditions are not satisfied, ICSID will lift the stay of execution allowing IDA to start the enforcement process.

    IDA has also shared expected litigation timeline – might take up to mid-April’24 until the decision on the annulment is made.

    IDA’s CEO remains confident Tanzania will not meet the requirements to justify the annulment:

    In either circumstance, the Claimants have comfort that ICSID is requiring Tanzania to comply with the Award through providing sufficient comfort through a legally binding commitment that if the Award is not anulled, the Claimants will promptly receive the full amount of the Award to which they are entitled. Indiana shareholders should take comfort in the disciplined legal process that is being followed by the ad hoc Committee, and that Tanzania is clearly engaging in this process to the best of their ability. Put simply, we consider this a victory.


    Indiana is also encouraged by the Tanzania’s submission that it has assets both inside and outside Tanzania sufficient to satisfy the Award, and that Tanzania is ready, willing and able to honour the Award if it is not annulled, and that it has sufficient means to pay the amounts due to the Claimants under the Award.

    IDA is currently trading at 80% discount to the award amount, which also accrues around 10% annual interest. The company’s market cap is now at US$23m vs US$113m award plus US$4m costs. Interest accrues at around US$1m per month.

    It’s not clear yet whether MON will also choose the litigation route like IDA or will settle with Tanzania like WINS. At current prices, however, either option seems to entail a large upside potential. WINS is currently trading at a slight premium to the recent net-settlement value (mostly due to the announced C$0.25/share dividend). But at wider discount levels, MON’s stock would probably double if an identical settlement is reached. If MON were to re-rate in line with IDA’s 80% discount to the award value instead, the potential upside would be even larger.

    ICSID decision on IDA’s case https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02735691-6A1178828?access_token=83ff96335c2d45a094df02a206a39ff4

    • Did you take into account IDA’s partial ownership stake in the claimant entities? The court also refused to award the claimants any third-party litigation funding costs, so that $19-23m will also come out of the final amount.

      Why do you think WINS settled at such a low percentage given IDA’s success?

      • You are correct – IDA’s partial (62%) ownership stake in the claimant entities reduces the discount at which IDA stock is currently trading relative to the claim/award size. That makes the large MON discount even more of an outlier and suggests MON would re-rate materially higher if a positive court verdict is reached. When it comes to litigation funding, yes these would need to be deducted from both IDA’s and MON’s awards, and this was discussed above. However, in comparing MON vs IDA, I am not trying to estimate the net-award amount or final distribution amount, rather I am only looking at the relative discounts at which both companies are trading at different stages of very similar litigations.

        WINS settled because they got cash right away whereas IDA now has to force collection of this award and might still fail in doing that. Other than that, I am not able to comment on any differences between two litigation that might have caused the companies to choose different paths.

    • Thanks, so MON is moving forward with the arbitration and the hearing is will take place in Washington DC on December 4 -8.

  4. Last week Montero announced a 5.3 million share private placement at C$0.15/share (25% below market prices), raising a total of C$0.8 million. Another 1.3 million shares were issued as a settlement for CAD$200,000 debt owed to the CEO. Both sets include four-month lock-ups.

    While dilution at below-market prices does not look great, the fresh equity funding and conversion of debt add some confidence to the setup.

      • Has management said anything about if/how they are planning to distribute the money? Winshear distributed almost everything. Indiana said it’s going to retain US$10-13m.

  5. The share price seems to have settled at C$0.27/share. This is nearly in line with the price target I established back in mid-October, which was based on where WINS, a peer company involved in a similar legal dispute, was valued following its settlement with Tanzania. To anticipate any further upside here, one would have to assume that following a similar settlement MON would also promptly implement shareholder-friendly measures (e.g., returning a significant portion of the cash to shareholders) or that, instead of settling, it would prevail in court at attractive terms, mirroring IDA’s outcome. These higher upside scenarios are far from guaranteed, meanwhile potential downside from these levels has increased substantially. The idea has returned 17% from its original write-up levels and has doubled from its mid-October sell-off levels, when the price plummeted after the WINS settlement terms were revealed.

  6. Does anyone know when the decision on MON’s case can be expected?

    By the way, IDA’s situation also seems interesting now. A few positive developments have happened with it over the last months:
    – In late December, Tanzania provided an undertaking that it will not challenge the tribunal’s decision if unfavorable, and will pay the full amount of the award within 45 days of the final decision on annulment. As a reminder, ICSID had previously requested that Tanzania must provide such a written government-backed undertaking, ensuring that the country would comply with the award terms and be able to make the payment.
    – Earlier this month, ICSID announced that it has struck down two of the three claims made by Tanzania in its annulment application. The remaining claim is that “the tribunal seriously departed from fundamental rules of procedure.” I think that Tanzania’s last remaining claim is unlikely to hold. The tribunal has made a preliminary assessment of this remaining claim and has stated that the allegations are “extremely preliminary, lacking substance, and legal basis.” Also, as noted in a recent IDA write-up by Jaime Bermejo (see link below), ICSID has never granted an objection based on “departure from fundamental rules of procedure”.”

    ICSID’s hearing on the annulment is expected to take place in June/July, after which Tanzania would have 45 days to pay the full amount (if the annulment is granted).

    So the chances of a favorable final tribunal ruling for IDA seem to have increased. There is also a possibility of a settlement, which I would expect to come much closer to the full value compared to WINS (where the gross settlement amounted to 32% of the claim value).

    IDA continues to trade at a wide discount to the award amount. The market cap stands at US$33m compared to a US$120m award (in which IDA has 69% interest), that is also accruing $1m/month.


  7. Following the private placement there are 45,281,295 shares outstanding.

    However, there is also a Stock Option Plan which seems to allow for the issuance of another 10% of shares outstanding. DT, have you looked into the Stock Option Plan and the possibility of a further 10% dilution? I read the terms of it, but found it confusing, hence I’m asking you.


  8. What’s best case scenario upside in this case? Only have a lotto ticket so willing to ride to zero.


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