Cadence Minerals (KDNC ) and its subsidiary REM Mexico are to commence international arbitration against the United Mexican States in regard to their investments in the Sonora lithium project.
The arbitration will be conducted under the umbrella of the agreement Mexican and British governments for the promotion and reciprocal protection of investments (BIT).
The news comes after LCM Funding SG Pty Ltd completed due diligence and issued a Funding Confirmation Notice under the Arbitration Funding Agreement entered into between LCM, Cadence and Cadence's wholly owned subsidiary, REM Mexico Limited.
Under the signed arrangements, LCM has agreed to pay Cadence and REM Mexico's legal fees and disbursements in accordance with an agreed budget on a non-recourse basis.
Cadence and REM Mexico's claims arise from measures taken by the United Mexican States that destroyed the value of Cadence and REM Mexico's investments in the Sonora Lithium project. Those measures included the cancellation of the mining concessions in which Cadence and REM Mexico held a significant interest, against the backdrop of Mexico's nationalisation of its lithium sector. Those measures breached protections owed by Mexico to Cadence and REM Mexico and their investments in Mexico under the UK-Mexico BIT, including protections against unlawful expropriation and unfair, arbitrary or discriminatory treatment.
"We are pleased that LCM has completed its due diligence and issued the Funding Confirmation Notice in relation to Cadence and REM Mexico's legal claims regarding the Sonora Lithium project,” said Kiran Morzaria, chief executive of Cadence Minerals.
“This is an important milestone as it provides dedicated non-recourse funding to support the advancement of the claims. The measures that Mexico took against our interests in the Sonora Lithium project breached the protections afforded to us under the UK-Mexico BIT. This funding materially strengthens our ability to pursue the arbitration in an appropriately resourced manner, while preserving balance sheet flexibility and supporting our objective of protecting shareholder value and seeking appropriate redress.”
View from Vox
This looks a sensible way to proceed as Cadence attempts to get redress for its losses in relation to the appropriation of Sonora a few years ago. The company’s own balance sheet won’t have to take the strain of the legal fees, but the company will still be exposed to the upside of any positive outcome. Lithium’s somewhat back in style, too, so there may be more value on the table now than there would have been a year or two ago, and more attention on the case, perhaps, as well.