REG - Churchill Mining plc - Final Results <Origin Href="QuoteRef">CHLL.L</Origin> - Part 1
RNS Number : 3467UChurchill Mining plc15 October 201415 October 2014
AIM: CHL
CHURCHILL MINING PLC
("Churchill" or "the Company")
Full Year Results for the 12 Months ended 30 June 2014
Churchill Mining (AIM: CHL) reports its full year results for the 12 months ended 30 June 2014.
CHAIRMAN'S STATEMENT
Dear Shareholder,
I present Churchill Mining Plc's ("Churchill" or the "Company") Full Year Report for the 12 months ended 30 June 2014.
During the year the Company continued actively to seek recovery of shareholder value by progressing the international arbitration against the Republic of Indonesia at the International Centre for Settlement of Investment Disputes ("ICSID") in Washington DC (the "Churchill Arbitration"). The arbitration relates to the revocation of the mining licenses that made up the East Kutai Coal Project in East Kalimantan ("EKCP"), Indonesia, in which Churchill andits wholly owned subsidiary Planet Mining Pty Ltd's ("Planet") held a 75% interest.
Churchill and Planet are represented in the ICSID arbitration by the highly regarded international law firm Quinn Emanuel Urquhart & Sullivan ("Quinn Emanuel"). Experienced London- based partner Stephen Jagusch heads the Quinn Emanuel team for Churchill/Planet.
The Republic of Indonesia had previously filed an objection to ICSID's jurisdiction to hear Churchill/Planet's claim for damages.
On February 25, 2014 the ICSID arbitral tribunal ("Tribunal"), comprising Prof. Gabrielle Kaufmann-Kohler (President), Mr. Michael Hwang S.C (Arbitrator) and Prof. Albert Jan van den Berg (Arbitrator), rejected the Republic of Indonesia's challenges to the Tribunal's jurisdiction.
In summary, the jurisdictional challenges by the Republic of Indonesia claimed:-
(i) the Republic of Indonesia had not consented to ICSID arbitration of the dispute with Churchill and Planet under the UK-Indonesia and the Australia-Indonesia Bilateral Investment Treaties,
and
(ii) even if the Tribunal found that the Republic of Indonesia had consented to ICSID arbitration as a general matter, the tribunal would still lack jurisdiction because Churchill's and Planet's investments fell outside the scope of protected investments under the respective Bilateral Investment Treaties.
In its ruling, the Tribunal dismissed the Republic of Indonesia's challenges and found that the Tribunal has jurisdiction over the claims Churchill and Planet have submitted.
In May 2014, Quinn Emanuel, filed a supplemental memorial on quantum and damages after valuation experts FTI Consulting Canada LLC ("FTI") had prepared an independent assessment of Churchill/Planet's damages.
FTI determined the damages to Churchill/Planet of US$1,149.90 million plus pre-award interest of US$165.70 million for a total of US$1,315.60 million.
FTI calculated the fair market value of Churchill/Planet's investment in the EKCP using the industry standard prime methodology Discounted Cash Flow analysis. The analysis was based on a production rate of 50Mtpa and a railway haulage scenario.
ICSID Document Inspection & Contemporaneous Police Raid on Jakarta Office
In accordance with the ICSID Tribunal's ("Tribunal") Procedural Order No 10, representatives from Churchill and the Republic of Indonesia met in Singapore on 29 August 2014 to inspect a designated bundle of original documents relating to the mining licenses. Whilst this Tribunal-ordered document inspection was in progress in Singapore, police officers from Indonesia raided the Company's Jakarta office and seized a number of documents, computers and back-up drives supposedly as part of a new police investigation into alleged license document forgery.
It is the Company's view that this police raid was strategically timed to harm and prejudice the Company's case currently being heard by the Tribunal. The Company has accordingly made an application for provisional measures pursuant to Article 47 of the ICSID Convention and Rule 39 of the ICSID Arbitration Rules that the Tribunal recommend that Indonesia (i) return forthwith all documents and other items that were seized by the Indonesian police in the raid on 29 August 2014, and (ii) refrain from engaging in any conduct that would aggravate the dispute, alter the status quo or jeopardise the procedural integrity of the ICSID proceedings.
With regard to Indonesia's resurfaced allegations of document forgery, the Company categorically denies that it ever participated in or that it was ever in any way involved in the forgery of any documents. Furthermore, prior to the revocation of the EKCP mining licenses in which the Company held an interest, agencies of Indonesia regularly (i) visited the EKCP site, (ii) sought and received payments in relation to the EKCP properties, and (iii) were provided with exploration and other technical reports relating to the EKCP properties. The Company also notes that previous investigations, carried out by both the Indonesian police and the Independent Stage Agency (BAWASDA), into these allegations of document forgery concerning the Ridlatama EKCP mining licenses concluded there was no case to answer.
Indonesia's "Application" For Dismissal of Churchill's Claims
On 26 September 2014 the Company received notification from its solicitors that Indonesia had written to the Tribunal on 25 September 2014 and submitted a so-called "Application for the Dismissal of Churchill and Planet's Claims".
This unusual "last minute" application by Indonesia has also requested an order by the Tribunal to modify the procedural timetable to schedule an immediate hearing within the next 30 days or sooner if feasible to resolve the forgery allegations as a discrete issue. The Company sees this application as part of a calculated strategic attempt to derail the arbitration proceedings and notes that Indonesia has had 18 months to consider the Company's case on merits which include Indonesia's theory of alleged license forgery.
Whilst Indonesia's disjointed application raises a number of issues including allegations of forgery, background and actions of the Ministry of Forestry that seemingly contributed to the revocation of the EKCP mining licenses, as well as the economics and feasibility of the EKCP and the damages value that has been claimed by Churchill/Planet, it does not address many of the substantive issues raised in the Company's Memorials and claim for damages.
Accordingly, the Company through its lawyers, Quinn Emanuel, has requested the Tribunal reject any attempt by Indonesia to litigate piecemeal the merits of the case and to direct Indonesia to complete its submissions on the merits by 12 November 2014 as set out in the established procedural schedule.
I can assure you the Board continues to work with diligence and enthusiasm to seek a suitable outcome for shareholders and I thank shareholders, my fellow Directors and staff for their continued support and patience.
David Quinlivan
Chairman
15 October 2014
The full report and accounts for the period ended 30 June 2014 are available on the Company's website www.churchillmining.com and will be sent to shareholders.
For further information, please contact:
Churchill Mining plc
David Quinlivan
Nicholas Smith
Russell Hardwick
+ 61 8 6382 3737
Northland Capital
Partners Limited
Edward Hutton/William Vandyk
+44(0)20 7382 1100
STRATEGIC REPORT
BUSINESS REVIEW / HISTORY
Churchill Mining Plc ("Churchill" or "the Company") listed on AIM in April 2005. Churchill's growth path accelerated following the discovery of a world-class thermal coal deposit (the East Kutai Coal Project "EKCP") in the East Kutai Regency of Kalimantan, Indonesia, through an intensive and targeted exploration program.
Churchill's investments and operations culminated in the completion of a feasibility study in readiness for funding and the commencement of construction of the necessary infrastructure to support the exploitation of the coal resource. The Group's operations were subsequently halted by a decision by the East Kutai Regent to revoke the mining licences held by Churchill's Indonesian partners, the Ridlatama group of companies ("Ridlatama"). The East Kutai Regent's decision was challenged before the Indonesian courts, resulting initially in a negative ruling from the Samarinda Administrative Tribunal which upheld the East Kutai Regent's decision to revoke the licences. The decision was appealed, first to the Administrative High Court in Jakarta and then to the Supreme Court of Indonesia, but both appeals were unsuccessful.
FILING OF INTERNATIONAL ARBITRATION CLAIM
In May 2012 Churchill filed a Request for Arbitration at the International Centre for Settlement of Investment Disputes ("ICSID") against the Republic of Indonesia ("ROI") alleging breaches by ROI of obligations under the UK-Indonesia Bilateral Investment Treaty. In addition, Churchill's Australian subsidiary, Planet Mining Pty Ltd ("Planet"), also filed a Request for Arbitration at ICSID against the ROI pursuant to the Australia-Indonesia Bilateral Investment Treaty. The Churchill and Planet arbitrations were subsequently consolidated into a single proceeding.
Churchill and Planet have filed their Memorials setting out their case against ROI supported by witness statements and expert and documentary evidence. Key elements within the Memorials include:-
The ROI initially supported and encouraged Churchill/Planet to invest in the East Kutai Coal Project;
Churchill/Planet invested in the ROI in compliance with applicable laws and regulations;
After Churchill/Planet's discovery of substantial coal deposits, the ROI took a series of unlawful actions that resulted in the destruction of Churchill/Planet's valuable investment;
The actions of the ROI constitute clear violations of its obligations under the Bilateral Investment Treaties with the United Kingdom and Australia; and
Churchill/Planet presently quantify their losses and seek damages in the amount of USD 1,315 million (including interest) based on an industry-standard Discounted Cash Flow analysis.
Aside from a direct minority interest in some manganese exploration tenements in Western Australia, Churchill has no business interests or activities other than its and Planet's claims against the ROI, which remain Churchill's principal activity and focus.
Refer to the Chairman's report in relation to the progress of the international arbitration claim during the 2014 Financial Year.
STRATEGY AND OBJECTIVES
Churchill's key objective is to restore shareholder value following the revocation of the mining licenses that made up the EKCP in East Kalimantan, Indonesia, in which Churchill/Planet held a 75% interest.
FINANCIAL SUMMARY
Results of Operations (All amounts in US$)
The Group incurred a loss for the year attributable to equity shareholders of the parent of $2,450,087 compared to a loss of $11,601,978 for the previous year. The basic loss per ordinary share for the year was 1.99c compared with the loss per share of 9.45c for the previous year.
Other administrative expenses totalled $2.71 million (June 2013: $7.1 million).
Significant expenditure items during the period include:
Legal and professional fees of $1.46 million (June 2013: $4.22 million) reflecting ongoing expenditure for the Company's arbitral claim against the Republic of Indonesia;
Consulting, directors, staff and professional fees of $0.58 million (June 2013: $0.94 million) which reflects the planned reduction in corporate overheads.
The reduction in the net cash outflow from operating activities during the period reflects the board's efforts to reduce other administration and corporate overheads where possible to preserve the Company's cash position:
30 June 2014
30 June 2013
30 June 2012
$'000
Audited
$'000
Audited
$'000
Audited
Net cash flows from operating activities
(2,355)
(7,017)
(8,965)
The balance of operating expenditure is in line with the Company's expectations and resources allocated to progressing the ICSID arbitration proceedings against the Republic of Indonesia.
Selected Annual Information
The Group's statement of financial position at 30 June 2014 and comparatives at 30 June 2013 and 30 June 2012 are summarised as follows:
2014
2013
2012
$'000
$'000
$'000
Non-current assets
7
295
4,099
Current assets
5,565
8,075
15,604
Total assets
5,572
8,370
19,703
Current liabilities
3,222
3,967
4,341
Non-current liabilities
40
44
73
Total liabilities
3,262
4,011
4,414
Net assets
2,310
4,359
15,289
Liquidity & Capital
The Group began the year with US$4.8 million in cash and ended the year with US$3.01 million in cash asset. The Company continues to reduce other administration and corporate overheads where possible to preserve the Company's cash position. As part of this, the Directors have agreed to accept equity securities in lieu of receiving cash payments in respect of Directors' fees.
During the year the Group disposed of its minority interest in ASX-listed Spitfire Resources Limited ("Spitfire") for A$250,000. Apart from a minority direct interest in three of Spitfire's tenements in Western Australia, Churchill now has no business interests or activities other than its and Planet's arbitral claims against the Republic of Indonesia which continue to be Churchill's principal activity and focus for the group.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board regularly reviews the risks to which the Group is exposed and endeavours to minimise these risks as far as possible. The following summary, which is not exhaustive, outlines some of the risks and uncertainties facing the Group in its present position following the revocation of the mining licenses that made up the EKCP and the filing of international arbitration against the Republic of Indonesia.
Litigation risk
As detailed in the Chairman's statement and Strategic Review, the Company is engaged in legal actions including a significant damages claim in international arbitration against the Republic of Indonesia of which the outcome remains unknown. There can be no assurance that any or all of the various proceedings may be awarded in favour of the Company. The Company has engaged experienced international counsel to assist in mitigating this risk.
Sovereign risk
The Group has an administration office in Indonesia where there are a number of associated risks over which it will have no control. Potential risks in Indonesia could include economic, social or political instability, terrorism, currency instability, government participation and taxation.
Reliance on key management
The Group's future success is substantially dependant on the continued services and performance of its key personnel. The Company's aim is to ensure that key personnel are rewarded for their contribution to the Group and are motivated to enhance the return to Shareholders. There can be no assurance that the Company's current personnel, systems, procedures and controls will be adequate to support the litigation or any future operations or expansion.
Funding risk
The ability of the group to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions as well as the general performance of the Company and the progress of the International arbitration claim. There can be no assurance that additional capital or other forms of finance may be available if needed, or that, if available the terms of such financing will be favourable to the group.
Currency risk
The Company is exposed to exchange rate risk in its daily operations and mitigates this risk where possible by holding currency in GBP, USD and AUD based on budgeted expenditure
ANALYIS USING KEY PERFORMANCE INDICATORS
The International arbitration claim has in effect become Churchill's principal activity and focus. The key performance indicator is to manage the arbitration claim in an efficient and cost effective manner. The Directors regularly monitor available cash to meet on-going administration and legal costs with the aim of a recovery of value for Shareholders.
APPROVAL OF THE BOARD
This strategic report contains certain forward-looking statements that are subject to the usual risk factors and uncertainties with a company that has a legal claim as its main business. Whilst the Directors believe that any expectation reflected herein to be reasonable in light of the information available up to the time of their approval of this report, the actual outcome may be materially different owing to factors beyond the Group's control. Accordingly no reliance may be placed on any forward-looking statements.
By order of the Board
David Quinlivan
Chairman
15 October 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2014
2014
2013
Note
$'000
$'000
Other operating income
8
4
Impairment of other financial assets
8
-
(2,258)
Other administrative expenses
(2,711)
(7,110)
Impairment of exploration expenditure
-
(399)
Impairment of land
11
-
(1,757)
Loss on sale of financial asset
8
(46)
-
Total administrative expenses
3
(2,757)
(11,524)
Loss from operations
(2,749)
(11,520)
Finance income
2
306
79
Finance expense
3
(7)
(160)
Loss before taxation
(2,450)
(11,601)
Tax expense
5
-
-
Loss for the year attributable to equity shareholders of the parent
(2,450)
(11,601)
Other comprehensive (expense)/income:
Transfer of Available for Sale Reserve to Income Statement
-
533
Foreign exchange differences on translating foreign operations
(5)
(49)
Other comprehensive (expense)/income for the year
(5)
484
Total comprehensive loss for the year attributable to equity shareholders of the parent
(2,455)
(11,117)
Loss for the year attributable to:
Owners of the parent
(2,450)
(11,601)
Non-controlling interest
-
-
(2,450)
(11,601)
Total comprehensive loss for the year attributable to:
Owners of the parent
(2,455)
(11,117)
Non-controlling interest
-
-
(2,455)
(11,117)
Loss per share attributable to owners of the parent:
Basic and diluted loss per share (cents)
6
(1.99c)
(9.45c)
The accompanying notes form part of these financial statements.
STATEMENTS OF FINANCIAL POSITION
As at 30 June 2014
Company number 5275606
Consolidated
Company
Note
2014
2013
2014
2013
$'000
$'000
$'000
$'000
ASSETS
Current assets
Cash and cash equivalents
3,016
4,848
2,993
4,821
Other receivables
10
2,549
3,227
56
202
Total current assets
5,565
8,075
3,049
5,023
Non-current assets
Property, plant and equipment
11
7
21
6
10
Other financial assets
8
-
274
-
-
Investment in subsidiaries
12
-
-
-
158
Total non-current assets
7
295
6
168
TOTAL ASSETS
5,572
8,370
3,055
5,191
LIABILITIES
Current Liabilities
Trade and other payables
13
739
974
681
832
Loans and borrowings
14
2,483
2,993
-
-
Total current liabilities
3,222
3,967
681
832
Non-current liabilities
Provisions
15
40
44
-
-
Total non-current liabilities
40
44
-
-
TOTAL LIABILITIES
3,262
4,011
681
832
NET ASSETS
2,310
4,359
2,374
4,359
CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE COMPANY
Share capital
17
2,237
2,230
2,237
2,230
Share premium
17
77,791
77,641
77,791
77,641
Other reserves
17
2,424
2,180
2,488
2,239
Retained deficit
(81,246)
(78,796)
(80,142)
(77,751)
TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
1,206
3,255
2,374
4,359
Non-controlling interest
1,104
1,104
-
-
TOTAL EQUITY
2,310
4,359
2,374
4,359
The accompanying notes form part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 15 October 2014 and were signed on its behalf by:
David Quinlivan
Director
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2014
Other Reserves
Consolidated
Share Capital
Share premium
reserve
Merger reserve
Retained deficit
Foreign exchange
Equity settled share options
Available for sale
Total Equity attributable to equity holders of Company
Non-controlling Interest
Total Equity
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Changes in equity for year to 30 June 2013
Balance at 1 July 2012
2,220
77,537
6,828
(75,292)
(10)
3,435
(533)
14,185
1,104
15,289
Loss for the period
-
-
-
(11,601)
-
-
-
(11,601)
-
(11,601)
Other comprehensive (expense)/income
-
-
-
-
(49)
-
533
484
-
484
Transfer of Merger Reserve to retained
-
(6,828)
6,828
Deficit
Expiry of share options
-
-
-
1,269
-
(1,269)
-
-
-
-
Recognition of share based payments
-
-
-
-
-
73
-
73
-
73
Issue of shares
10
104
-
-
-
-
-
114
-
114
Balance at 30 June 2013
2,230
77,641
-
(78,796)
(59)
2,239
-
3,255
1,104
4,359
Changes in equity for year to 30 June 2014
Balance at 1 July 2013
2,230
77,641
-
(78,796)
(59)
2,239
-
3,255
1,104
4,359
Loss for the period
-
-
-
(2,450)
-
-
-
(2,450)
-
(2,450)
Other comprehensive expense
-
-
-
-
(5)
-
-
(5)
-
(5)
Recognition of share based payments
-
-
-
-
-
249
-
249
-
249
Issue of shares
7
150
-
-
-
-
-
157
-
157
Balance at 30 June 2014
2,237
77,791
-
(81,246)
(64)
2,488
-
1,206
1,104
2,310
The accompanying notes form part of these financial statements.
Company
Share Capital
Share premium reserve
Merger reserve
Retained deficit
Equity settled share options reserve
Total Equity
$'000
$'000
$'000
$'000
$'000
$'000
Changes in equity for year to 30 June 2013
Balance at start of the year
2,220
77,537
6,828
(76,513)
3,435
13,507
Total comprehensive loss for the year
-
-
-
(9,335)
-
(9,335)
Transfer of Merger reserve to retained deficit
(6,828)
6,828
Issue of shares
10
104
-
-
-
114
Expiry of share options
-
-
-
1,269
(1,269)
-
Recognition of share based payments
-
-
-
-
73
73
Balance at 30 June 2013
2,230
77,641
-
(77,751)
2,239
4,359
Changes in equity for year to 30 June 2014
Balance at start of the year
2,230
77,641
-
(77,751)
2,239
4,359
Total comprehensive loss for the year
-
-
-
(2,391)
-
(2,391)
Transfer of Merger reserve to retained deficit
-
-
-
-
-
-
Issue of shares
7
150
-
-
-
157
Recognition of share based payments
-
-
-
-
249
249
Balance at 30 June 2014
2,237
77,791
-
(80,142)
2,488
2,374
The accompanying notes form part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 30 June 2014
Consolidated
Company
Note
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Cash flows used in operating activities
19
(2,355)
(7,017)
(2,057)
(5,320)
Net cash used in operating activities
(2,355)
(7,017)
(2,057)
(5,320)
Cash flows used in investing activities
Finance income
2
16
2
14
Payments for exploration and evaluation assets
-
(146)
-
(1)
Receipts from sale of property, plant and equipment
1
4
-
-
Receipts from sale of financial assets
240
-
-
-
Acquisition of property, plant and equipment
-
(1)
-
-
Advances to subsidiaries
-
-
(304)
(1,343)
Repayment of subsidiary loans
-
-
244
-
Cash flows generated from/(used in) investing activities
243
(127)
(58)
(1,330)
Cash flows from financing activities
Proceeds from issue of share capital
-
114
-
114
Cash flows from financing activities
-
114
-
114
Net decrease in cash and cash equivalents
(2,112)
(7,030)
(2,115)
(6,536)
Cash and cash equivalents at beginning of year
4,848
12,000
4,821
11,517
Effect of foreign exchange rate differences
280
(122)
287
(160)
Cash and cash equivalents at the end of year
3,016
4,848
2,993
4,821
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2014
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users; that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.
BASIS OF PREPARATION
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. All amounts presented are in thousands of US dollars ($'000) unless otherwise stated.
These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union and in accordance with applicable United Kingdom Law. The adoption of all of the new and revised Standards and Interpretations issued by the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to the operations and effective for annual reporting periods beginning on 1 July 2013 are reflected in these financial statements.
As at 30 June 2014 the Group has cash funds of $3.0m. The Group is fully funded for the next 12 months. However, based on the Group's current level of operating and legal expenditure, the Director's anticipate that additional funding will be required after that. The Group remains fully committed to its ICSID litigation against the Republic of Indonesia. The Directors have a reasonable expectation that the Group has access to adequate capital resources to continue its operational existence and the pursuit of the ICSID litigation and for this reason, they continue to adopt the going concern basis in preparing these accounts.
NEW STANDARDS AND INTERPRETATIONS APPLIED
The IASB has issued the following new standards, amendments to published standards and interpretations to existing standards with effective dates on or prior to 1 July 2013 which have been adopted by the Group for the first time this year and which have not had a material effect. The new standards and amendments relevant to the Group have been disclosed below:
Effective period
commencing
on or after
Impact on Group
IFRS 13
Fair Value Measurement
1 January 2013
No material impact
IFRIC 20
Stripping Costs in the Production Phase of a Surface Mine
1 January 2013
No material impact
IFRS 7
Disclosures - Offsetting Financial Assets and Financial Liabilities
1 January 2013
No material impact
IAS 19
Amendment - Employee Benefits
1 January 2013
No material impact
IAS 36
Recoverable amount disclosures for non-financial assets
1 March 2013
No material impact
Annual improvements to IFRSs (2009-2011 Cycle)
1 January 2013
No material impact
New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting periods beginning after 1 July 2014 or later periods and which the Group has decided not to adopt early or which are yet to be EU endorsed. These are:
Effective period commencing on or after
IFRS 9*
Financial Instruments
1 January 2018
IFRS 10
Consolidated Financial Statements
1 January 2014
IFRS 11
Joint Arrangements
1 January 2014
IFRS 12
Disclosure of Interests in Other Entities
1 January 2014
IAS 27
Amendment - Separate Financial Statements
1 January 2014
IAS 28
Amendment - Investments in Associates and Joint Ventures
1 January 2014
IAS 32*
Offsetting Financial Assets and Financial Liabilities
1 January 2014
* Not yet adopted by the European Union.
None of the above standards are expected to have a material impact on the financial statements of the Group.
SIGNIFICANT ACCOUNTING POLICIES
Finance income
Interest income is accrued on a time basis, by reference to the principal outstanding at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
The financial statements of subsidiaries are included in the Group's financial statements from the date that control commences until the date that control ceases.
Non-controlling interests are presented in the statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company and in respect of the statement of comprehensive income are presented on the face as an allocation of the total profit or loss and other comprehensive income for the year between non-controlling interests and the equity shareholders of the Company.
Foreign currency
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the statement of comprehensive income.
The consolidated financial information is presented in US dollars ($), which is the functional and presentation currency of the Company. On consolidation, the results of overseas operations are translated into US$ at rates approximating to those when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in the statement of changes in equity (the "foreign exchange reserve"). Exchange differences recognised in the statement of comprehensive income of group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the foreign exchange reserve if the item is denominated in the functional currency of the Company or the overseas operation concerned. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.
Financial instruments
Financial assets and financial liabilities are recognised when the Group and Company become party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual right to the cash flow expires or when all the risks and rewards of ownership are substantially transferred. Financial liabilities are derecognised when the obligations specified in the contract are either discharged or cancelled.
Financial assets
The Group and Company classify their financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's and Company's accounting policy for each category is as follows:
(i) Available-for-sale
Financial assets designated as available for sale are initially recognised at fair value, being the consideration given including, where appropriate, acquisition costs associated with the investment. The Group's investments in quoted shares are designated as 'available-for-sale' financial assets and are included in non-current assets. Such investments are subsequently carried at fair value, with any gains or losses arising from changes in fair value being recognised in equity. Financial assets are derecognised when the rights to receive cashflows from the investments have expired or have been transferred and the Group has substantially transferred all risks and rewards of ownership. Fair value is based on market value at the date of the Statement of Financial Position.
The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of a financial asset classified as available-for-sale, a significant or prolonged decline in the fair value of the financial asset below its cost is considered an indicator that the financial asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on financial assets which are equity instruments are not reversed through the income statement.
(ii) Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They incorporate various types of contractual monetary assets, such as advances made to affiliated entities which give rise to other receivables and cash and cash equivalents includes cash in hand and deposits held at call with banks. Other receivables are carried at cost less any provision for impairment. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty) that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.
Financial liabilities
The Group's financial liabilities consist of trade payables, other short-term monetary liabilities and long term liabilities which are initially stated at fair value and subsequently at their amortised cost.
Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability.
Share-based payments
Where share options are awarded to Directors and employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income immediately or over the vesting period if applicable. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where equity instruments are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of goods and services received or where this is not possible at the fair value of the equity instruments granted. Fair value is measured by use of an option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. When the Company grants options over its shares to employees of subsidiaries, the fair value at grant date is recognised as an increase in the investment in subsidiaries, with a corresponding increase in equity over the vesting period of the grant.
Exploration, evaluation and development expenditure
In line with IFRS 6 'Exploration for and Evaluation of Mineral Resources', exploration and evaluation expenditure can be capitalised as an intangible asset in respect of each area of interest. This expenditure includes:
Acquisition of rights to explore;
Topographical, geological, geochemical and geophysical studies;
Exploratory drilling;
Trenching;
Sampling; and
Activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource.
Capitalisation of exploration and evaluation expenditure commences on the acquisition of a right to explore a specific area or evaluate a mineral resource, either by means of the acquisition of an exploration licence or an option to a mineral right and ceases either on the acquisition of a mining lease or mineral production right in respect of that specific area or mineral resource or the making of a decision by management of the Group as to the technical feasibility or economic viability of conducting mining operations in that specific area or extracting the mineral resource being evaluated.
Where management of the Group decides that it is not technically feasible or economically viable to conduct mining operations in a specific area or to extract the mineral resource being evaluated, then capitalised exploration and evaluation expenditure attributable to the exploration and evaluation of that specific area or mineral resource, as the case may be, capitalised up to the date of making such a decision, is written off and any further exploration and evaluation expenditure incurred in respect thereof is charged to profit or loss as and when incurred. Management reviews the levels of capitalised exploration and evaluation expenditure for each area of interest on a regular basis and where deemed appropriate either continues to carry forward costs or impair expenditure based on management estimates of recoverable values for each area of interest.
Assets used exclusively in activities in respect of the exploration for and evaluation of mineral resources are classified as property, plant and equipment. Depreciation charges reflecting the consumption of these assets in carrying out such activities are included in exploration and evaluation expenditure.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items if applicable. The corresponding liability is recognised within provisions. Depreciation is provided on all items of property and equipment to write off the carrying value of items over their expected useful economic lives as follows:
Freehold land - not depreciated
Leasehold improvements - 5 years
Furniture and fixtures - 3 years
Office equipment - 3 years
Motor vehicles - 8 years
Taxation
Tax on the profit or loss from ordinary activities includes current and deferred tax.
Current tax is based on the profit or loss adjusted for items that are non-assessable or disallowed and is calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Tax is charged or credited to the statement of comprehensive income, except when the tax relates to items credited or charged directly to equity, in which case the tax is also dealt with in equity.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs to its tax base, except for differences arising on:
The initial recognition of goodwill;
The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/ (assets) are settled/ (recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
The same taxable Group Company; or
Different Group entities which intend either to settle current tax assets and liabilities on a net basis or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Tax consolidation
The Company and its 100% Australian controlled entities have formed a tax consolidation Group. Members of the tax consolidated Group intend to enter into a tax sharing arrangement which will allow for the allocation of income tax expense to the wholly controlled entities on a pro rata basis. The arrangement will provide for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. The head entity of the tax consolidated Group is Churchill Mining Plc.
Impairment of non-financial assets
Impairment tests on intangible assets and tangible assets with indefinite useful economic lives are undertaken annually on 30 June or when a trigger for impairment is identified. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit (i.e. the lowest level group of assets in which the asset belongs for which there are separately identifiable cash flows).
Impairment charges are included within total administration expenses in the statement of comprehensive income, except to the extent that they reverse gains previously recognised in the statement of changes in equity.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is the Managing Director, under his delegated board authority, is responsible for allocating resources and assessing performance of the operating segments.
Investments
In its separate financial statements, the Company recognises its investments in subsidiaries at cost inclusive of share based payments less any provision for impairment.
Cash and cash equivalents
Cash comprises bank and cash deposits at variable interest rates. Any interest earned is accrued monthly and classified as interest income. Cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Employee benefits
Provision is made for the Company's liability for employee benefits arising from services rendered by employees. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash flows to be made for those benefits.
Key sources of estimation uncertainty
The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
While conducting an impairment review of its assets, the Group exercises judgement in making assumptions by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Changes in these estimates used can result in significant charges to the statement of comprehensive income ; and
Employee, corporate advisory and consulting services received as well as the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant, excluding the impact of any non market vesting conditions. The fair value of share options is estimated by using an option pricing model, on the date of grant based on certain assumptions. Those assumptions are described in the Notes to the accounts where more details, including carrying values, are disclosed.
NOTE 2: FINANCE INCOME
Consolidated
2014
2013
$'000
$'000
Finance income - foreign exchange gains
304
63
Finance income - Bank interest
2
16
Total finance income
306
79
NOTE 3: LOSS FROM OPERATIONS
Consolidated
2014
2013
$'000
$'000
Loss before tax includes the following expense items:
Administrative expenses
Audit & accounting and other fees
91
178
Consulting & professional fees
252
535
Legal fees
1,462
4,221
VAT costs unrecovered
6
61
Depreciation & amortisation
13
45
Employee salaries and benefits
336
872
Operating lease expense
60
120
Travel expenses
45
114
Public relations consultancy
58
619
Other administrative costs
139
272
Impairment of land
-
1,757
Impairment of other financial assets
-
2,258
Impairment of exploration and evaluation expenditure
-
399
Equity settled share based payment expense
249
73
Loss from sale of financial assets
46
-
2,757
11,524
Finance expenses
Foreign exchange losses
7
160
Total administrative and finance expenses
2,764
11,684
During the year the following fees were paid or payable for services provided by the Auditors of the parent entity and subsidiaries:
Consolidated
2014
2013
$'000
$'000
Fees payable to the Company's Auditor for the audit of the Company's annual accounts
31
38
Other services - interim review
10
11
Fees payable for the audit of the subsidiaries
12
22
Total
53
71
NOTE 4: SALARIES
Consolidated
2014
2013
Note
$'000
$'000
Staff costs (including Directors' fees) comprise:
Employee salaries and benefits
144
704
Superannuation/pension costs
7
25
Directors' fees and benefits
186
147
Share-based payments
18
249
73
586
949
Number
Average number of employees (including Directors)
11
17
2014
2013
Directors' remuneration and Other Key Management disclosures
$'000
$'000
Directors' short term benefits
Directors' fees and benefits
186
147
Consultancy fees/Salaries
18
415
Sub-Total
204
562
Directors' long term benefits
Share based payments (options)
171
51
Total Director Remuneration
375
613
Other Key management short term benefits
Consultancy fees
209
229
Key management salaries
-
116
Sub-Total
209
345
Key management long term benefits
Share based payments (options)
39
9
Total Other Key Management Remuneration
248
354
Total Director and Key Management Remuneration
623
967
The amounts set out above include emoluments for the highest paid Director as follows:
Short term benefits
51
333
Total
51
333
Key management consists of the Board of Directors and the Company Secretary/Chief Financial Officer.
The Company provides Directors' & Officers' liability insurance at a cost of $38,125 (2013: $38,821). This cost is not included in the above table.
NOTE 5: TAXATION ON LOSS FOR THE YEAR
Consolidated
2014
$'000
2013
$'000
Major components of income tax expense for the years ended 30 June 2014 and 2013 are:
Current tax expense
-
-
Deferred tax expense
-
-
Total tax expense
-
-
A reconciliation of income tax expense applicable to accounting loss before income tax at the statutory income tax rate to income tax expense at the Company's effective income tax rate for the years ended 30 June 2014 and 2013 is as follows:
Accounting loss before income tax
(2,450)
(11,601)
At the statutory income tax rate of 30%
(735)
(3,480)
Effects of:
Non-deductible expenses
566
1,549
Temporary differences and tax losses not brought to account as a deferred tax asset
158
1,775
Less:
Tax rate differential
11
156
Income tax expense
-
-
Effective income tax rate of 0%
0%
0%
No amounts of deferred tax assets or liabilities have been charged / (credited) to the consolidated statement of comprehensive income or reserves. The deductible temporary differences and Australian domestic tax losses being $18,405,000 (2013: $18,176,000) do not expire under current tax legislation. Indonesian tax losses expire after five years. Deferred tax assets have not been recognised in respect of these items because at this point it is not probable that future taxable profits will be available against which the Group can utilise the benefits of tax losses. The Group has not offset deferred tax assets across different jurisdictions. Foreign tax losses in relation to the Indonesian subsidiary PT Indonesia Coal Development expire as follows:
Financial Year
Expire (year)
$'000
2009/2010
2015
2,798
2010/2011
2016
4,351
2011/2012
2017
3,680
2012/2013
2018
1,086
2013/2014*
2019
277
*Estimate based on the actual loss for 2013/2014
NOTE 6: LOSS PER SHARE
Consolidated
2014
2013
$'000
$'000
Loss attributable to owners of the parent company
(2,450)
(11,601)
Number
Weighted average number of shares used in the calculation of basic and diluted loss per share
123,383,315
122,822,049
Cents
Loss per share
Basic and diluted loss per share
(1.99c)
(9.45c)
The effect of all potential ordinary shares arising from the exercise of options going forward is considered to be anti-dilutive. 13,318,493(2013: 7,205,068) potential ordinary shares have been excluded from the above calculation as they are not dilutive.
NOTE 7: PARENT COMPANY LOSS FOR THE FINANCIAL YEAR
The Company has taken advantage of the exemption as allowed by Section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The Company loss for the year was $2,390,597 (2013: Loss $9,335,223).
NOTE 8: OTHER FINANCIAL ASSETS
Name
Country of incorporation
Reporting Date
Proportion of voting rights held at 30 June 2014
Proportion of voting rights held at 30
June 2013Spitfire Resources Limited
Australia
30 June 2014
0%
9.8%
$'000
2013
Balance at 1 July 2012
2,006
Impairment of available for sale asset
(2,558)
Reversal of available for sale reserve to income statement
533
Effect of movement in exchange rates
(7)
Balance at 30 June 2013
274
2014
Balance at 1 July 2013
274
Sale of financial asset
(240)
Loss on sale of financial asset
(46)
Effect of movement in exchange rates
12
Balance at 30 June 2014
-
NOTE 9: SEGMENT INFORMATION
The Group's reportable segments are set out below and include the Indonesian and Australian corporate offices which are administrative cost centres.
Operating segments are reported in a manner consistent with the reporting provided to the board.
Consolidated 2014
Australia - Corporate office
Indonesia - Administration Office
Total
$'000
$'000
$'000
Finance income
5
5
10
Administration expenses
(2,479)
(232)
(2,711)
Loss on sale of financial assets
(46)
-
(46)
Exchange differences
304
(7)
297
Loss for the year after taxation
(2,216)
(234)
(2,450)
Non current assets
6
1
7
Other receivables
57
2,492
2,549
Cash and cash equivalents
2,993
23
3,016
Segment assets
3,056
2,516
5,572
Trade and other payables
681
58
739
Loans and Borrowings
-
2,483
2,483
Provisions
-
40
40
Segment liabilities
681
2,581
3,262
Segment net assets
2,375
(65)
2,310
Consolidated 2013
Australia - Corporate office
Indonesia - Administration Office
Total
$'000
$'000
$'000
Finance income
15
1
16
Administration expenses
(5,846)
(1,264)
(7,110)
Impairment of Land
-
(1,757)
(1,757)
Impairment of other financial assets
(2,258)
-
(2,258)
Impairment of exploration and evaluation assets
(253)
(146)
(399)
Exchange differences
(160)
67
(93)
Loss for the year after taxation
(8,502)
(3,099)
(11,601)
Non current assets
284
11
295
Other receivables
202
3,025
3,227
Cash and cash equivalents
4,825
23
4,848
Segment assets
5,311
3,059
8,370
Trade and other payables
832
3,135
3,967
Provisions
-
44
44
Segment liabilities
832
3,179
4,011
Segment net assets
4,479
(120)
4,359
NOTE 10: OTHER RECEIVABLES
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Current
Related party receivables
3,342
4,029
-
-
Impairment for non-recovery
(859)
(1,036)
-
-
Prepayments and other receivables
66
234
56
202
2,549
3,227
56
202
The Group's exposure to credit and currency risk related to other receivables is disclosed in Note 20. Contingencies in relation to the recovery of related party receivables are detailed in Note 22.
NOTE 11: PROPERTY, PLANT AND EQUIPMENT
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Plant & Equipment
Cost
Balance at start of year
255
409
111
110
Disposals
(12)
(156)
-
-
Additions
-
1
-
1
Effects of movements in exchange rates
-
1
-
-
Balance at end of year
243
255
111
111
Accumulated Depreciation
Balance at start of year
234
324
101
66
Depreciation expense for the year
13
45
4
35
Reversal of accumulated depreciation - disposal
(11)
(134)
-
-
Effects of movements in exchange rates
-
(1)
-
-
Balance at end of year
236
234
105
101
Net book value at end of the year
7
21
6
10
Freehold land
Cost
Balance at start and end of year
-
1,757
-
-
Impairment
-
(1,757)
-
-
Balance at the end of year
-
-
-
-
Net book value at end of year
-
-
-
-
Total
Cost
Balance at start of year
255
2,166
111
110
Impairment
-
(1,757)
-
-
Disposals
(12)
(156)
-
-
Additions
1
-
1
Effects of movements in exchange rates
1
-
-
Balance at end of year
243
255
111
111
Accumulated Depreciation
Balance at start of year
234
324
101
66
Depreciation expense for the year
13
45
4
35
Reversal of accumulated depreciation - disposal
(11)
(134)
-
-
Effect of movements in exchange rates
(1)
-
-
Balance at end of year
236
234
105
101
Net book value at end of year
7
21
6
10
Net book value at start of year
21
1,842
10
44
NOTE 12: INVESTMENT IN SUBSIDIARIES
The principal subsidiaries of Churchill Mining Plc, all of which have been included in these consolidated financial statements, are as follows:
Name
Country of Incorporation
Proportion of ownership interest
Planet Mining Pty Ltd
Australia
100%
PT Indonesia Coal Development
Indonesia
100%
PT Techno Coal Utama Prima*
Indonesia
100%
PT Ridlatama Tambang Mineral*
Indonesia
75%
PT Ridlatama Trade Powerindo*
Indonesia
75%
PT Ridlatama Steel*
Indonesia
75%
PT Ridlatama Power*
Indonesia
75%
*Undertaking held indirectly by the Company.
Churchill Mining Plc owns 95% of the shares in PT Indonesia Coal Development with the balance (5%) held by Planet Mining Pty Ltd.
Movements of investments in subsidiaries during the period are:
Company
2014
2013
$'000
$'000
Loans to subsidiaries - Non-current assets
- Opening Balance
-
-
- Loans to subsidiaries
60
1,343
- Impairment of subsidiary carrying value
(60)
(1,343)
Total loans to subsidiaries - non-current assets
-
-
Equity investment in subsidiaries
- Opening Balance
158
2,205
- Impairment of subsidiary carrying value
(158)
(2,047)
Total equity investment in subsidiaries
-
158
Total investment in subsidiaries
-
158
The total of subsidiary loans at 30 June 2014 is $49,039,912 (2013: $48,979,805), the recovery of which has been impaired in full. The intercompany loans are unsecured, non-interest bearing and repayable on demand. Following impairment of the underlying assets held within the relevant subsidiaries, Churchill Mining Plc has accordingly reduced the carrying value of investments held at a parent company level.
NOTE 13: TRADE AND OTHER PAYABLES
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Current
Trade payables
67
847
67
721
Accruals and other payables
672
127
614
111
739
974
681
832
The Group's exposure to credit and currency risk related to trade and other payables is disclosed in Note 20.
NOTE 14: LOANS AND BORROWINGS
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Current
Related party payables
2,483
2,993
-
-
2,483
2,993
-
-
Included in the loans and borrowings are amounts potentially payable of $2,482,664 due to the non-controlling shareholders of the IUP Companies PT Ridlatama Tambang Mineral, PT Ridlatama Trade Powerindo, PT Ridlatama Steel and PT Ridlatama Power. Contingencies in relation to the payment of related party loans are detailed in Note 22.
NOTE 15: PROVISIONS
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Non-current
Employee benefits
40
44
-
-
40
44
-
-
The provision relates to the estimated liability for post-employment benefits at year end for staff engaged by PT Indonesia Coal Development.
NOTE 16: COMMITMENTS
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Operating lease commitments
The total future aggregate minimum lease payments under non-cancellable operating leases:
Within one year
20
18
20
16
Within two to five years
18
-
18
-
38
18
38
16
The above amount relates to a property sub-lease for 41 York Street, Subiaco Western Australia with the term expiring on 31 May 2016 with rent payable monthly in advance.
Consultant and Key Management compensation commitments
Commitments under consulting contracts not provided for in the financial statements and payable:
Within one year
204
249
204
249
204
249
204
249
Other commitments
In February 2013 the Company entered into an engagement letter with Quinn Emanuel Urquhart & Sullivan ("Quinn Emanuel")"in connection with the ICSID international arbitration proceedings against the Republic of Indonesia. As part of this engagement the Group is committed to pay Quinn Emanuel a success fee of 3% of the value of the first $50 million recovered and 5% of all recovered amounts greater than $50 million.
NOTE 17: SHARE CAPITAL, SHARE PREMIUM AND RESERVES
Company
Company
2014
2013
2014
2013
Number
Number
$'000
$'000
Allotted, called up and fully paid
At start of year
123,168,095
122,520,368
2,230
2,220
Additions
451,467
647,727
7
10
At end of year
123,619,562
123,168,095
2,237
2,230
Allotted, called up and fully paid
Share premium
Date
Details
Number
$'000
$'000
30/6/2012
Closing balance at 30 June 2012
122,520,368
2,220
77,537
11/1/2013
Issue of shares to directors @ 11p per share
647,727
10
104
30/6/2013
Closing balance at 30 June 2013
123,168,095
2,230
77,641
7/1/2014
Issue of shares to directors @ 22.23p per share
451,467
7
150
123,619,562
2,237
77,791
Share premium
The share premium reserve amount arises from subscriptions for or issue of shares in excess of nominal value.
Other Reserves
Other Reserves include
(i) Merger reserve
During the 2013 year, the merger reserve which arose previously from the availability of merger relief in connection with the acquisition of PT Indonesia Coal Development by a share for share exchange that represented the difference between the fair value of consideration given for the shares and the nominal value of those instruments, was transferred to retained deficit due to the impairment of the investments in the subsidiary companies.
(ii) Foreign exchange reserve
The amount represents gains/losses arising from the translation of the financial statements of foreign operations, the functional currency of which is different from the presentation currency of the Group. The reserve is dealt with in accordance with the accounting policy set out in note 1 to these financial statements.
(iii) Equity settled share options reserve
The amount relates to the fair value of the share options that have been expensed through the statement of comprehensive income less amounts, if any, that have been transferred to the retained earnings/deficit upon exercise.
Retained deficit
Retained deficit represents the cumulative net gains and losses recognised in the statement of comprehensive income less any amounts reflected directly in other reserves.
NOTE 18: SHARE BASED PAYMENTS
Share options
The Company has issued share options, some of which have vested immediately on grant and others with vesting periods. The options are not listed. Share options are exercisable for ordinary shares which when exercised rank equally with existing ordinary shares.
Exercise price
Grant date
Outstanding at start of year
(Exercised)/
Granted during the year
(Lapsed/ Expired) during the year
Outstanding at end of year
Final exercise date
2013
60p
17/12/2007
250,000
-
(250,000)
-
17/12/2012
70p
17/12/2007
250,000
-
(250,000)
-
17/12/2012
80p
17/12/2007
250,000
-
(250,000)
-
17/12/2012
75p
09/05/2008
3,100,000
-
(3,100,000)
-
09/05/2013
50p
19/08/2011
5,000,000
-
(300,000)
4,700,000
19/08/2016
50p
29/10/2012
-
1,500,000
-
1,500,000
29/10/2017
28p
21/03/2013
-
5,400,000
-
5,400,000
21/03/2018
48p
03/05/2013
-
50,000
-
50,000
03/05/2018
Total
8,850,000
6,950,000
(4,150,000)
11,650,000
2014
50p
19/08/2011
4,700,000
-
-
4,700,000
19/08/2016
50p
29/10/2012
1,500,000
-
-
1,500,000
29/10/2017
28p
21/03/2013
5,400,000
-
-
5,400,000
21/03/2018
48p
03/05/2013
50,000
-
-
50,000
03/05/2018
50p
09/12/2013
-
3,000,000
-
3,000,000
09/12/2018
Total
11,650,000
3,000,000
-
14,650,000
Weighted average exercise price
Number
Weighted average exercise price
Number
2014
2014
2013
2013
Outstanding at beginning of the year
40p
11,650,000
60p
8,850,000
Expired during the year
72p
-
72p
(4,150,000)
Issued during the year
33p
3,000,000
33p
6,950,000
Outstanding at end of the year
42p
14,650,000
40p
11,650,000
Exercisable at the end of the year
40p
11,650,000
40p
11,650,000
Fair value
The fair value of the share options granted has been derived using the Black-Scholes model that takes into account factors such as the option life, the volatility of share price and expected early exercise of share options. Volatility has been based on an estimate of comparable listed companies to Churchill.
2014
Grant date
9/12/2013
Granted to
Key Management Personnel
Number granted
3,000,000
Fair value at grant date
7.47c
Assumptions used
Share price
34.32c
Exercise price
81.72c
Expected volatility
70%
Average Option life
2.65
Risk free interest rate
2%
2013
Grant date
29/10/2012
21/3/2013
3/5/2013
Granted to
Key Management Personnel
Key Management Personnel
Key Management Personnel
Number granted
1,500,000
5,400,000
50,000
Fair value at grant date
1.80c
3.07c
11.26c
Assumptions used
Share price
18.00c
15.86c
40.43c
Exercise price
80.51c
42.30c
74.64c
Expected volatility
70%
70%
70%
Average Option life
2.65
2.65
2.65
Risk free interest rate
2%
2%
2%
Equity settled share based payment expense
The share based payment for the year ended 30 June 2014 was US$249,297 (2013: $73,759).
NOTE 19: NOTES TO THE CASH FLOW STATEMENT
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Reconciliation of (loss) after tax to cash from operating activities
(Loss) after tax
(2,450)
(11,601)
(2,391)
(9,335)
Share option expense
249
73
249
73
Shares issue expense
157
-
157
-
Depreciation expense
13
45
5
35
Impairment expense
-
399
218
3,175
Impairment of land
-
1,757
-
-
Impairment of other financial assets
-
2,258
-
-
(Gain)/ Loss on exchange rates
(297)
96
(287)
160
Loss on subsidiary loans & investment
46
-
-
216
Net gain on disposal of property, plant and equipment
-
(4)
-
-
Finance income
(2)
(16)
(2)
(14)
Decrease / (Increase) in receivables
167
237
138
(42)
(Decrease) / Increase in payables
(238)
(261)
(144)
412
Cash flow from operating activities
(2,355)
(7,017)
(2,057)
(5,320)
NOTE 20: FINANCIAL INSTRUMENTS
Significant accounting policies
Details of the significant accounting policies in respect of financial instruments are disclosed in Note 1 of the financial statements.
Financial risk management
The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring them on a regular basis. No formal policies have been put in place in order to hedge exposure of the Group's and Company's activities to the exposure to currency risk or interest risk. No derivatives or hedges were entered into during the year.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group and Company's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.
The Group is exposed through its operations to the following financial risks:
Liquidity risk;
Credit risk;
Cashflow interest rate risk;
Foreign exchange risk.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group and Company's competitiveness and flexibility. There have been no substantive changes in the Group and Company's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Further details regarding these policies are set out below:
Principal financial instruments
The principal financial instruments used by the Group and Company, from which financial instrument risk arises are as follows:
Loans and receivables;
Other receivables;
Cash and cash equivalents;
Trade and other payables; and
Loans and borrowings.
Categories of financial assets
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Current financial assets classified as loans and receivables
Other receivables
2,543
3,024
51
2
Cash and cash equivalents
3,016
4,848
2,993
4,821
Total current financial assets
5,559
7,872
3,044
4,823
Non-current financial assets classified as loans and receivables
Intergroup receivables
-
-
49,040
48,980
Impairment for non-recovery
-
-
(49,040)
(48,980)
Non-current financial assets classified as available for sale
Other financial assets
-
274
-
-
Total non-current financial assets
-
274
-
-
Total financial assets
5,559
8,146
3,044
4,823
Categories of financial liabilities
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Current financial liabilities measured at amortised cost
Trade and other payables
739
974
681
832
Loans and borrowings
2,483
2,993
-
-
Total current financial liabilities
3,222
3,967
681
832
Total financial liabilities
3,222
3,967
681
832
At the year end, the Group had a cash balance of US$3,015,620 (2013: US$4,848,872) which was made up as follows:
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Great British Pound
1,355
3,942
1,355
3,942
United States Dollar
1,429
844
1,407
831
Australian Dollar
231
52
231
48
Indonesian Rupiah
1
10
-
-
3,016
4,848
2,993
4,821
There is no material difference between the book value and fair value of the Group's financial instruments.
The Group and Company received interest for the year as follows:
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Interest from bank deposits
2
16
2
15
Total interest from bank deposits
2
16
2
15
LIQUIDITY RISK
The Group's and Company's policy is to ensure that it has sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain readily available cash balances to meet expected requirements for a period of at least 60 days.
Cash forecasts identifying the liquidity requirements of the Group and Company are produced frequently. These are reviewed regularly by management and the Board to ensure that sufficient financial headroom exists for at least a 12 month period.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:
Consolidated
Carrying amount
Contractual cash flows
6 months or less
Greater than 6 months
2014
$'000
$'000
$'000
$'000
Current financial liabilities
Trade and other payables
739
739
739
-
Loans and borrowings
2,483
2,483
-
2,483
3,222
3,222
739
2,483
Company
Carrying amount
Contractual cash flows
6 months or less
Greater than 6 months
2014
$'000
$'000
$'000
$'000
Current financial liabilities
Trade and other payables
681
681
681
-
681
681
681
-
Consolidated
Carrying amount
Contractual cash flows
6 months or less
Greater than 6 months
2013
$'000
$'000
$'000
$'000
Current financial liabilities
Trade and other payables
974
974
974
-
Loans and borrowings
2,993
2,993
-
2,993
3,967
3,967
974
2,993
Company
Carrying amount
Contractual cash flows
6 months or less
Greater than 6 months
2013
$'000
$'000
$'000
$'000
Current financial liabilities
Trade and other payables
832
832
832
-
832
832
832
-
CREDIT RISK
Credit risk arises principally from the Group's other receivables and investments in cash deposits. It is the risk that the counterparty fails to discharge its obligations in respect of the instrument.
As detailed in Note 22, the group is awaiting a decision on the appeal in relation to a dispute with the Ridlatama Group. Should PT ICD and PT TCUP be unsuccessful in all avenues of appeal then the receivables in the Statement of Financial Position before impairment would be reduced by $1.67 million due to these companies no longer being consolidated in the Group accounts. In addition the payables in the Statement of Financial Position would be reduced by $1.24 million.
The Group holds its cash balances across several bank accounts. The Groups seeks to deposit its cash with reputable financial institutions with strong credit ratings.
The Group and Company's maximum exposure to credit risk by class of individual financial instrument is shown in the table below:
Consolidated
2014
2013
Carrying value
Maximum exposure
Carrying value
Maximum exposure
$'000
$'000
$'000
$'000
Current assets
Cash and cash equivalents
3,016
3,016
4,848
4,848
Other receivables
2,543
2,543
3,024
3,024
5,559
5,559
7,872
7,872
Company
2014
2013
Carrying value
Maximum exposure
Carrying value
Maximum exposure
$'000
$'000
$'000
$'000
Current assets
Cash and cash equivalents
2,933
2,933
4,821
4,821
Non - current assets
Loans to subsidiaries
49,040
49,040
48,980
48,980
Impairment for non-recovery
(49,040)
(49,040)
(48,980)
(48,980)
2,933
2,933
4,821
4,821
CASH FLOW INTEREST RATE RISK
The Group and Company is exposed to cash flow interest rate risk from its deposits of cash and cash equivalents with banks. The cash balances maintained by the Group and Company are managed in order to ensure that the maximum level of interest is received for the available funds without affecting the working capital flexibility the Group and Company require.
The Group and Company is not at present exposed to cash flow interest rate risk on borrowings as they are not interest bearing. No subsidiary company of the Group is permitted to enter into any borrowing facility or lease agreement without prior consent of the Company.
Interest rates on financial assets and liabilities
The Group and Company's financial assets consist of cash and cash equivalents and other receivables. The interest rate profile at 30 June 2014 of these assets was as follows:
Consolidated
Floating interest rate
Fixed interest maturing in 1 year or less
Fixed interest maturing over 1 to 5 years
Non-interest bearing
Total
2014
$'000
$'000
$'000
$'000
$'000
Financial assets
Great British Pound
844
510
-
-
1,355
Australian Dollar
46
185
-
-
231
United States Dollar
-
1,430
-
60
1,490
Indonesian Rupiah
1
-
-
2,483
2,483
891
2,125
-
2,543
5,559
Weighted average interest rate
0%
0.17%
Financial liabilities
Great British Pound
-
-
-
31
31
Australian Dollar
-
-
-
26
26
United States Dollar
-
-
-
682
682
Indonesian Rupiah
-
-
-
2,483
2,483
-
-
-
3,222
3,222
Company
Floating interest rate
Fixed interest maturing in 1 year or less
Fixed interest maturing over 1 to 5 years
Non-interest bearing loan
Total
2014
$'000
$'000
$'000
$'000
$'000
Financial assets
Great British Pound
844
511
-
-
1,355
Australian Dollar
46
185
-
51
282
United States Dollar
-
1,407
-
48,980
50,387
Impairment for non-recovery
-
-
-
(48,980)
(48,980)
890
2,103
-
51
3,044
Weighted average interest rate
0%
0.17%
Financial liabilities
Great British Pound
-
-
-
31
31
Australian Dollar
-
-
-
26
26
United States Dollar
-
-
-
624
624
-
-
-
681
681
Consolidated
Floating interest rate
Fixed interest maturing in 1 year or less
Fixed interest maturing over 1 to 5 years
Non-interest bearing
Total
2013
$'000
$'000
$'000
$'000
$'000
Financial assets
Great British Pound
493
3,449
-
-
3,942
Australian Dollar
36
15
-
-
51
United States Dollar
89
759
-
32
880
Indonesian Rupiah
6
-
-
2,993
2,999
624
4,223
-
3,025
7,872
Weighted average interest rate
0%
0.22%
Financial liabilities
Great British Pound
-
-
-
149
149
Australian Dollar
-
-
-
32
32
United States Dollar
-
-
-
777
777
Indonesian Rupiah
-
-
-
3,009
3,009
-
-
-
3,967
3,967
Company
Floating interest rate
Fixed interest maturing in 1 year or less
Fixed interest maturing over 1 to 5 years
Non-interest bearing loan
Total
2013
$'000
$'000
$'000
$'000
$'000
Financial assets
Great British Pound
493
3,449
-
-
3,942
Australian Dollar
32
15
-
-
47
United States Dollar
73
759
-
48,980
49,812
Impairment for non-recovery
-
-
-
(48,980)
(48,980)
598
4,223
-
-
4,821
Weighted average interest rate
0%
0.22%
Financial liabilities
Great British Pound
-
-
-
149
149
Australian Dollar
-
-
-
32
32
United States Dollar
-
-
-
651
651
-
-
-
832
832
Sensitivity Analysis
Interest Rate Risk
The Group and Company have performed sensitivity analysis relating to its exposure to their interest rate risk at reporting date. The sensitivity analysis demonstrates the effect on the current financial year results and equity which could result from a change in these risks.
Interest Rate Sensitivity Analysis
At 30 June 2014, the effect on loss and equity as a result of changes in the interest rate, with all other variables remaining constant, would be as follows:
Consolidated
Company
2014
2013
2014
2013
$'000
$'000
$'000
$'000
Change in profit
- Increase in interest rate by 1%
13
72
13
65
- Decrease in interest rate by 1%
(2)
(16)
(2)
(14)
Change in equity
- Increase in interest rate by 1%
13
72
13
65
- Decrease in interest rate by 1%
(2)
(16)
(2)
(14)
FOREIGN EXCHANGE RISK
The Group has overseas subsidiaries, in Australia and Indonesia, whose expenses are mainly denominated in US dollars with some expenses in Australian Dollars and Indonesian Rupiah. In addition, the Parent Company incurs some expenses in British Pounds. Foreign exchange risk is inherent in the Group's activities and is accepted as such. The Group mitigates foreign exchange risk by transferring appropriate amounts to match the budgeted spend in each currency. Although its geographical spread reduces the Group's operational risk, the Group's net assets arising from such overseas operations are exposed to currency risk resulting in gains and losses on retranslation into US dollars. No formal arrangements have been put in place in order to hedge the Group and Company's activities to the exposure to currency risk or interest risk. It is the Group's policy to ensure that individual Group entities enter into local transactions in their functional currency wherever possible. The Group considers that this policy minimises any unnecessary foreign exchange exposure.
In order to monitor the continuing effectiveness of this policy, the Board, through its approval of both corporate and capital expenditure budgets, and review of the currency profile of cash balances and management accounts, considers the effectiveness of the policy on an on-going basis.
The following table discloses the exchange rates of the major currencies utilised by the Group:
Pounds Sterling
Australian Dollar
Indonesian Rupiah
Foreign currency units to US $1
Average for 2013/2014
0.6156
1.0895
11,374
At 30 June 2014
0.5866
1.0594
11,990
Average for 2012/2013
0.6378
0.9747
9,679
At 30 June 2013
0.6572
1.0934
9,901
Currency exposures & Sensitivity analysis
The monetary assets and liabilities of the Group that are not denominated in US dollars and therefore exposed to currency fluctuations are shown below. The amounts shown represent the US dollar's equivalent of local currency balances.
Australian Dollar
Pound Sterling
Indonesian Rupiah
Total
$'000
$'000
$'000
$'000
US Dollar equivalent of exposed net monetary assets and liabilities
At 30 June 2014
204
1,374
11
1,589
At 30 June 2013
302
4,208
27
4,537
A 10% strengthening of the US dollar against the Australian dollar at 30 June would have reduced loss by $2,921 (2013: reduced loss by $2,655) and reduced equity by $34,690 (2013: $17,687). This analysis assumed that all other variables, in particular interest rates, remain constant.
A 10% weakening of the US dollar against the above currency at 30 June would have had approximately the equivalent but opposite effects on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
A 10% strengthening of the US dollar against the Great British Pound at 30 June would have increased loss by $123,184 (2013: $394,180) and decrease equity by $123,184 (2013: $394,180). This analysis assumed that all other variables, in particular interest rates, remain constant
A 10% weakening of the US dollar against the above currency at 30 June would have had approximately the equivalent but opposite effects on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Capital
The objective of the Directors is to maximise Shareholder returns and minimise risks with the Group being mainly equity financed. In managing their capital, the Group and Company's primary objective is to ensure their ability to provide a sufficient return for their equity Shareholders, principally though the ICSID damages claim. In order to achieve and maximise this return objective, the Group and Company will, in future, seek to maintain a gearing ratio that balances risks and returns at an acceptable level while also maintaining a sufficient funding base to enable the Group and Company to meet their working capital and strategic investment needs. In making decisions to adjust their capital structure to achieve these aims, either through new share issues, increases or reductions in debt, or altering a dividend or share buyback policies, the Group considers not only its short term position but also its medium and longer term operational and strategic objectives.
NOTE 21: RELATED PARTY TRANSACTIONS
The Group had the following material transactions (excluding Directors' salaries and fees) with related parties during the year ended 30 June 2014.
a) As at 30 June 2014 US$1,670,983 (2013: US$2,014,301) was receivable from and US$1,312,975 (2012: US$ 1,582,737) was payable to Ms Florita who is the partner of Mr Anang Mudjiantoro. Both Ms Florita and Mr Mudjiantoro are related parties of Churchill by way of their Directorships in Indonesian subsidiary companies. The amount of the receivable has been impaired to equal the amount of the payable US$1,312,975. These amounts remain outstanding at 30 June 2014.
b) As at 30 June 2014 US$1,670,983 (2013: US$2,104,301) was receivable from and US$1,169,688 (2013: US$ 1,410,011) was payable to Ms Ani Setiawan who is the partner of Mr Andreas Rinaldi. Ms Ani Setiawan is a related party of Churchill as she holds the position of Commissioner with some of the Indonesian subsidiary companies. The amount of the receivable has been impaired to equal the amount of the payable US$1,169,688.These amounts remain outstanding at 30 June 2014.
The Key Management personnel disclosures are included in Note 4 to the financial statements.
NOTE 22: CONTINGENCIES
On 28th November 2012 the South Jakarta District Court held that the deeds of grant by which members of the Ridlatama Group transferred 75% of the issued share capital in two of the four licence companies that made up the East Kutai Coal Project (PT Ridlatama Tambang Mineral and PT Ridlatama Trade Powerindo) to PT TCUP are null and void on the basis that the requirements for a valid grant under Indonesian laws had not been satisfied. On 6th Dec 2012 PT ICD and PT TCUP filed a notice of appeal with the High Court in respect of the South Jakarta District Court's decision. In May/June 2014 the High Court ruled in favour of Ridlatama. In June/July 2014 PT ICD and PT TCUP filed a memoranda of appeal with the Supreme Court of Indonesia. The decision of the South Jakarta District Court is therefore not final and binding. Should PT ICD and PT TCUP be unsuccessful in all avenues of appeal then the receivables in the Statement of Financial Position before impairment would be reduced by $1.67 million due to these companies no longer being consolidated in the Group accounts. In addition the payables in the Statement of Financial Position would be reduced by $1.24 million. It remains the Group's position that the receivable and payable in the Statement of Financial Position are able to be offset. In the event that the balances cannot be offset the payable owing by the Group would not be settled until members of the Ridlatama group settled the receivable.
The Group is involved in litigation as detailed in the Chairman's Statement and Strategic Report. As at the date of this report the disclosure of any further information about the above matters would be prejudicial to the interests of the Group.
NOTE 23: EVENTS AFTER THE REPORTING PERIOD
On the 1st October 2014 Mr Rachmat Gobel resigned as a Director and on the same day Mr Nikita Rossinsky was appointed a Director.
There has not been any other matter or circumstance occurring subsequent to the end of the financial year, that has significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR FFSSMIFLSEFS
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