Stans Energy Soared 89 Percent Last Week — Here's Why

Fans of Canada’s Stans Energy (TSXV:HRE,OTCQX:HREEF) received some very good news late last Wednesday when the company announced that the Arbitration Court at the Moscow Chamber of Commerce and Industry has made a “final binding ruling” on its dispute with the Kyrgyz Republic’s government. 

Specifically, the court has ruled in favor of Stans to recover a total of US$118 million from the Kyrgyz Republic. The news sent shares of Stans as high as $0.265 Thursday morning, up 89 percent from the previous day’s close of $0.14.

Dispute background

The decision is a long time coming. As Stans COO Boris Aryev explained to Rare Earth Investing News (REIN) a few months ago, the company and its subsidiaries have been in international arbitration with the Kyrgyz Republic under the Convention for the Protection of Investors’ Rights in the Moscow Chamber of Commerce and Industry since October 30, 2013.

At issue is the fact that in April 2013 the General Prosecutor’s Office of the Kyrgyz Republic launched a suit against the State Agency for Geology and Mineral Resources of the Kyrgyz Republic to invalidate the process by which the 20-year mining licence for Stans’ Kutessay II heavy rare earths project was acquired. As Stans’ subsidiary was a third party to the case, it was the subject of a subsequent stop work order that restricted the company from carrying out any work at the mine site.

Implications

So how does last week’s news help clear up that situation? David Vinokurov, vice president of corporate development at Stans, told REIN last week that while the press release may look complicated, it’s actually fairly simple.

Essentially, he said, “this decision gives us a lot of leverage because we can say to [the Kyrgyz Republic], ‘if you don’t solidify the investment climate and actively support the company in the development and permitting processes, and really get behind the company, we’re going to go collect $118 million.’” Continuing, Vinokurov said, “at the end of the day, it’s a win-win situation for the company. We’ll either get the license back and full government support, or we’ll start the process to collect $118 million.”

Admittedly, that’s “not a simple process.” However, said Vinokurov, Stans “knows there are precedents that exist where other companies were able to get paid on their international arbitration ruling against the Kyrgyz government.” And, he added, “the decision from Moscow Arbitration Court is binding. It can’t be appealed.”

Next steps

Vinokurov didn’t say what the company’s next steps will be, but last week’s press release states that ”Stans Energy is open to continuing dialogue and negotiations to resolve the situation surrounding Kutessay II. Now that the conclusion to the legal proceedings is in place, the parameters to an amicable solution are clearly defined. The Company is consulting with its international legal teams to determine on how to best proceed.”

What do you think Stans should do? Tell us in the poll below!

 

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

What’s Going On? Stans Energy Discusses Arbitration and Kutessay II