Two Sides of the Coin

On the back of some rather one-eyed posts, I've put a bit of thought into how the SPX vs VMC situation might pan out. I've spent a bit of time in courtrooms over the years in various roles and, to be philosophical, the outcome of many cases is a coin toss. To explain, the decision could go either way based on any number of factors from the weight of the evidence, and the arguments put forward by the barristers through to what mood the judge is in; sad but in my experience, that's just the way it is. So, where does this take SPX?

Well for discussion's sake, let's say VMC win and there has been a breach. The quantum of what damages would be awarded would be a long and detailed discussion. How do you determine damages given the situation? Is it the value of the property? Rise in SP? Would they have discovered PN? Etc, etc. It would be a complex argument but one that VMC feels is worth having. The reason being that PW/PN would at this juncture likely make pushing the button and moving to a mining scenario at Youanmi a very attractive option. IMO it would make the whole thing work with the high-grade ore from PN paying for the CAPEX in the initial mining and set up phase. Hence the legal action and you can bet there are potential settlement discussions in play already - the worst-case scenario for SPX, it loses a percentage of PN.

And if you flip the coin? I cannot help but wonder if VMC has considered what might happen if they lose? SPX has said they are not pursuing damages 'at this time'; doesn't mean they won't? Why would you until you have some certainty on your position and until then it's a complete waste of time and money.

Let's say the Supreme Court says that SPX has no case to answer for. Great! SPX moves on and it's all smiles and happiness. They build the resource and go mining. And if they were to pursue damages? It's relatively easy to work out that particular quantum - it is obvious that the legal matter is negatively affecting the SPX sp so it would be the loss in enterprise value from the time of legal action being initiated to the time of the matter is resolved. Right now that loss is in the order of $90 million and counting!! That is 4 times VMC's current market cap and way beyond what I would expect 'directors & company insurance' might payout. The payout or settlement would wipe VMC off the map. So while some VMC investors might be watching with glee as the SPX sp drops, the risk to their position GROWS at the same rate! The investors may not even care? They probably only look to the upside but if I was on the board at VMC, not sure I'd be sleeping too well but we don't know what they have, it may be air-tight but are experienced operators like DB and PA really that reckless?

I'm trying to get people thinking here but in my view, SPX might lose a percentage of PW (depending on the settlement), but VMC has 'bet the farm'. They stand to lose everything as they will be completely at SPX's mercy. I'd give you even odds that we'll see a settlement before it gets to court just so everyone can move on with their lives.

But as I said, these things can be a coin toss. Thoughts?

N.B. Very wisely RXL is staying out of this; they know what's at stake.