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Interim Results

Fri 16th March, 2012 11:54am
RNS Number : 5159Z
Churchill Mining plc
16 March 2012
 



16 March 2012

 

 

CHURCHILL MINING PLC

("Churchill" or "the Company")

 

Interim Results

 

Churchill Mining (AIM: CHL) reports its interim results for the six months ended 31 December 2011.

 

Chairman's Statement

 

I present Churchill Mining Plc's ("Churchill" or the "Company") Half Year Report for the six months ended 31 December 2011.

 

Following the June year-end, the Company has continued to actively protect its interest in the East Kutai Coal Project ("EKCP")  following the negative ruling from the regional Samarinda Administrative Tribunal that sought to overturn the East Kutai Regent's ("Bupati's") decision to revoke the EKCP licenses. The Company believes that the actions of the Bupati and the subsequent Administrative Court decisions have brought into serious question the ability of foreign companies to invest in long-term, high value projects within Indonesia.

 

EAST KUTAI COAL PROJECT (CHL 75%)

 

The EKCP is currently in pre development and the project is ready to benefit from its close proximity to the Asian and Chinese end-markets once it is in production. The project has the opportunity to bring substantial benefits to Indonesia including employment, local community development and government royalties.

 

Churchill regards the EKCP as a highly strategic asset, ideally located both in relation to core energy consuming markets, and in the context of rising demand for energy resources such as high quality thermal coal. The Company notes recent amendments to the existing regulations regarding Mining business activities in Indonesia. The amended regulations provide that foreign ownership in companies holding mining permits will be subject to mandatory progressive divestment requirements, such that foreign ownership is capped at 49% after the 10th year of mining production. The effect of, and timeframe for implementation as they may apply to the Company are still subject to interpretation and is likely to be some time away. At the appropriate time the Company will take legal and corporate advice in relation to its ownership structure.

 

Most development and construction activities at the EKCP site have been suspended pending the appeal decision of the Supreme Court.  We have, however, continued to support the local East Kutai communities through ongoing community development and social programs. Transportation assistance has been provided to local and public service organisations in and around the EKCP site and we have also assisted local communities with infrastructure maintenance where requested.  The East Kutai population continues to strongly support our endeavors maintain our licences despite the fact that employment numbers in both our land acquisition teams and base camp have been significantly reduced as a result of the actions of the regional government.  

 

Administrative Tribunal

 

On 3 March 2011, the Administrative Tribunal ruled against Churchill Mining and its Indonesian partner Ridlatama, finding that the Bupati's attempted cancellation of the EKCP licenses did not contravene any administrative regulations. The Company and Ridlatama rejected the conclusions of the Tribunal and lodged an appeal to the Administrative High Court in Jakarta.

 

On the 19 August 2011 the Company was advised that this appeal had been dismissed and the Administrative High Court agreed wholly with the legal considerations and findings of the Administrative Tribunal in Samarinda.

 

The Company immediately moved to file its notice of appeal to the Supreme Court of Indonesia, with subsequent filing of its Memoranda of appeal on the 26 September 2011.  On the 23 January 2012 the State Administrative Chamber of the Supreme Court of Indonesia announced that its head, Prof. Dr. Paulus Effendi Lotulung, S.H has selected the following three judges to determine the appeal:.

 

·      Mr. Prof. Dr. H. Achmad Sukardja, S.H.

·      Mr. Dr. H. Imam Soebechi, S.H., M.H

·      Mrs. Marina Sidabutar S.H., M.H

 

 As at the time of writing the Supreme Court has not handed down its decision on the appeal.

 

INTERNATIONAL ARBITRATION AND GOVERNMENT MEETINGS

 

In late November 2011 the Company sent a formal letter to the Republic of Indonesia seeking cooperation from senior government officials to assist in achieving an amicable and commercial resolution to the investment dispute the Company is facing. The Company has highlighted that following a significant investment in coal exploration in Indonesia, the company has been subjected to a sustained campaign to expropriate Churchill's rights as a legitimate foreign investor in Indonesia.

 

Churchill has advised that if an amicable solution cannot be achieved the Company will look to initiate International Arbitration against the Republic of Indonesia.

 

DISPUTE WITH RIDLATAMA GROUP

 

In July 2011, the Company's Indonesian subsidiary PT Indonesia Coal Development ("ICD") delivered a notice of dispute to its Indonesian minority partner, the Ridlatama Group ("Ridlatama"), as well as several individuals related to Ridlatama, with regards to the EKCP. Further, ICD has commenced arbitration proceedings in Singapore under the rules of the International Chamber of Commerce, against other members of the Ridlatama Group who are parties to the investor's agreements, for their alleged breaches of the said agreements.

 

ICD has filed an unlawful act claim against Mr Andreas Rinaldi, one of the controllers of the Ridlatama Group in the Tangerang District Court in Jakarta. Both ICD (the Claimant) and Rinaldi (the Defendant) were in agreement that the parties before the Court were incomplete and asked the Court to dismiss the claim. The Court's decision was to dismiss ICD's claim against Rinaldi in its entirety on the grounds that ICD did not submit any evidence to support its claim, not that the parties were incomplete. ICD has lodged an appeal against this decision.

 

Further ICD has instructed its solicitor's to file a new unlawful act claim against Mr Rinaldi and also Mr Anang Mudjiantoro (both controllers of the Ridlatama group) seeking, amongst other things, an order for damages to compensate ICD for losses suffered arising from Mr Rinaldi's and Mr Mudjiantoro's unlawful acts which gave rise to the alleged breaches of the investor's agreements.

 

During September 2011 the Company filed an application seeking a court order for a shareholders meeting to be called for PT Ridlatama Tambang Mineral (75% direct subsidiary) to replace the existing Director/Commissioners with members of the Churchill board. The Company was advised on 13 March 2012 that the application was unsuccessful and the company is currently considering its alternatives in relation to this matter.

 

In November 2011, ICD received notices that members of the Ridlatama group have filed two unlawful act claims in the South Jakarta District Court seeking an order that ICD's 75% interest in PT Ridlatama Tambang Mineral and PT Trade Powerindo be declared null and void. ICD considers the Ridlatama claim frivolous and to have no commercial or legal merit and will continue to take whatever action it deems necessary to fully protect its legal rights in this matter.

 

FINANCIAL REVIEW

 

The loss for the half year was US$6.4 Million or 5.30c per ordinary share (Dec 2010: US$3.0 million or 3.13c per share).  Other administrative expenses totalled US$5.1 million (Dec 2010: US$3.4 million) reflecting the increased costs of public relations, government and media outreach costs, legal, professional and consulting expenses. 

Significant expenditure items during the period include:

·      Legal and professional fees of US$1.5 million (2010: US$0.78 million) reflecting the significant costs incurred as a result of the Administrative Tribunal, subsequent appeal to the Supreme Court of Indonesia and the on-going dispute with Ridlatama;

 

 

·      Public relations, government and media outreach costs of US$0.6 million within Indonesia to assist in highlighting the groups issues with the revocation of the EKCP licenses;

 

·      Consulting, Directors and professional fees of US$1.3 million (2010: US$1.2 million) reflects the continued work undertaken to protect the group's interest in the EKCP;

 

·      During the half year the Company also expensed US$1.011 million in pre-development and site expenditure at the East Kutai Coal Project.

The balance of operating expenditure is a result of the Company's current operations which include maintaining a presence at the EKCP site and management resources allocated to the current legal proceedings in relation to the appeal to the Supreme Court of Indonesia.

The Group's statement of financial position as at 31 December 2011 and comparatives at 31 December 2010 and 30 June 2011 are summarised below:

 


31 Dec 2011

31 Dec 2010

30 June 2011


$'000

$'000

$'000





Non-current assets

4,711

32,003

6,585

Current assets

19,997

18,332

26,207

Total assets

24,708

50,335

32,792

Current liabilities

5,016

4,064

5,084

Non-current liabilities

66

61

66

Total liabilities

5,082

4,125

5,150

Net assets

19,626

46,210

27,642

 

 

The Company started the half-year with US$22.4 million in cash and remains well funded with cash at bank of US$14.3 million at the date of this report to pursue the legal appeal process and any subsequent action to restore value for shareholders.

 

LOOKING FORWARD

 

The group is now awaiting the result of the Supreme Court appeal. In the meantime, activities at the EKCP site, including local community development, have been maintained. The Group's focus remains on pursing legal and commercial outcomes for the current EKCP dispute.

 

The Board will continue to focus on protecting and generating shareholder value and I will update on the Company's progress during the second half of the year.

 

 

 

 

David Quinlivan

Executive Chairman

16 March 2012

 

 




6 months to

6 months to

Year ended



31 Dec 2011

31 Dec 2010

30 June 2011



Unaudited

Unaudited

Audited


Note

$'000

$'000

$'000






Other administrative expenses


(5,118)

(3,396)

(9,167)

Impairment of exploration assets


(1,011)

-

(27,897)

Impairment of related party receivable


-

-

(1,196)

Total administrative expenses


(6,129)

(3,396)

(38,260)






Loss from operations


(6,129)

(3,396)

(38,260)






Finance income  - interest received


20

20

34

Finance income - foreign exchange gains


194

175

165

Total finance income


214

195

199






Finance expenses - foreign exchange losses


(496)

(65)

(454)

Total finance expenses


(496)

(65)

(454)






Fair value gain on investment in associate


-

772

772

Deemed loss on disposal of associate


-

(54)

(54)

Share of operating loss of associate


-

(482)

(482)






Loss before taxation


(6,411)

(3,030)

(38,279)

Tax expense


-

-

-






Loss for the period/year attributable to equity shareholders of the parent


(6,411)

(3,030)

(38,279)

Other comprehensive (loss)/income:





Net (loss)/gain  on revaluation of financial assets


(1,721)

(71)

1,721

Foreign exchange differences on translating foreign operations


(218)

413

630

Other comprehensive (loss)/income for the period/year


(1,939)

342

2,351






Total comprehensive loss for the period/year attributable to equity shareholders of the parent


(8,350)

(2,688)

(35,928)






Loss for the period/year attributable to:





Owners of the parent


(6,411)

(3,030)

(38,279)

Non-controlling interest


-

-

-



(6,411)

(3,030)

(38,279)

Total comprehensive loss for the period/year attributable to:

 





Owners of the parent


(8,350)

(2,688)

(35,928)

Non-controlling interest


-

-

-



(8,350)

(2,688)

(35,928)

Loss per share attributable to owners of the parent:





Basic and diluted loss per share (cents)

2

(5.30c)

(3.13c)

(38.57c)


 

 

 

 

Note

6 months to

6 months to

Year ended

31 Dec 2011

31 Dec 2010

30 June 2011

Unaudited

Audited

$'000

$'000

$'000









ASSETS





Current assets





Cash and cash equivalents


                16,310

                13,552

22,385

Trade and other receivables


                  3,687

                 4,780

3,822

Total current assets


19,997

18,332

26,207






Non-current assets





Intangible assets

3

251

26,185

262

Property, Plant and Equipment


1,916

1,998

1,953

Other financial assets


2,544

2,464

4,370

Other receivables


-

1,356

-

Total non-current assets


4,711

32,003

6,585






TOTAL ASSETS


24,708

50,335

32,792






LIABILITIES





Current Liabilities





Trade and other payables


1,739

759

1,628

Loans and Borrowings


3,277

3,305

3,456

Total current liabilities


5,016

4,064

5,084






Non-current liabilities





Provisions


66

61

66

Total non-current liabilities


66

61

66






TOTAL LIABILITIES


5,082

4,125

5,150






NET ASSETS


19,626

46,210

27,642






CAPITAL & RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY





Share Capital


2,195

1,797

2,195

Share premium


77,257

62,982

77,257

Available for Sale reserve


-

(71)

1,721

Merger reserve


6,828

6,828

6,828

Other reserves


3,564

3,231

3,448

Retained deficit


(71,322)

(29,662)

(64,911)

TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT


18,522

45,105

26,538

Non-controlling interest


1,104

1,105

1,104

TOTAL EQUITY


19,626

46,210

27,642

    


 

 

 


Share

Share

Merger

Retained

Other Reserves


Total

Non-

Total


Capital

Premium

Reserve

Deficit

Equity

controlling

Equity



Reserve



Foreign

Equity

Available

attributable

interest







exchange

settled share options

For sale reserve

to equity holders of











the company




$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000












Changes in equity for period to 31 December 2010











Balance at 1 July 2010

1,797

62,982

6,828

(26,632)

(345)

3,163

-

47,793

1,104

48,897

Loss for the period

-

-

-

(3,030)

-

-

-

(3,030)

-

(3,030)

Other Comprehensive income

-

-

-

-

413

-

(71)

342

-

342

Non-controlling interests' share of reserves

-

-

-

-

-

-

-

-

1

1

Balance at 31 December 2010

1,797

62,982

6,828

(29,662)

68

3,163

(71)

45,105

1,105

46,210












Changes in equity for the period to 31 December 2011











Balance at 1 July 2011

2,195

77,257

6,828

(64,911)

285

3,163

1,721

26,538

1,104

27,642

Loss for the period

-

-

-

(6,411)

-

-

-

(6,411)

-

(6,411)

Other Comprehensive income

-

-

-

-

(218)

-

(1,721)

(1,939)

-

(1,939)

Recognition of share based payments

-

-

-

-

-

334

-

334

-

334

Balance at 31 December 2011

2,195

77,257

6,828

(71,322)

67

3,497

-

18,522

1,104

19,626













 







6 months to

6 months to

Year ended







31 Dec 2011

31 Dec 2010

30 June 2011







Unaudited

Unaudited

Audited






Note

$'000

$'000

$'000















Cash flows from operating activities

4

(4,627)

(3,578)

(8,440)

Interest paid


-

-

(3)

Net cash flows from operating activities


(4,627)

(3,578)

(8,443)






Cash flows used in investing activities





Finance Income


20

20

34

Acquisition of plant and equipment


(4)

(48)

(1,806)

Payments for land and buildings


-

(1,757)

-

Payments for exploration and evaluation assets


(1,003)

(4,083)

(5,520)

Cash flows used in investing activities


(987)

(5,868)

(7,292)






Cash flows from financing activities





Proceeds from issue of share capital


-

-

14,671

Cash flows from financing activities


-

-

14,671






Net (decrease)/increase in cash and cash equivalents


(5,614)

(9,446)

(1,064)

Cash and cash equivalents at start of the period/year


22,385

22,879

22,879

Effect of foreign exchange rate differences


(461)

119

570






Cash and cash equivalents at end of period/year


16,310

13,552

22,385






 

 

 

 

 

 

 

 

 

 


NOTES TO THE INTERIM REPORT

 

1.      BASIS OF PREPARATION

 

The consolidated interim financial statements of the Group for the six months ended 31 December 2011 which comprise the Company and its subsidiaries (together referred to as the "Group") were approved by the Board on 16 March 2012.  The interim results have not been audited, but were the subject of an independent review carried out by the Company's auditors, BDO LLP. The interim financial information has been prepared on the basis of a going concern and in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of Churchill Mining PLC for the year ending 30 June 2012.  The financial information for the year to 31 December 2011 does not constitute statutory accounts of the Company or the Group. The statutory accounts for the year ended 30 June 2011 have been filed with the Registrar of Companies.  The auditor's report on those accounts was unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

 

The consolidated financial statements incorporate the results of Churchill Mining PLC and its subsidiary undertakings as at 31 December 2011. The corresponding amounts are for the year ended 30 June 2011 and the 6 month period ended 31 December 2010.

 

 

2.      LOSS PER SHARE

 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period.

 

 

 

6 months to

6 months to

Year ended


31 Dec 2011

31 Dec 2010

30 June 2011


Unaudited

Unaudited

Audited


$'000

$'000

$'000





Loss for the period/year attributable to owners of the parent company

(6,411)

(3,030)

(38,279)






Number of Shares

Number of Shares

Number of Shares

Weighted average number of shares used in the calculation of basic and diluted loss per share

120,920,368

96,727,354

99,225,074





Loss per share




Basic and diluted loss per share

(5.30c)

(3.13c)

(38.57c)

 

The total number of shares in issue at 31 December 2011 amounted to 120,920,368 (31 December 2010 - 96,727,354). The total amount of options held over the shares at 31 December 2011 was 11,650,000 (31 December 2010 - 12,040,348).  These options are exercisable at prices that range between 12p (18.5c) and 80p ($1.24). 

 

The effect of all potential ordinary shares arising from the exercise of options going forward is considered to be anti-dilutive. 

 

 

 

 

 

 

 

 

 

 

3.      INTANGIBLE ASSETS

 


6 months to

6 months to

Year ended


31 Dec 2011

31 Dec 2010

30 June 2011


Unaudited

Unaudited

Audited


$'000

$'000

$'000





Exploration and evaluation assets




    Capitalised exploration expenditure:




    Balance at start of period/ year

194

19,578

19,578

    Additions

1,011

3,725

5,696

    Impairment of exploration costs

(1,011)

-

(25,080)

    Effects of movements in exchange rates

(8)

-

-

    Balance at end of period/year

186

23,303

194





Exploration and evaluation assets




    Cost of acquisition:




    Balance at start of period/year

68

2,872

2,872

    Impairment of exploration assets

-

-

(2,817)

    Effects of movements in exchange rates

(3)

10

13

    Balance at end of period/year

65

2,882

68





Total




    Cost:




    Balance at start of period/year

262

22,450

22,450

    Additions

1,011

3,725

5,696

    Impairment of exploration and evaluation costs

(1,011)

-

(25,080)

    Impairment of exploration assets

-

-

(2,817)

    Effects of movements in exchange rates

(11)

10

13





    Balance at end of period/year

251

26,185

262





 

The Group has a 75% interest in the East Kutai Coal Project ("EKCP").  

 

Whilst the company continues to vigorously protect its interest in the Indonesian EKCP, the Company has in accordance with the requirements of International Financial Reporting Standards and its accounting policies impaired the carrying value of the EKCP in full at 30 June 2011 and 31 December 2011.

 

The Group retains a 20% interest in the original South Woodie Woodie Manganese Project in which Spitfire Resources Limited continues to hold the remaining 80% interest. The Group is "free-carried" on its share of exploration costs in respect of its 20% interest until a decision to mine is made in relation to the project. An amount of $251,157 is included within the exploration and evaluation asset above.

 

 

 

 

 

 

 

 

 

 

 

 

 

4.      NOTES TO THE STATEMENT OF CASH FLOWS

 


6 months to

6 months to

Year ended


31 Dec 2011

31 Dec 2010

30 June 2011


Unaudited

Unaudited

Audited


$'000

$'000

$'000

Reconciliation of loss after tax to cash flows from operating activities








Loss after tax

(6,411)

(3,030)

(38,279)





Net exchange differences

301

(110)

289

Share options expense

334

-

-

Depreciation

41

41

88

Impairment of exploration costs

1,003

-

-

Impairment expense

-

-

27,897

Impairment of related party receivable

-

-

1,196

Fair value (gain) on investments in associate

-

(772)

(772)

Deemed loss on disposal of associate

-

54

54

Finance income

(20)

(20)

(34)

Share of associate loss

-

482

483

VAT written off

-

-

482





(Increase) in receivables

198

(283)

(394)

Increase in payables and accruals

(73)

60

550





Cash flow from operating activities

(4,627)

(3,578)

(8,440)

 

5.      TAXATION

 

No taxation has been provided due to losses in the period.  No deferred tax asset has been recognised for past or current losses as the recoverability of any such assets is not considered probable in the foreseeable future.

 

6.      EVENTS AFTER THE REPORTING DATE

 

Other than events detailed elsewhere in this report, there has not been any other matter or circumstance occurring subsequent to the end of the reporting date 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.

 

7.      FORWARD LOOKING STATEMENTS

 

This report contains certain forward looking statements, which include assumptions with respect to future plans, results and capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Please refer to the Company's Annual Report available from the Company's web site for a list of risk factors. The Company's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this report are made as at the date of this report.

 

 

8.      INTERIM REPORT

 

Copies of this interim report for the six months ended 31 December 2011 will be available from the offices of Churchill Mining PLC, Suite 1, 346 Barker Road, Subiaco, WA, 6008, and on the company's website www.churchillmining.com          

 

 

For further information, please contact:

 

Churchill Mining Plc

David Quinlivan

+ 61 8 6382 3737

 

 

 

 

Northland Capital

Partners Limited

Shane Gallwey / Luke Cairns

+44(0)20 7796 8800

Tavistock Communications

Paul Youens / Jos Simson

+44(0)20 7920 3150

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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