Arbitration Series #3: Almaden Minerals (TSXV: AMM)

1048% upside with a 1:22 risk return tradeoff and a sub 2-year timeline

Almaden Minerals (TSXV: AMM) | Equity Research Report | Case Research

Company: Almaden Minerals

Ticker: AMM, AAUAF

Listings: TSXV (Can), OTC (US)

Reccomendation: Long

Theme: Arbitrations

Stock Price: $0.13

Target Price: $1.49

Upside: 1048%

Timeline: 1.75 years

CAGR: 303%

Summary

Almaden Minerals (TSXV: AMM) is in ICSID proceedings with Mexico over a gold and silver mine concession which was revoked, which is an expropriation-rich jurisdiction with clear proof of the CPTPP-breaching mining law changes. The memorial is extremely convincing, as it was with Silver Bull Resources (SVB.TO).

AMM offers 1048% upside in two years, trading at 8% of the awards expected value (including risk of loss). The hearing is scheduled for the end of 2026, so an award is likely by August 2027, or 360% CAGR. This is essentially risking $1 for $22 of upside if you factor in the probabilities.

Being initiated in 2024, the proceedings are early stage, but even at ICSID averages it should trade at c.18% of the claim, or over 100% upside before anything’s actually happened.

Another great lever on returns is the gold and silver price, which have both appreciated about 250% since the memorial, which leaves you with a 3,668% upside. However, it’s not entirely clear if this was included in the recent memorial, so take it with a pinch of salt. Of course this could change, and the leverage goes both ways, so the 1048% figure is what we officially think, but technically it’s the correct figure as of today.

The discount largely exists due to a very slow shareholder turnover, the $18mn market cap, and pessimism regarding the risks: unfavorable ruling, enforcement issues, and possible poor cash allocation from the management post award payment.

The Dispute

Treaty: Almaden Minerals, partnered with their spin-off Almadex submitted their memorial, which lays out the claim, on behalf of their Mexican subsidiaries Minera Gorrion / Gavilan. They have initiated a claim against Mexico under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, AKA ‘treaty’). Almaden suspect Mexico have breached the treaty by expropriating their investments in Ixtaca, a gold-silver project in Ixtacamaxtitlan, Pueblo, which was supposedly state of the art and in development for the last two decades. For those that don’t know, expropriation is the effective loss of economic exposure to an investment. Almaden’s ownership structure, as per the memorial, is shown below:

Political context: AMLO, Mexico’s populist president banned any mining developments made by foreign businesses, purely for the sake of populism. Now, we are not politically literate, but the proof is in the pudding, and no speculation is required. AMLO felt prior presidents had given control of Mexico’s natural resource extraction to foreigners, despite this foreign dependence being a natural consequence of Mexico’s privatisation in 1992 (which was greatly effective until AMLO). Experts argue that Mexico would not be aware of the Eastern Region mineral potential if foreign miners hadn’t brough their capital and expertise over. If you are a resource investor, AMLO’s not a fan - he thinks foreign miners use concessions to ‘negotiate and profit through speculation on stock exchanges’, which is partly true, but there’s nothing wrong with it by any standard. This over-entitled sentiment matches his dislike of the neoliberal period, and how it gave foreign miners half of Mexican territory through concessions. He also feels strongly about the environment, factoring it in to his decision whether or not to grant permits / concessions. The latest kicker was in 2024, when he banned outright open pit mining, which is the main way of extracting precious metals.

Almaden’s Legal Merits

The following should be a convincing argument that Almaden’s concession revocation was unjustified. These arguments were largely laid out in their memorial, a 307 page rather entertaining document.

Concession ownership: Almaden had acquired two 50-year mineral concessions under their Minera Gavilan subsidiary. The oldest one has about 30 years left, or at least it’s supposed to. The previous granting of a concession backs up the idea that AMLO is indeed irrationally nationalist, and going against the terms of the treaty. To be clear, the minerals are in Mexican territory, so technically belong to the state, but a concession effectively signs over economic exposure, so both costs and returns, to the recorded holder. There may be concerns that Ixtaca didn’t actually meet concession application standards, but they did, and anything to the contrary is a retrospective measure. Economia had approved the application / expert reports, and granted Almaden the ‘Cerro Grande’ and ‘Cerro Grande 2’ concessions in 2003 and 2009 respectively, renewable after expiry in 50 years. Economia had no issue with the given info, so they put out a certificate in 2002 to admit the application for study and processing:

In February 2003, Economia issued Oficio No. 120/21/A.4/6.1/2003, which approved the concession application:

To kill any doubts, proof that Ixtaca met all the criteria was given:

The concession title (No. 219,469) was issued for a 6 year term starting 6th march 2003, later extended to 5th March 2053 thanks to the 2005 amendment.

They also acquired the surface rights required to carry out Ixtaca, which was done through a lease agreement. This is not important in and of itself, but the counterparty wouldn’t have agreed if the concessions weren’t held - it would be like loaning to someone without the means to pay you back.

Here’s a photo which proves the concession was cancelled:

AMLO policies: AMLO’s nationalist policy is exactly what the CPTPP treaty is designed to prevent, but it can’t protect against collateral damage of any political policy, for that matter. This was set in stone when AMLO elected a new administration to enforce these policies, setting up the Secretaria de Medio Ambiente y Recursos Naturales (we’ll stick with SEMARNAT) to reject the Manifestacion de Impacto Ambiental (MIA). They were only implemented using self-imposed policies, and done so before sufficient context was present. They made sure that Almaden had an unrealistically high bar of ‘absolute scientific certainty’, and then used that as grounds to 1) cancel the concession on ‘infeasibility’ grounds (they were only minor technical defects), and 2) ensure Almaden won’t again qualify for a concession. Bear in mind these measures didn’t bother Economia, who’s in charge of applications, 20 years ago.

As is usually the case when it comes to corruption, there were some undisclosed relationships. Emerita Resources (TSXV: EMO) comes to mind. Mexico allegedly worked with US-backed Non-Government Organisations (NGOs), notably to conjure up scientific studies to invalidate the claim after Almaden had already made their concession application. There are transcripts obtained through Mexico’s Transparency Act to back up this claim. AMLO had put NGO activists in SEMARNAT roles, which disincentivises any change Almaden would benefit from.

Retroactive concession cancellation: this usually means records were changed to justify a change in past decision, in this case 14 and 20 years ago, done to fit AMLO’s policies. There’s not much data on it, but it’s an important mental model to place when thinking about Almaden’s situation.

Community manipulation:The amparo lawsuit, AKA a lawsuit constitutional rights protection this time against Almaden and intiated by the Tecoltemi at the beck and call of the NGOs, was prepared / prosecuted by those NGOs who coopted the Tecoltemi community. Bear in mind the Tecoltemi are a mountain village with 142 people, 2569 meters above surface level, making them out of the projects area of influence - it’s a c.45 minute car ride. In their conditions, they needed Almaden’s help. Mexico framed the Tecoltemi community suffering from the development of the project as a retrospective reason to revoke the concession. Almaden gave the following reasons for why Tecoltemi is irrelevant in the concession decision:

1. not previously identified by Government as indigenous, and no one had ever said they were until three weeks before bringing the amparo lawsuit

2. the amparo proceedings demanded a declaration of unconstitutionality of entire sections of the Mexican Mining Law, which is above the usual requirement of indigenous consultation

3. when Almaden, through Minera Gorrion, sought to have the amparo lawsuit dismissed via dispossesing concession areas overlapping with the Tecoltemi, who appealed that decision to maintain their lawsuit. This raises a question of incentives - why would Tecoltemi go beyond their own self interest completely of their own volition? We don’t think they would.

The amparo is what led to the Mexican Supreme Courts April 2022 decision on indigenous consultations, which was context to cancel Almaden’s concession rights. The amparo was oddly timed. It came in 2015 despite the concessions being granted in 2003 and 2009, so you have to question the incentives - it’s very unlikely they took 6-12 years to decide they had any issues with the project, so there must have been some prompt. You can guess what it was.

Mexico’s absolute determination to stop Almaden, along with all the other foreign miners, was made obvious when Almaden offered to resolve the amparo by reducing the concession area, but Mexico didn’t allow it. Essentially, they weren’t going to settle for anything more than zero despite that protocol being within Mexican Mining Law. Naturally, Almaden took this to judicial courts, who ordered Economia to process the reduction application in the next 24 hours (April 8th 2016). Economia didn’t, so a second order was released, which Economia abided by on the 9th June 2017. It should not have taken this long and Mexico’s efforts to delay the eventual re-granting of concessions, once you’ve gone through all the motions, is unlawful. The Tecoltemi, despite getting the land reduction, wanted to fully nullify the concessions so they could pursue the amparo. This is of course confusing, but it helps to imagine what a 142 person community in the middle of nowhere is really like - they are fairly unsophisticated, and probably desperate. They probably don’t have the personal leeway to deny the requests of NGO’s or Mexican Government Organisations - they likely just want whatever resources they can get, and are doing what’s necessary. They’re not thinking for themselves - they’re neither incentivised nor have the initiative or resources to do all this by themselves.

Almaden had employed local residents, financing access to education, healthcare, and fresh water. Essentially, Almaden were committed to materially improving living conditions for communities within Ixtaca’s area of influence. They also disclosed information in a timely manner and made cost-intensive changes to please the communities, e.g. constructing a permanent water storage infrastructure. They also had a shared benefit agreement with small landowners to build water-related systems, which received local praise, and a separate agreement with ‘Ejidatarios Unidos para el Desarrollo Sustenable de Santa Maria Zotoltepec, AC (EJUNDS) aiming to better agricultural sustainability. It is agreements like these that make evident the US-backed NGOs coopted the local communities to support their retrospective efforts to revoke Almadens concession title - why would a community economically / biologically benefitting from a company, who they’ve been praising, suddenly give another sentiment?

Regulatory validity: Almaden was a star model for responsible mining practices, and had the endorsement of the UN back in June 2022 (bear in mind they haven’t been able to mine the last few years, so is recent compared to when they could actually be judged) when Economia, the Mexican organisation, and the UN Economic Commission for Europe chose Ixtaca for the Mining Pilot Project, which draws from global candidates. They also had the support of local communities thanks to years of engagement, and had not been made aware of any issues, probably because there weren’t any. On this basis, there’s no arguing Ixtaca was infeasible, so the concession revocation can’t be justified.

Their environmental efforts ensured local communities were considered through the UN Global Compact Network, amongst a long list of associated guidelines. They would not have been selected by the UN if they had not at the very least met these standards, but since it is a competition, it is likely they had to exceed them to be considered. Mexico’s environmental body, PROFEPA, had also verified Almaden’s compliance with environmental law through on-hands visits, and the accusations regarding Almaden’s alleged violations were ill-founded.

As NOM-120 provisions required, Almaden filed a notice of commencement for their first drilling programme, Tuligtic, with SEMARNAT’s office over in Puebla. No additional info was requested, so Almaden moved to complete the programme. This was how they eventually discovered Ixtaca, after which they submitted four IP applications for separate zones between October 2010 and April 2013, which is only to expand the concessions ‘jurisdiction’. They filed again in 2014 for further expansion after consulting the Zacatapec, Vista Hermosa de Lazaro Cardenas, Tuligtic, Santa Maria Zotoltepec, Xiuquenta, and Ixtacamaxtitlan communities. SEMARNAT didn’t include the Tecoltemi in the consultation list, which is also the community the NGOs targeted with Mexico’s help. It could be a coincidence or consequence of patchy legal framework, but it’s improbable.

Procedural irregularities: SEMARNAT displayed all sorts of procedural irregularities when managing the MIA evaluation process, such as postponing the RPI once month post-deadline to ‘not interfere with the Puebla State Elections’ (majoritively unrelated), requesting technical opinions and disallowing Almaden to comment on them, suspending the MIA, developing pretextual reasons to then reject the MIA, relying on outdated technical opinions that Almaden never got to review, ignoring MIA case file info, applying the ‘absolute scientific certainty standard’ and using it to reject the MIA, using the community consultations as grounds for revoking the concession, and upholding the amparo action four years after Tecoltemi filed it. This last point is especially telling - as is consistent with the retrospectivity, Mexico have used practically dormant legal matters as background after they were settled. The District Court found that the Mexican Government violated Tecoltemi’s constitutional rights by not consulting the communities before granting the concessions. They also declared certain sections of the Mining Law unconstitutional thanks to Mexico’s failure to incorporate a clear community consultation mechanism. Problem is, that meant the concessions were granted under an incomplete process, and so their possession is illegal. However, Almaden weren’t given a chance to address these changes, rather, the concessions were immediately declared ineffective. So, Economia’s DGM had to revaluate the concession application, taking into account that community consultations aren’t actually required under Mining Law, and the original concession relates to land given to the Tecoltemi ejido. However, they also ruled that the Tecoltemi qualified as an indigenous community, and therefor consultation despite there being no administrative recognition of the community as indigenous. We do not think that self-identification is a responsible way to run the Mining Law, precisely for the reasons this case exists.

Economia failed to issue a feasibility decision for Ixtaca, which was after Almaden’s voluntary land reduction to help the Tecoltemi, which came with a social impact assessment, which Economia ignored. This goes against their legal requirement to register the application officially and then either 1) certify their completeness or 2) request more info to help them make a decision. To make up for this, Almaden had to file a writ before the Puebla District Court, who decided Economia were right to declare the concessions invalid, but they failed to reassess Ixtaca’s feasibility. Consequently, Economia were ordered to reassess within three days, but nothing happened. Almaden filed another motion on the 9th January 2023, a month later, and on the 26th the District Court issued a final compliance deadline, which Economia defied by filing 14 days late, on the 9th February.

Jurisdiction: As is the most important question for whether any compensation should be granted, Almaden are defined as an ‘investor’ under Article 9.1 of the CPTPP - ‘an investor of a Party that is a party to an investment dispute with another Party’ that ‘attempts to make, is making, or has made an investment in the territory of another party’. This perfectly describes Almaden. You also need proof they are Canadian, AKA are a foreigner, which is the case because Almaden have always been organised and existed under British Columbia, Canada’s laws. Their registered office is Suite 210, 1333 Johnston Street, Vancouver, BC, Canada, V6H 3R9. If anyone pays a visit, let us know. Of course the claim exists through the Minera subsidiaries, but there’s proof of ownership, so no issues. Minera Gorrion held the concession, and Minera Gavilan had a 2% NSR. They are also covered investors under the ICSID Convention Article 25(1), which allows arbitration to commence if ‘any judicial person which had the nationality of a Contracting State other than the State Party to the dispute on the date on which the parties consented to submit such dispute to... arbitration’. Ixtaca also qualifies as a protected investment, and while there’s no definition, certain conditions have been recognised:

• contribution of money / assets

• certain duration

• element of risk

• contribution to economic development of the host State

Ixtaca has sunk costs, a timetable for extraction, risks such as expropriation, and have agreed to contribute to local infrastructure and education.

Rationae Temporis: there’s not much to say here, but it’s important to recognise that Almaden met the 3.5year deadline post-being aware of expropriation / incurring damages to submit the claim to arbitration under the CPTPP. Mexico’s supposed earliest measure was 17th December 2020, when SEMARNAT denied the MIA, and the Request for Arbitration was filed on the 14th June 2024. They just made it.

CPTPP obligation breach: Mexico directly expropriated treaty-protected investments (so Almaden lose their economic exposure to Ixtaca) to breach article 9.8 without meeting the exceptions:

• for public purpose

• non-discriminatory

• payment of prompt, adequate, and effective compensation

• accordance with due process of law

If you invert, it’s clear they don’t meet any of these conditions, which by default means they must have expropriated Almaden’s investments, and so breached the CPTPP. What’s more relevant to mining is Annex 9-B, which says there has to be interference in tangible or intangible property right / property interest in an investment. This fits in nicely with Almaden, who lost the rights to operate on their own land.

Then there’s the lack of Fair and Equitable Treatment (FET), which I’m sure all arbitration analysts have heard a million times. Anyway, Mexico failed to provide FET under CPTPP Article 9.1, evidenced by the procedural irregularities we already mentioned, and the arbitrary exercise of their regulatory powers to set unrealistic retrospective standards to justify cancelling Almaden’s concession title. Mexico also acted in a disproportionately, which has a three part test: 1) is the measure just enough required to achieve the aim? 2) is the measure no less drastic than would have done the job?, and 3) was the measure disproportionately severe to the investor compared to the (at least meant to be) completed aim?

Most Favoured Nation Treatment: Mexico adopted a discriminatory anti-mining policy to target foreign corporations. MFN is designed to protect against any discriminatory treatment towards non-domestic corporations, but Mexico have not abided. All of Mexico’s actions mentioned so far only back up this claim, so we won’t repeat ourselves to justify the CPTPP Article 9.4/9.5 breach. For margin, there is a three stage test: 1) has the state given Almaden / Ixtacca treatment regarding the conduct, operation, and sale or other disposition of investments?, 2) are there close comps, e.g. local investments ran by foreign parties?, and 3) were Almaden treated worse than those comps?

Right to compensation

Mexico’s CPTPPP breaches deprived Almaden of Ixtaca, AKA it’s economic exposure, and so they’re seeking full compensation of $1.06bn.

There is no CPTPP rule on deciding compensation, so international law methods should be applied, which says ‘full reperation’ is owed for injuries caused by internationally wrongful acts. Previous cases have led to compensation equating opportunity cost, AKA putting Almaden in the situation they would be in at the time of award if Mexico hadn’t expropriated Ixtaca. So, Ixtaca’s fair market value must be assessed as the ‘price a willing buyer would buy given goods at and the price at which a willing seller would sell it at on condition that none of the two parties [is] under any kind of duress and that both parties have good information about relevant circumstances involving the purchase’. This is now a well established principle, and is the only sensical option. I’ve heard of multiples on sunk costs, which for miners is absurd.

The CIMVAL code (Code for the Valuation of Mineral Properties), an international standard, has three approaches: 1) owners CF, 2) transaction prices, and 3) sunk cost multiple.

Ixtaca has income generating capacity, and would have eventually produced gold and silver, as Mr Morgan Poliquin explained in his witness statement, so Brattle (valuation experts) go with the good old DCF approach, and if that is rejected, the sunk cost approach. We hope it’s the DCF for both logical and economic reasons.

It’s also argued interest must be annually compounded until when the award is paid, for the sake of 1) to ensure full compensation is given (the more time Almaden miss out on with Ixtaca, the more opportunity cost they accrue, assuming that the allocation return would be positive during that period), and 2) to disincentivise paying late.

Almaden’s $1.06bn claim uses either the 2025 proxy valuation date for the income approach, or 2023 for the DCF approach, which they have the right to choose between. Using 2025 it’s $1.06bn, and using 2023 it’s $416.8mn, both including pre-award interest.

If using the dreaded cost-approach, for 2025 valuation date you get $253mn at a 4x multiplier or $317mn at five, and using 2023 you get $271mn using 4x and $338 using 5x.

Pre-award interest is calculated as the 1 month yield on US T-Bills (damages are in USD), but since Almaden have effectively been forced to put money into Mexico without return, like a creditor, it’s adjusted to include the Government of Mexico’s default risk.

Post-award interest is at the same rate.

Damages must also be net of Mexican Taxation to avoid double taxation.

Moving Forward

As the case progresses, there will be procedural developments the market can be updated on, which means they have a chance to 1) recognise the case for its merits (or lack thereof) and 2) to price the stock at the correct probability of a reasonable outcome, AKA a price appreciation (in this case).

Luckily, thanks to procedure, the procedural order gives us the scheduled dates. Before you take this in, remember that the schedule could change as new requests are made in light of e.g. new evidence. That said, you can at least use this as a rough timeline:

So, assuming the hearing is before the end of Q12027, you can expect a ruling by the end of the year - the tribunal is usually given 240 days, but there could be delays.

Parties Involved

Almaden’s management are mining / capital markets specialists, but no one involved in international arbitrations before. Of course they have their legal counsel to make up for it, but having someone who’s actually been hands on in the business and gone through all this before would be incredibly helpful. We’d suggest Mark Bolton of Panthera, who’s currently tied up, but in a few years. Regarding insider buying, there hasn’t been anything consequential, but the case is early on still, so their activity throughout the proceedings will be more revealing. We’ll keep a close eye.

Almaden’s is represented by Tim Foden (Boeis Schiller Flexner), specialises in mining-related cases by training, has won most public-company ICSID cases (easier to get info on). He is the most well known in his field, and while that doesn’t strictly tell us how good he is, he is well known for a reason. If interested, look at cases ARB/20/25, ARB/20/46, and ARB21/6 on the ICSID website, or search him up on YouTube.

Almaden have a mystery litigation funder, but our best bet would be either Burford or Litigation Capital Management, but whoever it is will be providing their legal expertise, and their investment is a stamp of confidence from someone. It doesn’t mean the case is a cinch but competent litigation funders, who are typically the only ones who have the capital to be involved in ICSID cases considering the basket approach, generally have a 50%+ win rate.

Mexico have a c.45% win rate in arbitration cases in which they were the respondent, but the same comparable-case issue arises - the closest is 3 oil/gas/mining cases, which isn’t a large enough group to account for the differences in investment laws argued / the acts Mexico are accused of.

Mexico previously had AMLO as their President, who we have established was the root of the expropriation thanks to his nationalist policy, which we have also seen in other cases such as Silver Bull Resources (SVB.TO), but is now under Claudia Scheinbaum since September 2024.Scheinbaum was AMLO’s environmental secretary, and they knew eachother for about 24 years. From what we can tell, there haven’t been any official reforms to the mining law since AMLO, which means the nationalist issue remains. From 1st October 2024 to 30th June 2025, there were 344 concession cancellations for ‘noncompliance’, recovering 450k hectares while concessions fell from 22591 to 22247 (slightly outdated, but it proves the point). This is of course a major risk to any foreign miners operating in Mexico, and it is probably a matter of time. However, in this case, investing post-expropriation yields an interesting opportunity.

Mexico’s law firm - Pillsbury Winthrop Shaw Pittman LLP were in a 2021 study which showed a 20% win rate. This is outdated, but info wasn’t entirely public, and other cases are pending. However, it’s indicative enough to show their relative lack of competence, but then again, Mexico must have chosen them for a reason. Regardless, by the merits of Almaden’s arguments, Mexico aren’t in the favorable position, and no amount of competence in a legal counsel can make up for that.

Appropriate Claim Value

Using past ICSID cases involving Mexico, who are by default the respondent 100% of the time (ICSID is meant for investor-state disputes, and Mexico are a state), we saw the outcome of each case and gathered the following data:

Practically speaking, this is all that matters:

Equity Upside

Starting off with the appropriate award, we get:

Note: in previous reports they say the award includes pre-award interest, but in their latest memorial they did not repeat this, so we add in pre-award interest, hence the 2023-2027 timeline.

This of course comes with expenses, some of which aren’t contingent on the award anyway, so would have to be paid at some point regardless:

This leaves us with:

Accounting for the fact some outcomes are more likely than others:

So, we can consider this an off-balance sheet receivable, already net of liabilities, contingent on the tribunal deciding to award Almaden. We can assume the market should appreciate the stock by at least $1 per $1 received assuming no speculation on future projects and their value, but that is unpredictable. We think that, for common stockholders (as opposed to options etc), the upside comes to:

Note: Latest payout is latest date final payment is received from any case

Note: sub-10% CAGR is the max afforded time for this to play out before we accrue opportunity cost for our non-indexed cash. Tt is also how long the price implies this will take using a 10% discount rate and treating it as PV.

Another way to spin it is the risk return tradeoff:

Other factors

What the market is implying in the price: the market cap / award ratio, AKA the implied probability of the probability weighted award being paid, is 8% if you ignore the change in commodity price and 2.49% if you account for it. Either way, for a case of it’s merits, especially against Mexico (an expropriation-rich jurisdiction), that is too low of a probability. It would also be too low for any ICSID case - we use 20% proability weighted against ICSID avg 18%, and we used a 65% success rate against ICSID 57% average across all jurisdictions. This should demonstrate how absurd the mispricing is.

Commodity premium: Ixtaca’s value is levered to gold and silver prices, by revenues from ounces of each supposedly in the ground. At the 2023 valuation date (as reported in the memorial), they used $1275/oz gold and $17/oz silver, whereas it’s now at $4,300/oz and $67/oz respectively. This is a 237% and 294% increase, so at current commodity prices the claim should be adjusted upwards that amount. This takes us to about $3.71bn, or simpler put, the probabilities stay the same but the upside goes from:

• prob. weighted upside = 1048%

• commodity adjusted upside = 3668%

• risk / return = 1 / 77, AKA risking $1 permanent capital loss for $77 upside.

However, it is not entirely clear if they factored this into the recent memorial figure we officially quote, so there’s some nuance, and it’s just important you recognise the leverage - commodity prices could change between now and the award date, likely August 2027, so we don’t factor it into our official calculation. However, technically speaking AMM do now hold a claim which has tripled in face value without any extra legal work, and so if the commodity price at the award date is what is it now, the adjusted upside scenario is more realistic assuming you invested today. If you do invest later, chances are it’s still an excellent investment - there is significant margin of safety.

Shell company: We are a fan of how Almaden don’t have any other projects which may require dilutive financing - it makes things much simpler

Cash allocation: whether we see this upside through a plain increase in BV or a partial distribution is unknowable. What we do know is that some of the funds will be retained for contingent expenses, like litigation funding or the Key Persons Retention Agreement (incentives).

So in essence, weighted by probability, there’s a 65% chance of c.1000% upside net of all liabilities / contingencies, and a 35% chance of losing all your money. However, as we have written off the value of the other potential projects financed by the award, it’s very unlikely the market will value the company at zero, but we do it in the downside scenario for margin of safety. This is effectively, at a very conservative level, risking $1 to make $22. We see this an excellent tradeoff, and a statistically responsible investment.

Why the discount exists

1. The discount exists primarily because of shareholder turnover, as with most special situations investments. Almaden was a mining company, and should be valued as such, until the expropriation, which effectively made Almaden a legal case holding company with a few other mining-related arrangements. Previously, AMM was held by mining specialists, but since June 2024, when the ICSID arbitration was initiated, those who can assess the business (and so if there’s an opportunity) are arbitration focused investors. However, this turnover cannot be instant - you get both resource investors who hold out of ignorance or hope or both, and the much nicher crowd of arbitration investors who by nature are weary of investing in a case so early on, despite it being a good bet. In other words, those who can actually value AMM haven’t had enough time to come to a sound valuation, despite it being a statistically sound investment.

2. The arbitration-focused crowd is few and far between, mostly because people assume you need a legal expertise to understand the situation, when in reality all you need is curiosity about past cases and a long attention span. Legal training is not required, although it would help. That said, we are not trained lawyers. Actually, we’re not technically trained in anything.

3. Another reason would be preference for cases nearer the end of the proceedings, e.g. Equatorial Resources or Zenith Energy, which are considered less risky by the market as the relatively increased volume of public arguments helps them decide the most likely outcome more accurately.

4. Almaden is a $18mn market cap company with c.$6.5k volume (3 month daily average), which means that, in a stock only suitable for an already niche crowd, competent investors who have generated cash from investing in arbitrations may be working with amounts too large to justify the holding. This is the classic scaling problem, but from the advantaged side.

5. Investors may also be deterred by the downlisting from the NYSE to the OTC, and the TSX to the TSXV. This doesn’t actually affect the case, and so the Almaden’s value, but it has a bad rap.

6. There may also be ‘meme stock’ treatment of sorts, where highly diversified speculators decide AMM is a ‘punt’ in either direction, and so push the price around until the shareholder turnover has made some meaningful progress.

The only possible catalysts are:

the case proceedings updates allowing the market to come to a better price,

or the actual award decision / payment making it blatantly obvious.

Unfavorable Ruling

The main risk, and worst case, in any ICSID proceeding is that the tribunal decide Almaden should both not be compensated, and reimburse Mexico for their legal costs, which is compensation for wasting Mexico’s time. As we know, the risk of permanent loss of capital is 35%.

Enforcement

While the market should price in the award pre-payment, it’s not guaranteed. The ICSID ruling does not order payment, but it sets the legal groundwork to then go and ‘enforce’ the award in another international court so they can secure the payment order.

It should be straightforward procedure wise, but Mexico may just refuse to pay. Almaden must take a certified award copy from the secretary-general, go to any ICSID Contracting State and request the enforcement. Since the contracting state is linked to ICSID, they don’t have to hear any arguments again. This is what the ICSID Convention requires. Where it gets tricky is that Mexico must actually be able to pay, so you have to know what assets are located abroad that can be seized. This you can’t predict, but Mexico has a GDP over $1tn, so a $220mn award should be payable. Mexico don’t have much of a choice in paying, but they can delay it with various procedural requests, e.g. submitting new evidence for review.

However, there’s significant margin of safety here - we could receive 10% of the probable award and still double our money.

Commodity Price Changes

Ixtaca’s value is tied to gold and silver prices, by revenues from ounces of each supposedly in the ground. At the 2023 valuation date (as reported in the memorial), they used $1275/oz gold and $17/oz silver, wheras it’s now at $4,300/oz and $67/oz respectively.

However, commodity prices could change between now and the award date, likely August 2027, so we don’t factor it into our official calculation. We also don’t think we, or anyone, can predict it beyond the general direction, and even that is hard over a two year period - it only takes one anomaly to push the price around for an extended period.

However, technically speaking AMM do now hold a claim which has tripled in face value without any extra legal work, and so if the commodity price at the award date is what is it now, the adjusted upside scenario is more realistic assuming you invested today. If you do invest later, chances are it’s still an excellent investment - there is significant margin of safety.

Poor Cash Allocation

When Almaden receive the award, they have to do something with the cash. There are no signs of intentions to distribute to shareholders, although a partial-award dividend is feasible, but management have said they will reinvest the cash back into exploring other mining sites.

This is an investment like any other, and it may have a poor / negative ROIC, which the market may see coming pre-award date and apply an ‘allocation discount’ to the face value of the award. We’re not sure how they would see this coming in any real detail, but some may talk to management or be speculative about the management’s track record.

Useful Resources

Almaden Website: https://www.almadenminerals.com/investors/financials

ICSID Case Page: https://icsid.worldbank.org/cases/case-database/case-detail?CaseNo=ARB/24/23

2025 Q2 Financial Statements: https://static1.squarespace.com/static/5ed92e4d58c63e6402d44f65/t/6898b907159f99105186c84c/1754839303934/ALMADEN-2025-Q2FS.pdf

2025 Q2 MD&A: https://static1.squarespace.com/static/5ed92e4d58c63e6402d44f65/t/6898b920b3962a753eba4c19/1754839328046/ALMADEN-2025-Q2MDA.pdf

AMM TSX Page: https://money.tmx.com/en/quote/AMM/company?utm_source=chatgpt.com

Thanks for Reading!

We very much appreciate you taking the time to read this report, and we welcome any feedback, especially the negative kind. We aimed to make this one a leaner read without losing any of the valuable content, and we hope you enjoyed the read!

To Almaden’s management: we feel your company lacks recognition, hence the discount, and we are interested in discussing initiating sponsored coverage next year for a negotiable small fee. We will be emailing you shortly, and we hope things go the way they deserve.

To all: If you have any questions, either email or DM us!

Disclosure: We have no affiliation or communication with the company. This is not investment advice. Do as you see fit.

Email: Info@casersrch.onmicrosoft.com or contact us on substack.
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We will do our best to respond same day, and are happy to schedule calls at a time of your convenience.