Guest Pitch: Indiana Resources (IDA:AX)

Arbitration Award – 95% Upside

This idea was shared by Tobias from Kingfish Capital substack.

Indiana Resources took Tanzania to the International Centre for Settlement of Investment Disputes (ICSID) and in Jun’23 won a claim which is currently sitting at USD$121m (~AUD$184.6m) earning interest at USD$1m/month (US prime rate + 2%). IDA owns 69% of this claim.

The claim concerns an issued Retention license for IDA’s mining project in Tanzania during 2015 (similar to WINS.V, MON.V, both covered on SSI). Tanzania amended the Mining Act by abolishing the legislative basis for the Retention License with no replacement classification. In 2018, Tanzania published new mining legislation making it clear that all retention licenses no longer exist as well as the underlying rights over all areas under the retention licenses (basically transferring all those rights over to the Government of Tanzania). All of this is in breach of the UK-Tanzania Bilateral Investment Treaty, and hence after 3 years of proceedings, ICSID handed down an award against Tanzania.

Since then, Tanzania applied for an official Request for Annulment. After an award is handed down by the tribunal you can request an annulment if:

  • the Tribunal was not properly constituted;
  • the Tribunal has manifestly exceeded its powers;
  • there was corruption on the part of a member of the Tribunal;
  • there has been a serious departure from a fundamental rule of procedure; or
  • the award has failed to state the reasons on which it is based.

The tribunal has struck down on all grounds except “that there has been a serious departure from a fundamental rule of procedure”. This is the only ground that you are not able to strike down quickly as you need to go through each part of the arbitration to prove wrong/right. According to IDA’s lawyers, this claim is completely baseless. It is also imperative to mention that no ad hoc committee has ever granted an annulment based on this ground, not once. This is because there is a lot of thought that goes into setting out the schedules for these ICSID arbitrations. I will mention that from finishing the hearing of the case to getting an award handed down, the tribunal was unusually quick. In my opinion, this was because the case is straightforward. Remember not long before, WINS.V was handed down an award (unknown amount as they settled at 30m USD before hearing the quantum, which was promptly paid) based on the exact same legal precedent and using the same lawyers as IDA.

Tanzania’s memorial on Annulment is due 15th of March 2024 – the memorial is a long document that basically states their case. Everyone is puzzled as to what they could put forward to their case. I began to think, about what logical team of politicians/lawyers would risk USD$1m dollars for every month the case is delayed. There might be two explanations. The first might simply be incompetence (not kidding). If you watch WINS hearing on Youtube, along with a bunch of angry people commenting in Swahili, you can see just how weak Tanzania’s case was (remember it’s the same legal precedent) and also how bad they truly are at making any kind of solid arguments. I remember one of their members stating something about how they don’t have to follow contracts after they sign them if they don’t feel like it, and the entire side of IDA’s lawyers laughed along with the tribunals’ very confused faces. The other reason being if you don’t try your hardest to not pay such a large sum of money in a country like Tanzania, where the average monthly salary is about USD$400-800 and corruption is rife, there is a good chance something unwarranted might happen to you once you return…

We have an official final annulment hearing date on the 26th of July 2024 where, as I understand, an ad hoc committee will review the procedures of the previous tribunal, and decide if there was a serious misstep. The committee will show that there was no ‘serious departure from a fundamental rule of procedure’ and Tanzania will be liable to pay the award of USD$121m + delay fee of $1m per month.

But how do we know Tanzania will pay up? This is where it gets interesting.

The Committee of ICSID ordered Tanzania to hold an official Annulment hearing and to provide an undertaking (fancy word for legal promise) to the Committee and the Claimants (i.e. IDA) that is executed by a government official or officials of Tanzania with full power to bind the State, together with information sufficient to establish for the Committee and the Claimants the legal basis as a matter of Tanzanian law for the power to bind the State of the relevant official or officials to the undertaking. Basically in my opinion, our decision is strong, you’re not getting out of paying this, if you want to waste time with an annulment hearing you must provide proof that you’ll pay once the hearing is over.

At the end of December 2023, The Attorney General provided an undertaking to the claimants and the ad hoc committee of ICSID that it will.

  • Pay the full amount of the award plus interest to the claimants within 45 days of the final decision on annulment.
  • Not subject the payment of the award to any enforcement proceedings or to the scrutiny of Tanzanian courts (wouldn’t matter if they did anyway as IDA would lawfully seize their assets within other countries, but this is confirming that they won’t make IDA do that)
  • Abide by the final annulment decision when delivered by ICSID.

*All these details can be found in IDA’s public announcements.

In my view this is a guarantee of full payment once the annulment decision is handed down (which has nearly no risk of being upheld). Tanzania has given itself no legs to stand on now, it seems they are willing to pay up.

Moreover, the World Bank has just given Tanzania USD$1.14bn in financing – $750m to Development Policy Financing (of which they got only $250m last year) and $385m for a development project basically aiming to improve the quality of life. World Bank also mentions this financing will be used to “address longer-term structural challenges that have hampered economic growth and unleash private sector-driven recovery by providing a significant boost to ongoing reforms that are aimed at improving the business climate, strengthening the management of SOEs, improving transparency, and fostering economic resilience.” Let’s also remember that ICSID is a division of the World Bank. However, we can only speculate.

In terms of timing, I don’t know for sure how long it’ll take them to strike down Tanzania’s final point but if I had to guess, I would say that just like their terrible arguments in the hearing, their memorial isn’t going to be any better (since everyone agrees we can’t tell there’s been a misstep in procedure). So to be conservative, I will put it as 2 months after the hearing that we’ll get a decision, remembering that there is only 1 single point of contention. The Attorney General said they will pay the full award + interest within 45 days after the final decision, so I’ll add 1 more month to get paid.

So we have the following amounts and calculations:


IDA calc

Upside stands at a bit over 95% within 9-12 months. I also valued the retained cash at 50% of total value and added a bit extra onto the fees to be conservative.

The only reason this situation has so much upside is because one must value the Attorney General’s undertaking. Personally, I value it at close to 100% truth/fact (that it will be honored). Either way, IDA does have lawful opportunities to get what it is owed through enforcement agencies that as I’m aware have already scouted for Tanzanian assets in other countries (most likely their aircraft). It’s not like the Attorney General can suffer legal ramifications if the undertaking isn’t honoured (I think?) but Tanzania’s reputation will be severely damaged and as they are trying to attract private investment (as per the world bank funding) I doubt they want to make this issue worse than it already is. This combined with payment of USD$30m from Tanzania to WINS late last year + with upcoming arbitrations with the same legal precedent and representing lawyers, I think Tanzania will most definitely honor the undertaking they have presented to IDA.


20 thoughts on “Guest Pitch: Indiana Resources (IDA:AX)”

  1. Directors statement which alleges corporate governance issues:

  2. Great setup, I already bought and looking to buy more but haven’t seen many downside scenarios other than the discount chart given in the above jaimebermejo substack. What is the worst case downside here – 50-60%? This seems extremely unlikely from all the writeups I’ve seen – that scares me.

    • Hi, I was the one who wrote this one up. In my opinion, the only serious risk is IDA agreeing to a discount that Tanzania will most definitely at least offer. Then again, the Attorney General took an undertaking that they will pay the entire amount of the award handed down from ICSID if the annulment isn’t successful.

      The annulment is a formality, there is no way Tanzania wouldn’t file an annulment. The situation is different from WINS.tsxv because before the quantum of the award was handed down, they took up Tanzania’s offer of a ~40% discount to the amount they were going after. IDA has won the USD 128mil award, stated they will return majority of it in a tax free return of capital (after ATO private ruling, a formality), the only major risk in my opinion is that the independent committee find a serious deviation in procedure (the only reason left for annulment success). The award was handed down relatively quickly (if you watched the WINS hearing, you’d see why, Tanzania have no solid argument), so i’d recommend putting your own probabilities on the chance of non payment and the chance of the annulment being upheld. Conservatively, this bet is still very +EV. In the event of either of those scenarios, downside would probably be quite large, there’s just such a small probability that occurs though.

      • Why do you think Winshear settled for so little in Oct 2023 after having seen Indiana awarded the full amount in July 2023? This award would have been the best thing that ever happened to Winshear, an otherwise hopeless penny stock, so surely they’d make the most of it. Winshear settled for US$30M gross, $18.5M net of funding and legal cost compared to its total claim value of $96M.

        Are we discounting the collection time/risk conservatively? Available statistics only cover the arbitration process and there doesn’t seem to be any reliable data on enforcement. It is my impression that it often takes longer to collect than the arbitration process itself with cases getting stuck in courts for many years.

      • Re Winshear, everyone involved was scratching their heads at that decision. I don’t know, it doesn’t make a lot of sense from the information publicly available. In terms of collection time, I’d ask you to re read the write up. Enforcement would take ages, but IDA’s chairwomen is extremely keen to be compensated the entire amount. We aren’t betting on that though, it’s my contention that this will be paid by Tanzania, as outlined by them in their undertaking, for the multiple reasons listed in the write up.

      • ^kingfishcap’s response on friends account while he fixes issues with his log ins.

      • People involved, like Tim Foden and the legal team?
        Winshear is the only direct comp we have and I’m not sure it’s wise to dismiss it as an irrational settlement. I’m not sure it’s consistent to claim that while Tanzania is incompetent they managed to get a fantastic settlement against a plaintiff advised by a pretty good law firm.
        If the annulment doesn’t succeed then there are 3 possibilities: voluntary compliance, settlement and enforcement. The latter two are inevitably connected because the discount Tanzania would offer would take into account the time and expense Indiana saves through instant payment.
        Like you mentioned there are internal political considerations to avoid or delay paying that probably outweigh the international reputation issue.
        I’m not saying voluntary compliance won’t happen but I don’t think approximating the probability of other outcomes to zero is conservative.

      • Would you please link to the document where they state they will return the majority of the award? This seems key given the corporate governance allegations by David Ward.

  3. Does anyone have a copy of Tanzania’s 3/5/24 brief on annulment? I can’t seem to find it on the IDA website nor at the ICSID or databases.

  4. Any updates for the rights offering? Looks like US is not eligible for exercise, even though I was able to submit in IBKR. Exercise price of 7c, so juicy :(

  5. The hearing date is approaching (July 26), and IDA released a new presentation this month. Despite this, the stock price has remained stagnant since January. I really want to believe in this idea, but I’m still unsure if it’s genuinely better than just betting on red in roulette.

    The key concerns as I see them:
    – The timeline could stretch out longer than expected. Instead of getting paid by October/November (decision a few months post-hearing + 45 days for payment), the recent presentation suggests this might drag into 2025. Check slide 11.
    – While settlement seems the most likely scenario, you have to be very bold with the discount assumption just to break even from current prices. To breakeven, settlement has to come at least at 70% of the total award (assuming an award size of US$131m as of Dec ’24, US$25m litigation funding expense, and a stub value at 50% of retained cash). If the settlement is below 70% or if taxes must be paid, losses could be significant. At a 50% settlement, the loss could exceed 40%.
    – I’m not a tax expert, but it seems that most people are assuming IDA won’t have to pay any taxes due to accumulated tax losses on the balance sheet. However, this assumes that the litigation award will be treated as income, which may not be correct. As far as I understand, there are instances where litigation awards are treated as capital gain tax. If treated as a capital gain (which can’t offset income tax loss), IDA could face a large tax bill.
    – IDA’s management can’t be trusted. They plan to retain a large chunk of cash (A$15-A$20m) for burning on questionable exploration assets. Moreover, the recent boardroom drama revealed dubious related-party dealings, leading to forced resignation of the director who began asking questions. Management owns just 7.5% of the outstanding shares.
    – So on one side, you have Tanzania (notorious for corruption and bribery), and on the other, IDA’s management, which seems somewhat shady too. Who knows what kind of backroom dealings could be ongoing there and what kind of incentives could Tanzania come up with to persuade management to accept a much bigger settlement discount? Consider WINS, which had an identical case and held a very strong hand after IDA’s win, yet settled at just 30% of the award size. There’s no credible explanation for this, suggesting possible shady dealings. And WINS insiders were better aligned with 40% ownership.
    – IDA’s recent rights offering at A$0.07/share ended up undersubscribed. Only 46% of the rights were exercised initially, and even after a top up, the company still wasn’t able to fully fill the offer. It’s concerning that shareholders didn’t want to buy shares at a ~25% discount to market price.
    – I’m not fully convinced that Tanzania Attorney General’s undertaking guarantees payment if there’s no settlement and Tanzania loses the annulment. Given Tanzania’s track record, I wouldn’t be surprised if they attempt to delay payment further, maybe even necessitating expensive debt enforcers.
    – The situation has already been covered widely. So I don’t think you could write-off that much on the market inefficiency due to this being an obscure nanocap litigation stub.

    So not sure what kind of probabilities you would need to ascribe to each scenario, but it’s clear that you have to be very confident about the settlement happening close to 100% of the award in order to offset all the other caveats. I’m still on the fence and would appreciate input from other members.

    Presentation –

    • Do you think the odds are even less favorable at Montero Mining (MON:V)?

  6. As per the announcement, a settlement has been reached between IDA and Tanzania.

    Time to see the terms. Hopefully not to much of a haircut, I’ll throw out a guess, 30% discount.

    • If it’s 30% discount then there’s basically no upside from current prices right?

  7. the current value of the award is about $125mm (USD). Indiana has a look-through 69% stake in the award (net of litigation costs). On that basis, a 70% settlement value – assuming 50c on the dollar for cash retained in IDA and not paid out; 66c FX; and according a token $5mm AUD value for the rest of IDAs assets -and I get 10c value (pre-tax) for IDA shares (pre-tax – still tbd what/if taxes apply here but cant see how it is more than 1c out of the value either way).

    still, famous last words but 70c would be a very low settlement level, in my view, given the strength of case/where we are in the process. personally i was hoping for >85c on the dollar in any settlement. we shall soon see.

    • If Tanzania is willing to pay immediately, I think management will accept 30% discount, considering the time value of longer delay (in arbitration process, and in collection), and the credit risk of post-arbitration collection is not minimal.
      I think the issue is that, for us running a diversified special sit portfolio, we can accept a lower discount rate in one uncorrelated legal project and happily wait for arbitration/collection outcomes. For the management though, this project is all they’ve got, and they would rather see the money as soon as possible and would assign a very high discount rate (maybe 20%/year) for waiting.

  8. IDA asked for trading suspension till 29th of July pending announcement of the settlement.

    As I understand the wording, the settlement has not been reached yet, but is in the final stages:

    “The voluntary suspension is requested pending the release of an announcement in relation to a settlement being reached with the United Republic of Tanzania in relation to the arbitration proceedings”


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