However, if everything goes to plan these companies could become multi-baggers, generating impressive returns for those who are willing to take the risk.
For all intents and purposes, Oxus is a lottery ticket. As stated in the companyshalf-year report, other than the ongoing arbitration proceedingsthere are no other operating activities currently being undertaken by the company and its subsidiaries. So investors who take a position are betting on the companys success or failure in courts.
But there is value to be found in the arbitration process.
Oxus is currentlyinvolved in arbitration proceedings and a compensation claim related to the loss of the Amantaytau Goldfields and Khandiza mining assets. The two fields are located withinthe Republic of Uzbekistan, and the company ispursuing arbitration proceedings against the regional government.
Unfortunately, thesearbitration proceedings are dragging on, but Oxus believes that it is entitled todamages of up to $400m. Management is confident that the arbitral tribunal will rule in its favouralthough, whether or not the company can remain solvent until a decision is announced is another matter.
Oxus is facing a cash crunch. The group was forced to issue 83k new shares to pay itsNomad for three months work back in Julyand has since signed aconvertible loan note deal withDarwin Strategic Ltd for a total of 1.2m.
Still, even if Oxus is only awarded 25% of the compensation management believes the company deserves, (around 70m) Oxus shares could jump to 12p.
Like Oxus, Churchill Mining is also struggling topay the billsbut the group is set for a bumper payday if itsinternational arbitration claim pays off.
Churchill is fightingthe Republic of Indonesia for damages associated with the unlawful revocation of East Kutai Coal Project. Churchill and its partner, Planet Mining Pty Ltd. held a 75% interest in East Kutai.
An independent assessment has calculated that Churchills damages from the unlawful seizure of the mine could be $1.3bn, around 833m. At the timeof writing, Churchills market cap isonly24m.
Worth the wait
Churchills arbitration case is moving through the courts at a snails pace. At some point during the next fewmonths, the company should hear the results of itsrecentdocument authenticity hearing, which was heldbetween the 3rd and 10th August. There is no set date for the Tribunal todeliver its decision.
Nevertheless, Churchills potential payoff is worth waiting for, I believe.City analysts believe that if the companyreaches a settlement with the Indonesian government, it could receive a cash lump sum of $9.70per share, approximately 670p per share.
The bottom line
Churchill and Oxus are both high-risk/high-reward plays. If either company reaches a settlement, theyre set for a bumper payday.However, there is a very real risk that both companies could fail tonegotiate a deal, run out of cash and become insolvent.
So, in my opinion, neither company is suitable for widows and orphans.
With that in mind, if you’re looking for a reduced risk opportunity, The Motley Fool’s top analysts have recently identified a company that they consider to be one of the market’s“top small caps”.
The company in question has signed deals with some of the FTSE 100’s most successful companies, has astrong cash balanceand is already profitable.
All is revealed inour new free reportentitled“Is This Stock Tomorrow’s Big Winner?”
Don’t delay, download thefree report today— but hurry, it’s only available for alimited time.