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I don't think it's out of pessimism as much as conservatism - the market has no issues with the case that warrant the pricing, but they're just waiting to buy later

The pricing certainly wouldn't suggest it. Although, the market is wrong about these things all the time

https://open.substack.com/pub/caseresearch/p/the-closing-weekend-three-days-until?utm_campaign=post-expanded-share&utm_medium=web

Hey Guys, thought I'd start this off - anyone have any thoughts?

Equity Research report coming here: https://substack.com/@caseresearch

Been talking to Hayden and Graham recently, and I'm putting out an equity research report on EML here: https://substack.com/@caseresearch

Haha not a position we're in

Bang on

Absolutely, and there's a steep enough discount for the award payment to be delayed a few years and still have good CAGR

Definitiely one to keep an eye out. This should give some good downside protection - it'd be very hard to lose money here.

Oh I agree - the outcome is determined by the specifics of the case, but as nothing meaningful has happened with the case so far, it can only be considered a statistical bet.

The probability of settlement at the moment is unclear, but I wouldn't be surprised. It's an obvious case and Morocco have better things to put their money into.

Would be funny if their assessment is unjustifiably rejected and we have another legal case on our hands. It's unlikely being Italy but people said that about Spain too...

Italy is tricky for licensinve, but Cattaneo used to work for governments so maybe he has connections

Knowing Mark it'll probably be some detail, but he'll onyl disclose what he can

Suspicious of?

There will be dilution, but they're fully funded for now and they have some CF producing assets. There's also the possibility of a settlement before April, otherwise an award before YE. That will give them cash. The 20x comes from the legal case, so it's disconnected. It could of course be less - that's just expected value.

Not much good if they're rare!

My thoughts on what's been posted since I was last here:

@99icecream a claim is possible, but per ICSID averages it's not probable, but the large claim value relative to the Moroccan GDP may boost that chance. If talks to begin, we will either get a massive reduction to fair value, slowed timeline as Morocco use these settlement negotiations as an excuse to drag things out, or both. I'm not entirely sure settlement will be easy for them. They have the money, but there's no sign of any willingness/lack of, so it's safer to assume they'll resists - as is the incentive of the desperate.

@ComesMarcellino the GRX success has little overlap with EML, and it may only be of use for the Tribunal's mental models. Not something we can factor in.

@JazyGeoff I assume you mean expropriation, as per the article 6(1) of the UK-Morocco BIT. yes Emmerson will own the mining license, but it won't mean anything if they've already been compensated. It could be a mix. The inactivity argument is interesting, and Morocco will definitely give it a go. It's a risk the Tribunal agree more with them than us on that front, but the BSF backing helps put the odds in our favor. The settlement would likely mean the concessions are transferred over, otherwise you're looking at double compensation. But as I said it could be a mix, at which point EML becomes more economically complex.

I'm an arbitration equity analyst, and I run a research firm around that, sort of like a litigation funder except with stock and not the usual terms. Here's how I summarised it in my notes, and I'll eventually upload the full writeup here: https://substack.com/@caseresearch

- ICSID Case (Emmerson Plc v Kingdom of Morocco, Case # ARB/25/22)

- Dispute: rejection of environmental/social impact assessment; water usage concerns

- RFA: 23rd May 2025

- Emmerson Water Efforts: capex heavy reductions to get usage down 50%; multiple rejections followed

- Morocco's over conservatism: Emmerson would only use 0.6% of reserves; pos. socio-economic / water usage tradeoff

- Rejections: multiple rounds; no progress; ICSID responsible choice

- Incentives: Morocco's is unclear; Emmerson's water planned not otherwise allocated

- BIT Breach: lack of fair and equitable treatment clear; includes lacking compensation on/before expropriation date

- Parties Track Record

- Emmerson arbitrator: 93% of wins (appointing side W/ favorable outcome) while representing claimant, and 62% overall

- Emmerson backing: BSF / Tim Foden, who is a highly competent lawyer with a great track record

- Moroccan legal counsel: 1/3 win rate, only done three cases, and arbitrator has 57% win rate, with all losses while representing the state

- Incentives: Emmerson's litigation funding is non-recourse; (unrelated) some tribunal inter-personal bias inevitable, so not wholly rational / fact based outcome

- Valuation (US$)

- Award P/S (prob weighted; net of liabilities): 0.53

- Price P/S: 0.03

- Target P/S: 0.53

- MC($Mn): 42.00

- Upside: 1679.30%

- CAGR: 58% (6 years)

- Risk / Return: 1/17

- Margin of Safety: 85% reduction in award estimate --> 1:3 risk:return tradeoff

- Allocation: future dividend unclear, likely at least in part

- Catalyst: case progression gives many, periodic, chances to make odds / EML's fair value more apparent

- Risks

- Bear Case: Loss

- Potash Price Leverage: compensation (award) based on project value, so Potash price leverage

- No monetary award: no other value driver currently

- Enforcement trouble: ICSID ruling doesn't equal forced payment; another proceeding required

- Poor award allocation: if new project pursued, a poor project would warrant a lower valuation; no guarantee if up/down post-award date

- Reason for discount

- Shareholder turnover: junior mining investors out, new arbitration holders need time to assess

- Ignorance

- Single value driver: dependence on case may drive conservatism, at least for now

- Niche: arbitrations, especially early stage, are not as popular as e.g. Buffet's style

- Volume: £25k per day ($32k) rules out many funds / competent investors. Same for Market Cap.

Be weary of Grok's reasoning, I've played around with it and it tends to be overly optimistic, probably due to its agreeable nature (if you can call it nature)

And then 240 days later we should have a decision. And then two to three years after than payment (conservative)

Could be up to 20 based on the merits of the case. Bear in mind that figure writes off the operating business and we already have the ICC1 award whatever happens (inclusion in ICSID or not). You can also assign a small probability to ICC2 appeal paying off, I think I gave it 10% when I did my valuation work