TIDMCHL
RNS Number : 1625B
Churchill Mining plc
31 March 2017
CHURCHILL MINING PLC
INTERIM RESULTS FOR THE SIX MONTHSED 31 DECEMBER 2016
FILING OF ANNULMENT APPLICATION
The Directors of Churchill Mining PLC ("Churchill" or "the
Company") are pleased to present the Company's unaudited interim
results for the six months ended 31 December 2016 and to confirm
that later today the Company will lodge an application to annul the
ICSID Award of 6 December 2016. The Company will receive a
temporary ("provisional") automatic stay of execution of the Award
including the cost orders contained in it once the Application for
Annulment is registered by ICSID. A further announcement will be
made following the lodging of the application setting out the
Company's grounds for making the application together with an
update on the suspension position.
CHAIRMAN'S STATEMENT
Introduction
During the half year, the Company continued actively to pursue
its US$1.315 billion (plus interest) claim against the Republic of
Indonesia ("Indonesia") for unlawful measures taken by Indonesia
against Churchill's interests in the East Kutai Coal Project
("EKCP").
The unlawful measures taken by Indonesia include Indonesia's
revocation (without justification, compensation or due process) of
the mining licences that underpinned the EKCP (the "EKCP
licences"), which were held by Churchill and its local partner in
the project, the Ridlatama Group.
At the time the EKCP licences were illegally revoked, Churchill
and its wholly owned subsidiary Planet Mining Pty Ltd's ("Planet")
held a 75% interest in the EKCP. The area covered by the EKCP
licences (i.e. the EKCP) contained a JORC Resource of 2.8 billion
tonnes and incorporated a JORC Reserve of 980 million tonnes.
Churchill brings its claims against Indonesia under the United
Kingdom-Indonesia Bilateral Investment Treaty (the "UK BIT");
Planet's claim - which is being run in consolidation with
Churchill's case - is brought under the Australia-Indonesia
Bilateral Investment Treaty (the "Australia BIT").
The consolidated Churchill/Planet arbitration is being conducted
at the International Centre for Settlement of Investment Disputes
("ICSID").
In legal terms, Churchill and Planet's causes of action are
brought primarily under the expropriation and Fair and Equitable
Treatment ("FET") provisions of the respective treaties.
ICSID arbitration
The following significant events occurred during the 6-month
period between 30 June 2016 and 31 December 2016 in regard to the
ongoing ICSID arbitration.
Eleventh Hour Call for Further Submissions
After having deliberated for over a year the Tribunal, in a
letter to the parties dated 9 September 2016, referred to the
recent (2014) case of Minnotte v. Poland and invited the parties to
comment on this decision and in particular to provide their views
(on the basis of the existing factual record only) on paragraph 163
of the decision in connection with (i) the admissibility in
international law of claims tainted by fraud or forgery where the
alleged perpetrator is a third party; (ii) the lack of due care or
negligence of the investor to investigate the factual circumstances
surrounding the making of an investment; and (iii) the deliberate
"closing of eyes" to indications of serious misconduct or crime, or
an unreasonable failure to perceive such indications.
The parties were directed to provide submissions based only on
the evidence currently on the record and limited to 15 pages in
response to the above questions by 23 September 2016 and Churchill
filed its submission accordingly.
Whilst Churchill did comply with the Tribunal's last minute
request for two further submissions, the Company also objected to
the Tribunal (i) significantly expanding of the scope of the
Document Authenticity phase at the eleventh hour, and (ii)
directing that no new evidentiary or factual material be filed when
responding to new issues that were clearly outside the scope of the
Document Authenticity phase. The Company specifically put the
Tribunal on notice that it had directed the parties to provide
submissions on factual and legal issues that were well outside the
intended scope of the Document Authenticity phase and that the
volume and nature of these issues was such that they could only be
properly briefed, investigated and determined in a full merits
hearing.
As I have previously stated, Churchill believes the fundamental
principle of international law that underlies paragraph 163 of the
Minnotte decision is good faith. This explains why the Minnotte
tribunal held that an investor's failure to make enquiries that
might (or might not) have detected third-party wrongdoing does not
automatically deprive that investor of treaty protection as an
investor can fail to make such inquiries whilst still acting in
good faith. This also explains why the Minnotte tribunal held that,
if the proven facts clearly show that the investor did more than
fail to make such inquiries, and instead deliberately closed its
eyes to serious third-party criminal wrongdoing, that may vitiate
the investor's claim because it may mean the investor was not
acting in good faith.
Paragraph 163 of the Minnotte decision cannot however be viewed
in isolation. Paragraphs 129 to 140 explain the basis on which the
Minnotte tribunal reached the above conclusions.
In response to the factual aspects of the Tribunal's questions
on Minnotte, Churchill made all the points it could, based on the
existing evidentiary record of the proceedings (as per the
limitations set by the Tribunal). One of the key points was that
determining the level of due diligence is primarily a question of
appropriate commercial benchmarks - "what would a reasonably
prudent investor do in the circumstances?" Due diligence is also
about reasonably foreseeable risks at the time an investment is
made. The record shows firstly that Churchill conducted extensive
due diligence including multiple legal reviews prior to and during
the making of its investments and, secondly, that the risk that
signatures on mining licences and related consents could be forged
was not foreseeable throughout the process of applying for and
obtaining the Ridlatama licences. Churchill noted that there was
nothing on the record to suggest that forensic document
authenticity testing was required at the time Churchill made its
investment in East Kutai.
Further, Churchill emphasised the record shows that, far from
closing its eyes to indications of serious misconduct or taking
deliberate actions to avoid learning of such indications, Churchill
actively pursued all challenges to its mining licences by
instigating such actions as police investigations and fully
supporting the investigations being undertaken by statutory
government bodies such as BAWASDA.
The Award
On 7 December 2016, the ICSID Tribunal handed down its Award in
relation to Indonesia's application for dismissal of the Company's
claims based on forged Ridlatama mining licences.
In its Award the Tribunal granted Indonesia's application to
dismiss the Company's claims for damages arising out of the
revocation of the mining licenses that made up the EKCP in East
Kalimantan Indonesia and made the following findings:
-- Thirty four (34) disputed documents were held to be not authentic;
-- The forger of the disputed documents was most likely a person
or persons acting for or on behalf of Churchill's Indonesian
partner the Ridlatama group in collusion with a person inside the
East Kutai Regency;
-- There was no finding that Churchill or its officers were involved in any forgery;
-- Churchill's due diligence investigations conducted at the
time of acquiring the East Kutai Coal licenses were
insufficient;
-- The claims brought by Churchill in this arbitration are dismissed; and
-- Churchill is ordered to pay a total of USD 9,446,528 in costs
and arbitration tribunal fees.
Whilst accepting the finding that neither Churchill nor any of
its officers were in any way involved in any fraud or forgery, the
Company remains deeply troubled by many aspects of this Award.
Events Post 31 December 2016
The following significant events have occurred post 31 December
2016.
Annulment Application
The Company will today lodge an application to annul the ICSID
Award of 6 December 2016. The Company will receive a temporary
("provisional") automatic stay of execution of the Award including
the cost orders contained in it once the Application for Annulment
is registered by ICSID. Whilst the Directors believe the annulment
application has reasonable prospects of success, there can be no
guarantee that the tribunal will grant a permanent stay of the
adverse USD 9,446,528 costs order on terms satisfactory to the
Company and subsequently grant a partial or full annulment of the
ICSID Award.
The Company's Application for Annulment of the ICSID Award will
be available on the Company's website www.churchillmining.com
Financial Summary
The loss for the half year was $9,835,946 or 6.66c per ordinary
share (half year Dec 2015: $1,858,975 or 1.39c per share and 12
months to June 2016: $3,151,287 or 2.27c per share). Other
administrative expenses totalled $443,391 (Dec 2015: $1,909,428 and
June 2016: $3,275,437).
Significant expenditure items during the period include:
-- Provision of $9,446,528 for the costs order following the ICSID award in December 2016;
-- Legal and professional fees of $67,681 (Dec 2015: $1,005,219
and June 2016: $1,538,315) reflecting expenditure for the Company's
arbitral claim against the Republic of Indonesia.
-- Consulting, directors, staff and professional fees of
$196,467 (Dec 2015: $598,434 and June 2016: $923,841).
The Group's Net cash from operating activities for the period
ending 31 December 2016 with comparatives for the half year 31
December 2015 and 12 months to 30 June 2016 are summarised
below:
31 Dec 31 Dec 30 June
2016 2015 2016
$'000 $'000 $'000
Unaudited Unaudited Audited
------------------------- ----------- ----------- ---------
Net cash from operating
activities (614) (1,839) (3,058)
========================= =========== =========== =========
The Group's statement of financial position as at 31 December
2016 with comparatives at 31 December 2015 and 30 June 2016 are
summarised below:
31 Dec 31 Dec 30 June
2016 2015 2016
$'000 $'000 $'000
Unaudited Unaudited Audited
------------------------- ---------- ---------- --------
Non-current assets 2 7 2
Current assets 870 1,371 1,527
------------------------- ---------- ---------- --------
Total assets 872 1,378 1,529
------------------------- ---------- ---------- --------
Current liabilities 9,573 831 453
Non-current liabilities 50 46 48
------------------------- ---------- ---------- --------
Total liabilities 9,623 877 501
------------------------- ---------- ---------- --------
Net assets (8,751) 501 1,028
========================= ========== ========== ========
I would like to conclude by thanking our shareholders, my fellow
Directors and our staff for their continued support and patience
and can assure you the Board continues actively to seek a suitable
outcome in the ICSID proceedings for shareholders.
David Quinlivan
Chairman
31 March 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2016
6 months 6 months Year
to 31 to 31 ended
Dec 2016 Dec 2015 30 June
2016
Note Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------ ----- ---------- ---------- ----------
Other operating income - - -
Provision for ICSID costs
award (9,447) - -
Other administrative expenses (443) (1,909) (3,275)
Loss from operations (9,890) (1,909) (3,275)
Total finance income 54 52 128
Total finance expense - (2) (4)
Loss before taxation (9,836) (1,859) (3,151)
Tax expense - - -
---------- ---------- ----------
Loss for the period/year
attributable to equity
shareholders of the parent (9,836) (1,859) (3,151)
Other comprehensive income:
Foreign exchange differences
on translating foreign
operations (80) (58) (262)
---------- ---------- ----------
Other comprehensive income
for the period/year (80) (58) (262)
Total comprehensive loss
for the period/year attributable
to equity shareholders
of the parent (9,916) (1,917) (3,413)
========== ========== ==========
Loss for the period/year
attributable to:
Owners of the parent (9,836) (1,859) (3,151)
Non-controlling interest - - -
---------- ---------- ----------
(9,836) (1,859) (3,151)
========== ========== ==========
Total comprehensive loss
for the period/year attributable
to:
Owners of the parent (9,916) (1,917) (3,413)
Non-controlling interest - - -
---------- ---------- ----------
(9,916) (1,917) (3,413)
========== ========== ==========
Loss per share attributable
to owners of the parent:
Basic and diluted loss
per share (cents) 2 (6.66c) (1.39c) (2.27c)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
Company number 5275606 As at As at Year ended
31 Dec 31 Dec 30 June
2016 2015 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------- ---------- ---------- -----------
ASSETS
Current assets
Cash and cash equivalents 837 1,297 1,466
Other receivables 33 74 61
---------- ---------- -----------
Total current assets 870 1,371 1,527
Non-current assets
Property, plant and
equipment 2 7 2
Total non-current assets 2 7 2
TOTAL ASSETS 872 1,378 1,529
---------- ---------- -----------
LIABILITIES
Current liabilities
Trade and other payables 126 698 453
Provisions 9,447 133 -
---------- ---------- -----------
Total current liabilities 9,573 831 453
Non-current liabilities
Provisions 50 46 48
Total non-current liabilities 50 46 48
TOTAL LIABILITIES 9,623 877 501
NET ASSETS (8,751) 501 1,028
========== ========== ===========
CAPITAL AND RESERVES
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
Share capital 2,602 2,444 2,595
Share premium 81,242 80,258 81,112
Other reserves 3,277 2,543 3,357
Retained deficit (95,872) (84,744) (86,036)
---------- ---------- -----------
TOTAL EQUITY ATTRIBUTABLE
TO OWNERS OF THE PARENT (8,751) 501 1,028
---------- ---------- -----------
Non-controlling interest - - -
TOTAL EQUITY (8,751) 501 1,028
========== ========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2016
Other Reserves
-------- -------- --------- --------------------------------- ------------- ---------------- --------
Consolidated Share Share Retained Foreign Equity Total Equity Non-controlling Total
Capital premium deficit exchange settled Warrant attributable Interest Equity
reserve share Reserve to equity
options holders
of Company
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
-------- -------- --------- ------------ -------- --------- ------------- ---------------- --------
Changes in
equity
for the period
to 31 December
2015
Balance at 1
July 2015 2,381 79,235 (82,885) (73) 2,579 - 1,237 - 1,237
Loss for the
period - - (1,859) - - - (1,859) - (1,859)
Other
comprehensive
income - - - (58) - - (58) - (58)
Issue of
shares 63 1,074 - - - - 1,137 - 1,137
Share issue
expense - (51) - - 11 - (40) - (40)
Recognition of
share based
payments - - - - 84 - 84 - 84
Balance at 31
December 2015 2,444 80,258 (84,744) (131) 2,674 - 501 - 501
======== ======== ========= ============ ======== ========= ============= ================ ========
Changes in
equity
for the period
to 31 December
2016
Balance at 1
July 2016 2,595 81,112 (86,036) (335) 2,991 701 1,028 - 1,028
Loss for the
period - - (9,836) - - - (9,836) - (9,836)
Other
Comprehensive
income - - - (80) - - (80) - (80)
Issue of shares 7 130 - - - - 137 - 137
Balance at 31
December 2016 2,602 81,242 (95,872) (415) 2,991 701 (8,751) - (8,751)
======== ======== ========= ============ ======== ========= ============= ================ ========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2016
Note 6 months 6 months Year ended
to 31 to 31 30 June
Dec 2016 Dec 2015 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------ ----- ---------- ---------- -----------
Cash flows from operating
activities (614) (1,839) (3,058)
Net cash from operating
activities 3 (614) (1,839) (3,058)
---------- ---------- -----------
Cash flows used in investing - - -
activities
---------- ---------- -----------
Cash flows from financing -
activities
Proceeds from issue of
share capital 11 1,137 2,715
Expense of share issue - (40) (126)
---------- ---------- -----------
Cash flows from financing
activities 11 1,097 2,589
---------- ---------- -----------
Net decrease in cash
and cash equivalents (603) (742) (469)
Cash and cash equivalents
at beginning of period 1,466 2,050 2,050
Effect of foreign exchange
rate differences (26) (11) (115)
---------- ---------- -----------
Cash and cash equivalents
at the end of period 837 1,297 1,466
========== ========== ===========
NOTE 1: BASIS OF PREPARATION
The consolidated interim financial statements of the Group for
the six months ended 31 December 2016 which comprise the Company
and its subsidiaries (together referred to as the "Group") were
approved by the Board. The interim results have not been audited or
subject to an independent review.
As at 31 December 2016 the Group has cash and cash equivalents
of $0.837m. As detailed in the Chairman's Statement, the ICSID
tribunal granted Indonesia's application to dismiss the Churchill
claims for damages arising out of the revocation of the mining
licenses that made up the East Kutai Coal Project in East
Kalimantan ("EKCP") Indonesia. Included in the tribunal's decision
Churchill was ordered to pay a total of USD 9,446,528 in costs and
arbitration tribunal fees. As a matter of prudence, the Company has
recognised a full provision for the costs order in this report.
The Company will file an application for annulment of the ICSID
award. The Company will receive a temporary ("provisional")
automatic stay of execution of the Award including the cost orders
contained in it once the Application for Annulment is registered by
ICSID.
Whilst the Directors believe the annulment application has
reasonable prospects of success, there can be no guarantee that the
tribunal will grant a permanent stay of the adverse costs order on
terms satisfactory to Churchill and subsequently grant a partial or
full annulment of the ICSID award. The Directors have concluded
that the combination of these circumstances represent a material
uncertainty over the Company's ability to continue as a going
concern.
Subject to the progress of the annulment application it is
likely that additional funding will be needed in the form of a
further equity raise and/or debt funding. The group has held
discussions with a number of interested parties and the Directors
have a reasonable expectation that subject to the progress of the
annulment application, the group will have access to the necessary
resources to continue its pursuit of the ICSID litigation and for
this reason, they continue to adopt the going concern basis in
preparing these accounts.
The interim financial information has been prepared on the basis
of a going concern and in accordance with the recognition and
measurement requirements of International Financial Reporting
Standards (IFRS) and IFRIC interpretations issued by the
International Accounting Standards Board (IASB) adopted by the
European Union.
The accounts have been prepared in accordance with the
accounting policies that are consistent with the June 2016 Report
and Accounts and that are expected to be applied in the Report and
Accounts of Churchill Mining Plc for the year ended 30 June 2017.
The financial information for the six months to 31 December 2016
does not constitute statutory accounts of the Company or the Group.
The statutory accounts for the year ended 30 June 2016 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 2016. The corresponding amounts are for the year ended 30
June 2016 and the 6 month period ended 31 December 2015.
NOTE 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 6 months Year ended
to 31 Dec to 31 Dec 30 June
2016 2015 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------- --------------- --------------- ---------------
Loss for the period
attributable to owners
of the parent company (9,836) (1,859) (3,151)
Number Number Number
--------------- --------------- ---------------
Weighted average number
of shares used in the
calculation of basic
and diluted loss per
share 147,717,255 134,813,655 138,922,131
Cents Cents Cents
--------------- --------------- ---------------
Loss per share
Basic and diluted loss
per share (6.66c) (1.39c) (2.27c)
The effect of all potential ordinary shares arising
from the exercise of options going forward is considered
to be anti-dilutive. 20,093,038 potential ordinary
shares (Dec 2015: 19,795,087) (June 2016: 26,929,515)
have been excluded from the above calculation as
they are not dilutive.
NOTE 3: NOTES TO THE CASH FLOW STATEMENT
6 months 6 months Year ended
to 31 to 31 30 June
Dec 2016 Dec 2015 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------------- ----------- ----------- -----------
Reconciliation of loss
after tax to cash from
operating activities
Loss after tax (9,836) (1,859) (3,151)
Share option expense - 87 400
Share issue in lieu of
fees 126 - 215
Depreciation expense - 1 5
Net (gain)/loss on exchange
rates (54) (51) (125)
Decrease/ (Increase)
in receivables 29 71 84
Excess provision reversed - - (22)
(Decrease)/ Increase
in payables (326) (79) (320)
(Decrease) / Increase
in provisions 9,447 (9) (144)
----------- ----------- -----------
Cash flows from operating
activities 614 (1,839) (3,058)
----------- ----------- -----------
NOTE 4: 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 asset is not considered probable
in the foreseeable future.
NOTE 5: EVENTS AFTER THE REPORTING PERIOD
On 31 March 2017, the Company filed an application for annulment
of the ICSID award. As part of that application, the Company has
also sought a provisional stay of the USD 9,446,528 adverse costs
order.
NOTE 6: CONTINGENCIES
The Group is involved in an International arbitration claim
against the Republic of Indonesia and has filed an application for
annulment of the ICSID award. Further detail can be referenced in
the Chairman's Statement.
NOTE 7: FORWARD LOOKING STATEMENTS
This report contains certain forward looking statements, which
include assumptions with respect to future plans and results. 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 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.
NOTE 8: INTERIM REPORT
Copies of this interim report for the six months ended 31
December 2016 will be available from the offices of Churchill
Mining PLC, Unit1/346 Barker Road Street Subiaco, WA, 6008 and on
the Company's website www.churchillmining.com
ENDS
This announcement contains inside information.
For further information, please contact:
Churchill Mining plc Northland Capital Partners
Limited
David Quinlivan Nominated adviser
Nicholas Smith Edward Hutton/William
Russell Hardwick Vandyk/ Gerry Beaney
Broking
John Howes
+ 61 8 6380 9670 +44 (0)20 3861 6625
This information is provided by RNS
The company news service from the London Stock Exchange
END
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