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.
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.