A payday surpassing $1 billion — entangled in a multinational legal mining dispute — is in the offing for a small business that got its start in diving for treasure in long-lost shipwrecks.
For Odyssey Marine Exploration, a deep sea mineral extraction company based in Tampa, a proposed phosphate mining project off the coast of Mexico seemed the perfect opportunity. The company sunk tens of millions of dollars into the operation and was preparing to begin dredging — only to have the Mexican Ministry of the Environment and Natural Resources pull the plug by denying a single environmental permit.
Was that denial unlawful? Odyssey Marine CEO Mark Gordon is convinced it was, and he has some convincing voices backing him up.
“The highest level court in Mexico gave us the first unanimous decision in 20 years that Mexico did act unlawfully,” Gordon says. “Despite that ruling nothing happened, so we had to go through this other mechanism.”
The “other mechanism” is a legal claim that alleges Mexico violated the terms of the North American Free Trade Agreement (NAFTA).
‘We never wanted to have to take this legal action, and we still think it’s in Mexico’s best interest as well as Odyssey’s investors to move this project ahead. Mark Gordon, Odyssey Marine
“If a government acts in either a biased or arbitrary manner and that action damages the investment, under the treaty that the U.S., Mexico, and Canada have signed up for, that government then has to pay the investor the equivalent of what the investment would have been worth — not the sunk costs,” Gordon says. “In this case the underwater property, the value of the business, has been valued at over $2 billion by several different independent experts, so that’s what Mexico would have to pay us.”
That potential $2 billion judgment (of which Odyssey would be entitled to 65%, or some $1.3 billion, due to partnerships) for a publicly traded company with a market cap of about $90 million has been enticing to investors. Since the litigation started, Gordon says he’s seen a new group of investors emerge who are wagering on the outcome of the litigation. To date, Odyssey Marine has raised more than $30 million for the court battle with Mexico, with $20 million coming in the form of non-recourse debt that will not have to be repaid if they lose. The company posted $2.03 million in revenue in 2020, down from $3.07 million in 2019.
“Odyssey Marine has always been structured around asymmetric bets,” Gordon says, “and the investors that invest in our company are betting on asymmetric returns.”
That includes the early days of the company, when they plumbed the ocean depths in search of shipwrecks instead of minerals. Those exploits were covered on TV for the Discovery Channel series Treasure Quest (2009) and in specials for National Geographic. But another legal dispute, this one over treasure from a disputed Spanish shipwreck Odyssey was eventually ordered to return to Spain in 2012, forced the company to change course to satisfy investors.
“That case wrote a new and awful precedent,” Gordon says. “I joined Odyssey because of the shipwrecks. I worked my way through college and MBA school as a diver training civilian and law enforcement divers and diving on shipwrecks like every weekend somewhere on the east coast of the United States. I hate the fact that we had to exit it, but running a public company we had no choice based on how the governments treated us on that big deal. We couldn’t just keep banging our head on that wall.”
Odyssey Marine filed their first Memorial in the case against Mexico in September 2020. The document runs thousands of pages, and includes testimony of more than 20 experts who speak to the illegality of Mexico’s actions and the overall dollar value of the mining project. The Memorial was released in late January, marking the first time the major facts and evidence in the case were available to the public.
Mexico is expected to issue their response to Odyssey’s Memorial in spring, and the case will continue for the rest of 2021. Gordon says a decision should come sometime in early 2022. If the case actually makes it that far. There remains a significant chance Mexico will settle and allow Odyssey to proceed with the project — Gordon’s preferred outcome.
If the dispute doesn’t settle, under the current timetable there’s an upcoming series of filings that build to an appearance before a tribunal of three arbitrators who render a decision. That appearance is currently scheduled for January 2022.
“We never wanted to have to take this legal action, and we still think it’s in Mexico’s best interest as well as Odyssey’s investors to move this project ahead,” Gordon says, pointing to an ongoing phosphate shortage in Mexico that has the country importing half their supply from Morocco. “This project would solve some of Mexico’s ongoing food insecurity issues due to low crop yields.”
(This story was updated to reflect a quote from Mark Gordon on what investors are looking for in the company.)