Financings
Eco Oro challenges ICSID ruling, to raise $4.5M (U.S.)
EOM · Price
Executive Summary
- Eco Oro Minerals Corp. has filed an application to annul the July 15, 2024, ICSID tribunal decision that awarded no monetary compensation to the company in its arbitration against the Republic of Colombia.
- The company announced a $4.5 million U.S. private placement of contingent value rights (CVRs) to fund the annulment process and continuing operations.
- The financing involves a two-tranche structure ($4.0M and $500K) with a backstop from GrayWolfe Capital, alongside a revised distribution waterfall for existing and new CVRs.
Key Details
- Annulment Filing:
- Filed pursuant to Article 52 of the ICSID Convention (Case No. ARB/16/41).
- Grounds for annulment include:
- Contradictory reasoning: Tribunal found Colombia breached treaty obligations causing total loss but awarded no damages.
- Procedural injustice: Unreasonable evidentiary burden imposed on Eco Oro due to Colombia's failure to delimit the protected paramo zone.
- Excess of powers: Tribunal failed to exercise jurisdiction to assess damages or apply its own liability decision.
- Review by a three-member ad hoc committee; proceeding anticipated to take 18–36 months.
- Financing Structure:
- Total Amount: $4.5 million U.S. via 2025 Contingent Value Rights (CVRs).
- Tranche 1: $4.0 million U.S., expected completion on or about August 1, 2025.
- Tranche 2: $500,000 U.S., anticipated completion in September 2025.
- Pro Rata Rights: Existing eligible CVR holders may participate in the second tranche on a pro rata basis.
- Backstop: GrayWolfe Capital will backstop any shortfall in the second tranche.
- Use of Proceeds: Support annulment process and finance continuing operations.
- Revised Distribution Waterfall:
- Existing CVRs and promissory notes will be exchanged for replacement CVRs.
- Future Issuance Rights: Company permitted to issue up to $1M additional 2025 CVRs after July 30, 2027, and up to $7M in new CVRs (entitling holders to 20% of remainder) if resubmission/collection costs are required.
- Debt Capacity: Entitled to incur up to $6M senior debt and $4M subordinated debt.
- Claim Proceeds Distribution Order:
- 100% to settle outstanding trade payables, legal fees, and repay permitted senior/subordinated debt.
- 100% pro rata to holders of 2025 CVRs and resubmission CVRs until principal is repaid in full.
- Balance distributed to residual claimants:
- Company Counsel: Up to 8% of claim proceeds (less prior payments).
- Management Incentive Plan (MIP) Participants: 5% of remainder.
- 2025 CVR Holders: 85% of remainder.
- Replacement CVR Holders: 9.7% of remainder.
- Company: 0.3% of remainder.
- Board Approval & Related Party Transaction:
- Courtenay Wolfe (Executive Chair/Director) is a principal of GrayWolfe Capital.
- Transaction relied on exemption from minority approval requirements under Subsection 5.7(e) of Multilateral Instrument 61-101.
Notable Quotes
- "Eco Oro disagrees with the tribunal majority's damages award issued on July 15, 2024, which is internally contradictory and disregards the evidentiary record. The company files this annulment application with firm conviction that the ICSID system offers a critical mechanism to correct precisely the type of errors made by the tribunal here. Eco Oro trusts that an objective ICSID ad hoc committee will see the fundamental flaws in the damages award, which would pave the way for the company to pursue a new damages award that reflects the compensation rightfully owed to Eco Oro for Colombia's breaches of international law." — Courtenay Wolfe, Executive Chair of the Board of Directors