By Dr. Michael Green

A week or so ago, Ascent reported news from the Government of Slovenia that it had failed to set forward a damages proposal and confirmed that an amicable settlement wasn’t achievable at this time.  This means that Ascent will be moving ahead to commence arbitration proceedings shortly. At this juncture, it should be pointed out that as part of direct pre-arbitration settlement discussions the company had submitted a damages calculation to the State which was well in excess of €100 million – so we are talking about big bucks here

It was in July 2020 that Ascent formally notified the Government of Slovenia of the existence of disputes under both the UK-Slovenia Bilateral Investment Treaty and the Energy Charter Treaty. Basically, issuing such a Notice of Dispute triggers a mandatory minimum three month ‘cooling-off’ period, which is designed to allow the parties to try and resolve their dispute ahead of arbitration proceedings.

Ninety days later, in late-October 2020, the company announced that it was entering into direct negotiations with the Slovenian government, with a view to potentially settling the claim in an amicable manner (which we see to be important language). In late-February 2021 the State asked Ascent to delay initiating arbitration proceedings until 19th March 2021.

Well, this might be disappointing, but the company has been highly consistent in setting out the roadmap/newsflow concerning Slovenia. The latest couple of presentations have clearly shown the plan to bring pre-arbitration settlement talks to a head in Q1 2021. The funding of international arbitration claims has been well dealt in a past RNS, but sensibly the board did not progress litigation funding talks while these amicable discussions were ongoing with the Slovenian government or they might receive a large unnecessary bill.

So, as we see it, Ascent is continuing to pursue its well-flagged strategy of moving to initiate international arbitration proceedings in Q2 2021. International arbitration is a well-defined process with a structure that the Slovenian government must take part in. A lot of this case seems to be about the speed that Slovenia responds to these deadlines and perhaps now an amicable settlement can be reached by stick rather than by carrot. The truth is that Slovenia has a track record of settling when these cases move into arbitration.

It must also be remembered that Ascent is no longer a one project company. The new management team at the helm has worked quickly to bring in rapidly expanding interests in Cuban onshore oil along with an expected move into the ESG metals space. Joe Biden might have taken over the Presidency of the USA in a somewhat quiet fashion, but his victory looks set to ease Cuban sanctions. Biden had been promising a new Cuba policy and on the campaign trial he really highlighted his ambitions to promote human rights in Cuba and empower that country’s people to determine their own future.

It has to be said that Cuba represents one of the few remaining world-class yet largely unexploited hydrocarbon systems. In this country, the company has a highly compelling opportunity which includes six separate PSCs spread across four blocks which cover some 7,000km². Entry into Cuba has tremendous potential in our view and looks like Ascent is on the verge of being awarded operator status. Once that is in place, it looks as though the market might really begin to learn about the size of the prize in the vast onshore licence area where Ascent is negotiating access to a highly prospective area of Cuba. At the moment, Ascent have teams doing desk top studies on these licence areas for the field development plan.

Last month saw Ascent adding the prospect of ESG Metals as a new target sector within its resource focused business. ESG Metals is all about secondary mining and recovery opportunities which are consistent with Environmental, Social and Governance (ESG) principles. So here we are talking about the reprocessing of tailings where it is thought that revenue could be generated within 4-9 months of getting involved.

The big attraction of such ESG Metals is that these retreating tailings projects often come with extensive infrastructure. This is already a big sunk cost (so low capex) and of course low geological/mining risks because the material has already been mined and there are often decent records of what has gone onto the tailings pile or into the tailings dam. Due to the history of Cuba over the last 50-70 years, the country has only had rudimentary processing technology and so there is apparently an abundance of tailings opportunities which could be at some quite decent grades.

Apparently, the team is already sieving through projects in a variety of places including Latin America and Europe. Top of the list seem to be opportunities in gold, silver, platinum, base metals and ferrochrome, because here there are powerful economics with the chance of production costs being in the lowest quartile from sustainable metal production from legacy mining tailings.

We already know that the board has signed several new non-binding letters of intent in the battery metals mining space with either vehicles owned or backed by the Cuban government. At this stage it is worth noting that Cuba has the fifth largest nickel resources in the world.

We initiated coverage on Ascent with a Conviction Buy stance and a target price of 18.34p in mid-September 2020 when the shares were trading at 3.25p. That target price was solely based on possible Petišovci scenarios where we looked at the two alternative scenarios of either litigation or development, with both outcomes being thoroughly risked. The stock was merrily sitting at above the 10p mark but since the update on the Slovenian direct settlement discussions it has been under pressure, which we see as a renewed buying opportunity and as evidenced by our moving back above 10% last week.

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