Stans Energy Corp V.HRE.H

Hate to say I told you so...

[Kaliahk]

I have been shouted down in the past for posting my opinions that the prior award would be set aside and then for stating what I thought would be an issue with Stan's claims - that they would only be allowed to recover monies actually investing in Kyrg.  I had put that number at less than $30 million.  As I had explained, at least under US law, companies are not allowed to recover speculative damages (i.e. lost profits of a business that was never operating).  Based upon the Sedar filings, Stans had invested less than $30 million in actual purchases, mining/drilling and assay expenses, etc., in Kyrg as there was not that much paid in capital that could have been invested.  Since the treaty was to protect "investment", the measure of damages would seem to be the amount of money invested and lost.  I have not seen the written decision - it is not on Stan's website that I could see - but I am guessing the basis of the award was the dollars actually invested.  The latest UNICITRAL rules do not state if attorney fees for prevailing party may be awarded - that could be an avenue for some additional recovery but I suspect that is not the case.

As for the idea that Stans can appeal the award, this is also very unlikely to be successful.  Arbitration awards are not generally reviewable for error in the decision making, only with respect to the process such as lack of jurisdiction.   I am unaware of any allegations by Stans that the process was flawed.

The recovery seems to approximate what the obligation will be to the litigation finance companies.  However, it will require Stans cooperation to pursue collection so there will probably be at least enough to pay for Stans management to put in the time to collect the award. 

Assuming the litigation was a wash for Stans, there is still some other possible upside.  Stans still owns the processing plant which may someday have a significant value to whomever takes on the Kutassay mine.  They have also done a lot of themetalurgical work which will also has some value.  With the arbitration at an end, the Kyrgyz will now be free to market the mining leases and permits.  They previously tried to get a bidder to undertake the liability to Stans as part of the deal.  Now that this liability is known, the Kyrgyz may have more luck.  I am not sure exactly how it might shake out but the Kyrgyz could agree to pay Stans voluntarily and soon if Stans is willing to sell its other Kyrgyz assets as part of the deal.  The price Stans can negotiate will be the question.  For those who think that the lithum project is a great deal, there may be enough money to get Stans down the road on that project far enough to see how good it really may be (depending on how much other debt is on the Stans balance sheet after paying the litigation expenses).  I haven't looked at the Sedar filings for quite some time but if outstanding non-litigation debt is more than about $5 million it may be enough to bankrupt Stans.  Alternatively, Stans might be able to raise capital and dilute current shareholders to near nothing to pursue the lithium project, either way current shareholders will get little benefit if there is significant non-litigation debt outstanding.

These are my own opinions based upon very limited research, what I think are inadequate current disclosures by Stans management, and having followed Stans for about 4 years or so.  I could be wrong. DYODD.