The market cap of Prairie Mining (ASX: PDZ) could increase 30x if the small cap mining company is successful in its case against the Republic of Poland having lodged its £806 million Statement of Claim against the nation for depriving it of its investments.
The claim (which is equivalent to AUD $1.5 billion or USD $1.14 billion) is the formal commencement of litigation where legal proceedings commenced in February 2019 when Prairie first sought negotiations with the Polish Government in regards to Prairie’s Jan Karski and Debiensko mines.
The dispute dates back to 2018 when Prairie claims the Polish government blocked Prairie from progressing the Debiensko coal mine towards production, a mine they acquired in 2016 when the Company had secured the valid environmental consent to commence mine construction.
That same year, Prairie filed a civil claim against Poland’s Ministry of Energy (MOE) over its failure to grant mining concessions over Jan Karski which were needed to protect Prairie’s security over the asset which had accrued significant historical investment. Since these issues arose, no progress has been made by Prairie at either coal mine which the company is hopeful of addressing through this formal Statement of Claim seeking $1.5 billion in lost profit, accrued interest and damages.
The claim has been filed under both the Energy Charter Treaty (ECT) and the Australia-Poland Bilateral Investment Treaty (BIT) where both parties have agreed to apply the United Nations Commission on International Trade Law Rules to the proceedings. Prairie’s filing claims the Republic of Poland has breached both Treaties.
“The Claim is proceeding at pace, with the Company now having submitted its Statement of Claim in the BIT arbitration, which included a valuation of damages prepared by external quantum experts,” said Prairie CEO, Ben Stoikavich.
“The Prairie management team continues to work with legal counsel and a range of external experts in prosecuting the Claim.”
Although the Company has just $5.2m cash reserves as of 31 March 2021, Prairie will draw down on the $12.3m Litigation Funding it secured in July 2020 to progress the claim. The Company notes that investment disputes within Poland are not unique and have increased since the current Government came into power in 2015 where other claims up to USD $1.3 billion have been filed against the Republic.
As per Prairie’s 2017 Scoping Study, Debisengo had a Net Present Value of USD $1.5 billion where it was forecast to produce 2.6Mt per annum of coking coal over a 26 year mine life while a 2016 Pre-Feasibility Study of Jan Karsi identified a Net Present Value of USD $1.88 billion with forecast production of 6.34Mt per annum over a 24 year mine life.
Upfront capital expenditure to realise the value would have been USD $1.14 billion.