Memo: Emerita Resources
Corruption, admin court, and our take
This has also been published by our-coauthor Case Research on his page, but without further ado…
The Dispute
For those unfamiliar, Emerita Resources believe that the tender process for the Aznalcollar (Spanish Zinc mine AKA AZN) was wrongly awarded to Minorbis-Grupo Mexico JV thanks to various forms of corruption. However, on the 5th December, the Third Section of the Provicincial Court of Seville has ‘determined that it will not impose any criminal convictions on any of the accused’ relating to the AZN mining license / criminal trial. Essentially, this means that Emerita’s chief argument for getting their mining license back has now been decidedly irrelevant. This means there’s more pressure for Emerita to appeal this, but of course they need some legal background - if their appeal is to work in a system they think is corrupt, they need some externally backed indicators of corruption. We will get to that, but first some context...
Context, Pre-Recent Ruling
[From our Oct 30th Coverage, and if you know what happened pre-the recent ruling, skip ahead to the next section (centered bit of text)]
2016 - 7th Provincial Court of Seville’s Decision:
This ruling overturned Emerita’s previously failed attempt to dismiss the previousl ruling regarding the Aznalcollar mining tender award.
The Seville courts, via the Court of Instruction #3, decreed the provisional dismissal of the proceedings relating to the Aznalcollar mine award on the condition that their verdict of the presence of illegal acts during the public tender held for the Aznalcollar mine per the summoning of the Resolution of the General Directorate of Mines of the Ministry of Economy, Innovation, Science and Employment of the Andalusian Board. Emerita claimed that the exploitation of the mines resources were favorably awarded to the Minorbis Grupo Mexico entity, despite there being no legal reasoning, so in other words, Emerita feel they were on the wrong side of discriminatory activity. So naturally, Emerita got that provisional dismissal revoked, which means the investigation can continue. This paves the way for further court investigations into the demerits of the tender process, which by extension suggests that both the Spanish courts recognise that previous proceedings have no validity, and that this can be a fresh start for Emerita that render the last (so far) year of mine-tender-process related hassle irrelevant, only this time they’re starting out on the favorable side of the legal proceedings (as per the likely merits of their available arguments, assuming they make them, relative to that of those made by the ‘Juanta de Andalucia’ (Andalusion authority) in the investigative courts).
Better yet, the courts recognised that the appeal set forth by Emerita made evident a sizeable portfolio of unlawful actions, all of which directly contribute to the seeming invalidity of the public tender. The Courts emphasised the peculiar inconsistency of the tender process - it was won by a company called Minorbis-Grupo Mexico (a JV between Minorbis and Grupo Mexico despite records indicating that Minorbis was formed for the sake of the tender process), but when it came to the transfer of the mining licences, it was held under... Minera Los Frailes, an entity which never bid but is associated with the Minorbis-Grupo Mexico JV.
Criminal investigation was given a push once more when the Appelate Judges declared that the Andalusian government had never adequately explained why Grupo Mexico’s role was stated to be solely a ‘provider of insolvency’, which led to further (well founded) suspicions that the tendering process was not wholly lawful. This led to investigative steps, e.g. various seizing of documents and technical reports from the relevant organisations, which is all solely for the sake of making sense of the wrongdoings before making a judgment (one we are still waiting for, which is actually a good thing - if the results were out the chances of a mispricing narrow, although by no knowable extent, and we’re guessing you don’t own the stock yet.)
If it wasn’t for this ruling, the tender process would never be under question, which by extension means that criminal investigations wouldn’t have been possible. It is these investigations, that have now led up to the 2025 hearing (already happened, and we’ll get to it when it fits properly in the argument) which take the probability of Emerita receiving the mine from 0% to somewhere over 50%. The specific percentages aren’t knowable, but we know the case is favorable, so by definition. The benefit that comes with investigating post-hearing stage cases is that the validity of the legal arguments is made evident by the stage of the case in the present, which takes a lot of uncertainty out of it.
2021 Proceedings
Joaquin Jesus Merino Marquez, the investigating judge from the Investigating Court #3 of Seville with which were already familiar from past proceedings, ruled that there’s the evidence required to incriminate those involved in the tender process and therefor move to trial. He release an order accusing them of:
Unlawful use of their influence (specific to their personal function in the tender process)
Embezzlement (this seems fairly direct)
Breach of Duty (regarding the Officials)
Tampering with a public tender at the cost of public interest
So, a full rap sheet, which only works in Emerita’s favor - their arguments seem all the more valid now and have the backing of the courts, which is more important than ever (albeit out of our control) considering the courts will be making their decision following the hearing. It also greatly helps their reputation, and while it’s not supposed to matter, personal biases regarding perception will always play out in human interaction regardless of the setting - if it didn’t, Judges would be incapable of using their mental models (albeit with built in biases) to make decisions and Emerita would be stuck in legal limbo perpetually. You can also consider Minorbis-Grupo Mexico’s incentives, which we thought of along the lines of ‘okay, well, the legal proceedings haven’t gone their way so far, and it doesn’t look like it will, so assuming they don’t want to further risk their reputation staying out of the spotlight is in their best interest’.
So bottom line, Emerita have a great legal formula going: valid arguments + court recognition + an ‘opponent’ incentivised to acquiesce in the same legal process which is going against them.
However, likely due to lack of sense, Minorbis-Grupo Mexico didn’t act in line with their incentives and decided to appeal the Investigating Judges decision that there was criminal evidence. Characters involved included the President of the Tender Contracting Committee, its officials, The heads of Minorbis, Minorbis itself (just to have legal leverage more than the sum of its parts when put with the heads using their own resources), and the former Director of Mines. So, best way to think about it is that anyone with a vested interest in self protection made efforts to, well, protect themselves. Shocker. They argued that the Investigating Judge had blindly followed the Andalusian Courts guidance without proper considerations of the arguments presented, which the appeals court bluntly put down, emphasising that judgments are made on the back of evidence rather than procedure. If this wasn’t the case, hearing wouldn’t happen in such a structured fashion, and the attempted appeal wouldn’t have been as feasible.
July 2025 Hearing
On the 16th July, Emerita put out a press release announcing that:
‘the Third Section of the Provincial Court of Seville... has completed the hearings for the criminal trial on the alleged crimes committed during the process of awarding the Aznalcollar tender’
The hearing began on March 3, and somehow managed to last 135 days, but now means that the Trial Judges can prepare their ruling on the allegations set forth in the aforementioned court documents. They then point out that those involved in unlawful intervention in the tender process face potential prison sentences, on which point they specify the Minorbis Proprietors.
The company, wrongly in retrospect, has the confidence of the CEO, David Gower:
‘Emerita looks forward to the resolution of the trial now that hearings have completed. We will not speculate on the outcome of this important, and ongoing legal process, however the Company feels it was strongly represented. We do not believe the testimony from the accused of their supporting witnesses refute previous court rulings that led to various charges being levied. In our experience through the extensive appeals leading to the Trial, as well as the Company’s experience in the legal process to obtain it’s Iberian Belt West project in Spain, the Spanish Judiciary have been completely independent and we expect justice will prevail. Emerita’s goal has consistently been, and continues to be, to develop the Aznalcollar property as a modern, long-life mining operation that will operate at the highest standards of environmental stewardship, employee and community safety’.
That last sentence, while revealing, is an advertisement, but the rest of the announcement is basically the CEO saying ‘I can’t give any leading opinions, but I think we’re going to win’. It’s not a complete surprise he’d say this, but in a legal court system they think is corrupt, he is placing too much emphasis on the legal arguments, which should really be greatly discounted in the event of corruption.
Sure enough, their confidence was ill-founded, as the latest news announcement makes perfectly clear...
December 5th Ruling
There is an official 215 page document (off the top of my head) explaining all this, but Poder Judicial Espana (Spain’s Judiciary body, separate from the government / parliament, and are responsible for the Spanish Court’s) released a piece stating the situation in a much simpler way.
Bottom line is, the Third Section of the Provincial Court of Seville has acquitted the 16 defendants Emerita were accusing of corruption, including various officials and technical staff of the Andalusian administration. This of course raises the question of incentives - the Spanish Judicial body may not have wanted representatives of Spain to be seen as corrupt as it would make appeals from other past cases both more incentivised and more probable to go favorably for the claimant. So, the Spanish Courts didn’t think that there was any rigging of the international tender which Grupo Mexico (Minorbis) ended up winning, which was the basis of their legal argument.
On December 4th, and released the next day, the Courts acquitted the defendants, AKA dropping all criminal charges and implying all grounds for corruption were invalid. This disregarded all the following alleged actions:
influence peddling
continuing administrative prevarication
misappropriation of public funds
fraud
prohibited negotiations by public officials
and environmental misconduct
When you think ‘corruption’, consider it representative of those actions.
Emerita’s arguments were being put down for being ‘devoid of factual and evidential support’, which is unreasonable, stating that Emerita could not have failed to know how unjust and unreasonable their position was. This is also harsh considering the arguments they gave. A fair amount of evidence points to a biased trial from the beginning, but perhaps Emerita should have known when to call it a day.
According to the release, back in 2014 when the bids were being sorted out, Emerita had to provide a ‘solvency-providing’ entity as they were unable to meet the capital / technical requirements of the project on their own. However, the logical floor in that statement is that Minorbis had Grupo Mexico as their solvency-providing entity, which would be fine if they didn’t state an absolute. Their argument would’ve been much more valid if they had specified that Grupo Mexico were the more certain candidate, which would suggest less bias. Of course this is implied, but it leaves Emerita a small justification for the appeal. Later reports from the technical committee stated Minorbis as the more suitable candidate per their relatively higher chances of competently carrying out AZN. However, the tender board was comprised of the soon-to-be investigated individuals.
The ruling touched on the personal relationships, calling it ‘impartiality and professionalism’ of the technical staff, focusing on the two accused brothers: each a manager of Magtel (Minorbis parent) and Vicente Cecilio, who were involved in the case thanks to previous AZN business relations. Apparently there is not evidence to suggest that the relationship went beyond professional by e.g. ensuring a non-Emerita bidder was secured. This brings about the question of incentives - what reason is there for the accused to be against Emerita? We don’t think there are any strong enough to have their way in court, and arguably none depending on how strict with your criteria you get. It does however naturally warrant suspicion when some of the key decision makers in a case have previous relationships, but is not strictly grounds for an appeal - suspicions warrant investigation before they have any standing, so we need proof, or at least an indicator, of corruption. We’ll get to that.
This focus on relationships waffles on for another few paragraphs, but the point is essentially the same, that everything was strictly professional, as legal procedure requires. The relationships were pre-existing for the same reason you may pick someone you know with a good track record - trust. However, it does increase the odds materially that there was collusion, so it can be argued either way, but if the courts are indeed corrupt it would need to be taken internationally for that to make a difference.
Emerita’s main indicator of collusion was a meeting supposedly held on the 11th April 2014 in Emerita’s offices in Seville, which the court ruling says is neither conclusive or even convincing, citing doubts as to if it ever happened. We can’t comment on if it happened or not, but if it is revealed that it did, then Emerita have grounds for collusion, or at the very least an increased probability of winning.
They finish off by saying that any appeals, which Emerita should file, may be lodged against the Provincial Court of Seville before the Supreme Court.
Admin Court
The admin case, or ‘contencioso-administrativo’ for the Spaniards, relates to the AZN tender processes’ procedural irregularities. our previous analysis led us to this:
They were the only legitimately qualified bidder in the tender auction, which the courts have acknowledged in the proceedings. So by default, upon the courts likely ruling to overturn the previous tender decision and take the mining license away from Minorbis-Grupo Mexico, Emerita will have the rights to economically exploit the Aznalcollar mine, and the face value will be expressed on the balance sheet as they are the holder of the mining license by default thanks to legal procedure. On top of that, the corporate registry had no record of Mineras Los Frailles, associated with Grupo and Minorbis, existing when bids were being submitted. This means they couldn’t have been a bidder, and so that leaves Emerita as the suitable leftover candidate.
It’s also worth acknowledging that, even if arguments do arise that Minorbis-Grupo Mexico deserve to hold the mining license, there’s still the very questionable status of economic interest: Minera Los Frailes S.L. is the entity which is registered to hold the license, despite common practice dictating it should be in the bidders name (Minorbis). What’s more curious is that Minorbis’s ownership of Minera Los Frailes is in question per recent investor releases. This mostly closes off any arguments Minorbis-Grupo Mexico could make, and by natural consequence further ensures Emerita win the new tender.
Another procedural irregularity, although a grey area, is the altering of the scoring system (designed to decide the most appropriate bidder) after Emerita had the leading bid. There were also bits of evidence to suggest Emerita would have won had the system remained as it was. Regardless of it’s legality, we see no reason for the process to change, so it’s indicative that the tender / technical team didn’t favor Emerita as the lead bidder. However, this could be a scheduled event, and so a coincidence, and private undisclosed relationships would be needed between Grupo Mexico / Minorbis and the tender / technical team, which we can get no evidence for due to it having to be private. This put’s investors in a tricky position - a necessary condition for Emerita being right is exactly what is keeping Emerita from proving they are right.
The same could be said for the fact that there was not sufficient documentation to prove Grupo have the technical / economic means to complete the project, but it could also be that it wasn’t disclosed. Take this with a pinch of salt or two.
So, bottom line: The now correct legal procedures that come with the new tender process lead back to Emerita as the only techincally qualified owner of the mining license, and so they win by default and the investment plays out. This exists outside of the corruption case, which gives Emerita a path to appeal regardless of all the shareholder worries about the December 5th announcement crushing the chances of an appeal being A) granted and B) successful. Essentially, they are two connected matters but co-exist regardless of the other - one is not wholly affected by the other. If you are worried about the recent ruling, this should not carry over to the admin case. The contingency here for seeing any claim value via cash yield / distribution is the admin case. Forget about the corruption ruling.
If the admin court decides there were procedural irregularities...
Emerita can lever the ruling to effectively reopen the tender process, giving Emerita another chance regardless of the supposed corruption and the resulting December 5th decision. This essentially brings the case back to 2014, and also means that a monetary award is less likely if they accept the mining license. They will however, want some compensation to make up for the opportunity cost of the last ten years, even from a personal perspective - if you were Gower, wouldn’t you want something for your troubles?
But if they decide the tender was lawful, you can discount all this entirely and focus on IBW.
What This Means for Shareholders
Our view is that the only responsible thing there is to do is assign the appeal a slim chance and focus on IBW, bearing in mind both factor into value, and potentially have two separately-focused groups of shareholders. You have one group who is arbitration focused, and another mining, and they will both react to the share price regardless of the material relevant to the other group, excluding the slim crowd who have an edge in both.
We are not mining analysts, and this piece is focused on helping you understand the appeal side of things, so we’ll focus on that.
Emerita’s only option for unlocking any sort of compensation / grant of license to do with AZN is to have the admin court rule that there were procedural irregularities with the tender process. Considering the evidence, the admin court should rule that way, but if it is indeed corrupt (for which shareholdesr have little concrete evidence to decide either way) then the admin courts ruling may say the tender process was legitimate regardless of the evidence, and if this was to happen, you should discount the AZN legal matter saga entirely and focus on the value of IBW.
As a shareholder, you now have the benefit of only having to focus on one legal case, but you must understand the situation. We are currently pessimistic, partially by default and partially because Spain’s legal system clearly has some unjust kinks.
We would keep an eye out for the case being taken internationally - the easiest way to avoid the corruption is to have a majoritively non-Spanish entity constitute the tribunal. The default forum is still Spanish admin courts, but we would have the most confidence in analysing the situation moving forward if it was taken to an investor-state dispute forum such as ICSID, which Spain would need to consent to (improbable) - you often get the most documentation, and the tribunal is designed so that Spain appoint one, Emerita appoint one, and the two appointed arbitrators decide the President. This process relies much less on the Spanish legal system, and the three arbitrator system makes collusion much harder. The downside is of course that this effectively starts the issue back as it was in 2014, which would be a particularly complicated case - you would have to balance appropriate compensation and the renewed tender process. This would both warrant new due diligence and years of waiting before any meaningful A
This would leave us with a Venezuela / CITGO situation all over again, making it worth waiting until a new arbitration is initiated and we have at least the counter-memorial from Spain - that’s the minimum volume of arguments we would want.
Many shareholders are conflating the two cases (anecdotal observations), but broadly recognise that Emerita should’ve been awarded the tender, and so corruption is likely. The December 5th ruling has been a talking point for the last week and a half, and we leave them this message:
The legal system appears corrupt, or more accurately self-interested, which may mean the admin court rules there were no procedural irregularities regardless of the missing records, score system changes, MLF non existence, and expert evidence saying that Emerita should have been the favored bidder.
It is not clear why Grupo Mexico was favored over Emerita, and that mystery may be indicative of collusion in and of itself - if there is no logical explanation, taking all the reasons Emerita should’ve been the favored candidate into account, then it’s probabl not logical. Spain did what they were incentivised to do, and did what was necessary to ensure the party who would benefit Spain the most somehow was in business with them.
However, the problem with all of this is that there’s no hard evidence, so you can’t even begin to assign odds to what the admin courts decision will be, or the chances of an international arbitration.
The final question that comes to mind is ‘is an international arbitration necessary, and will it even happen?’...
This is exactly what shareholders should be on the lookout for. An international arbitration is only necessary if the admin court decide against Emerita, but there’s very little reason for Spain to consent to an arbitration, so it’s unlikely.
Bearing this in mind, the admin court ruling is the only realistic way Emerita receive any value tied to AZN, and if the ruling isn’t favorable then either focus on IBW and start fresh or sell out of your position.
