Panthera Resources (£PAT)
Company: Panthera Resources
Ticker: AIM.PAT
General Theme: Arbitration
Recommendation: Long
Stock Price (USD): 0.31
Target (USD): 2.17
Upside: 602%
Timeline (Max): 2 years
CAGR: 165%
Initial Coverage: https://caseresearch.substack.com/p/panthera-resources-lse-pat
CEO Talk (Takeaways): https://caseresearch.substack.com/p/panthera-lsepat
Overview: https://caseresearch.substack.com/p/the-daily-dispute-3-panthera-resources
Summary
After India blocked Panthera’s prospecting license for Bhukia, a 75% owned JV, Panthera tried to resolve in Indian High Courts, but was forced to take to the Permanent Court of Arbitation on the basis of expropriation under the Australia-India BIT. India had passed a decree to effectively nationalise the mining industry, and claimed that Bhukia wasn’t a sound project anyway, despite later auctioning it off to a domestic company. Panthera argued breaches of Article 3 (promotion / protection of investments), 4 (treatment of investments), and 7 (expropriation and nationalisation). It’s evident all were broken...
However, the case hasn’t reached the hearing, and procedure keeps arguments private, making it hard to judge the outcome with any certainty, but it has LCM’s backing, who have a 80%+ win rate over 13 years. Certainty, however, isn’t needed - Panthera claim $1.5bn, but we came to a $577mn award vs a $82mn market cap, giving 602% upside (165% CAGR) in two years (procedural order). Management intend to issue a special dividend and then give shareholders the chance to reinvest which is a thoughtful optionality.
This discount is thanks to incredible market pessimism, shown by the implied probability - they value Panthera at a 14% chance of receiving the $577mn, which is too low for an already conservative estimate. This gives us great leverage on small mental adjustments the forward-looking market will make as the case progresses e.g. the market deciding it’s a 25% probability instead gives a 78% price appreciation. It could go either way, but case info being made public can be an excellent catalyst, along with the eventual award.
The risks here are that Panthera receive no award, lower annualised return as the tribunal have to delay their decision thanks to India-related delay attempts, Panthera poorly allocating the cash to their two Mali and two Burkina Faso projects, and the market somehow never recognising the value. However, these are individually improbable.
If looking to take a position, if you understand the key value levers: how right Panthera are on principle (assessable now), if India have any legal standing, and the tribunals eventual decision, then you should make the position in the upper quartile of what you’d normally allocate. If just making a blind bet, which we find nonsensical, then it’s up to you, but considering the two year timeline / sizeable upside we’d have it as a small position. We do, however, recognise that it depends on your risk tolerance and personal situation, so adjust accordingly.