Cadence Minerals (KDNC ) has formally requested arbitration in regard to the ongoing dispute around the Sonora lithium project in Mexico.
On behalf of Cadence and its local subsidiary REM Mexico, the International Centre for Settlement of Investment Disputes has registered a Request for Arbitration against Mexico.
The arbitration is operating under the terms of the Agreement between the Government of the United Kingdom and the Government of the United Mexican States, which was signed on 12 May 2006 and entered into force on 25 July 2007.
The parties will now proceed with the appointment of a three-member arbitral tribunal to hear Cadence and REM Mexico's claims.
Cadence and REM Mexico's claims relate to the cancellation by Mexico of the concessions comprising the Sonora project and the resulting destruction of the value of Cadence and REM Mexico's investments, which violated Mexico's obligations under the UK-Mexico agreement, including the prohibition on unlawful expropriation.
Cadence first invested in the Sonora Lithium Project in 2013. Cadence and REM Mexico hold a 30% interest in Mexilit and Minera Megalit, which held seven of the nine concessions forming part of the Sonora project until Mexico cancelled all nine concessions in August 2023.
It is the cancellation of those concessions and related conduct by Mexico for which Cadence and REM Mexico are challenging in the arbitration.
Dedicated litigation funding from Litigation Capital Management is in place to finance the legal fees and disbursements associated with the arbitration, preserving Cadence's balance sheet flexibility.
"Our objective is clear: we are seeking compensation for Mexico's conduct in breach of the UK-Mexico treaty, which destroyed Cadence's investments in the Sonora project,” said Kiran Morzaria, chief executive of Cadence Minerals.
“We are ably supported by an experienced specialist international arbitration team from Clifford Chance, and the claim is funded on a non-recourse basis, which will allow us to pursue the case without diverting capital from Cadence's wider portfolio. We will remain disciplined, focus on execution and report material developments as the proceedings advance. It is disappointing that we have been left with no option but to seek compensation from Mexico by recourse to international arbitration. However, we are confident that we will ultimately secure a successful outcome."
View from Vox
At this stage, with Cadence powering ahead on its new iron ore operations in Brazil, there is little downside to these proceedings. The market has largely written off Sonora, but the company clearly has a case to make in regards to a sizeable compensation package. If it comes in, well and good. If not, the cost of the proceedings is not Cadence’s problem. Either way, it probably won’t be quick, since it’s already taken three years just to get to this stage. Amapa is where the action is now.