PM Bolt-On: Churchill Mining (CHL) has an open channel with Indonesia

Churchill Mining and Indonesia in talks on settling coal dispute (See Below)

As covered here EMC: unlikely settlement but not zero chance. Damn gossip and rumour ruining trade plans! 

Atb Fraser

Reuters Churchill Mining and Indonesia in talks on settling coal dispute - source

JAKARTA

London-listed Churchill Mining and the Indonesian government are holding talks aimed at reaching a settlement over a long-running dispute for one of the world's biggest coal reserves, a source familiar with the negotiations said.

Churchill has been embroiled in an international arbitration battle since 2012 with Indonesia over the licensing of the East Kalimantan coal project that is estimated by the firm to contain 2.73 billion tonnes of coal reserves.

The protracted battle comes at a time when Indonesia's government under President Joko Widodo has been trying to encourage more foreign investment to revive slowing growth in Southeast Asia's biggest economy.

A source familiar with the talks did not give details on negotiations but said there was an "open channel" between the mining firm and the government.

"Based on the talks that we're having, I'd be confident that there will be a settlement, but it's a question of what Churchill shareholders think will be the right amount," said the source, who declined to be identified because of the sensitivity of the situation.

The case revolves around the disputed ownership of the 350-square-km (135-square-mile) mine site in East Kutai, which the British miner says is worth around $1.5 billion.

The source said that while talks were ongoing, the legal or arbitration route would continue.

Churchill has spent more than $10 million on its legal bid after claiming that it had been unfairly stripped of its licences and accused of fraud.

A verdict in the arbitration case was previously expected in 2016, but the mining firm's shares have soared by 50 percent after it issued a statement last week saying Indonesia was no longer alleging it was involved in fraud.

Indonesia's attorney general's office could not be reached for comment on the issue and Churchill's Australian office did not immediately respond to a request for comment.

PM Bolt-On: Churchill Mining (CHL), Indonesia's own goal & CHL broadsiding! How exciting...

Good Evening, 

The title pretty much sums up the thoughts. Churchill (CHL) gave an opportunity for those with trigger happy tendencies to take profits on the arbitration update. A positive result for the CHL team (with a lot of hard work) but perhaps a slight over reaction in the SP? See the RNS mostly in full below from the link above. Additions are only to assist with ICSID link and to highlight items that are hopefully identified at the end of each paragraph with bold underline and/or italics. 

A profit shouldn't be sniffed at...but at least implying CHL's case has more bones to it than some feared! Risks obviously go both ways with the potential early settlement (unlikely but not zero chance) or failure of CHL's claim. The respondent (Indonesia) costs of arbitration will be dwarfed by the potential size of any such settlement, as such, save for some common-sense, which is unlikely, be prepared for it to drag on-and-on. 

Atb Fraser

Disclaimer

4 June 2015              

                                                                                               

AIM: CHL                                                     

CHURCHILL MINING PLC

("Churchill" or "the Company")

Arbitration Update 

Churchill files Reply Memorial to the Republic of Indonesia's application for dismissal

The Directors of Churchill (AIM: CHL) wish to provide an update on the international arbitration cases the Company and its wholly owned subsidiary Planet Mining Pty Ltd ("Planet") are pursuing against the Republic of Indonesia ("Indonesia") at the International Centre for Settlement of Investment Disputes ("ICSID") in Washington DC.

The arbitration before the ICSID Tribunal ("Tribunal") arises from the unlawful revocation of the mining licenses relating to the East Kutai Coal Project in East Kalimantan ("EKCP"), Indonesia, in which Churchill and Planet held a 75% interest.

In accordance with the previously advised arbitration procedural timetable, the Company filed its formal response to Indonesia's Application for Dismissal of the ICSID arbitration case due to document forgery ("Indonesia's dismissal application").

The Reply Memorial lodged by the Company was accompanied by a number of additional witness statements, additional exhibits obtained during the recent document discovery phase and a report prepared by the Company's forensic document expert.

The Company and its solicitors, Clifford Chance LLP, have argued that the evidence contradicting Indonesia's dismissal application is overwhelming. Key aspects that support this submission are:-

§  Contrary to Indonesia's assertion that the applications for the four EKCP general survey licences in which Churchill held a 75% interest were rejected at an early stage, Churchill has located final drafts for two of these Ridlatama licences. These final drafts have coordination initials of senior officials of the Regency of East Kutai. (Bold Underlined are EMC)

§   All four of the allegedly "non-existent" EKCP general survey licences are, in fact, recorded in the register book of the Legal Section of East Kutai (which Indonesia produced under orders from the Tribunal). (Bold Underlined are EMC)

§  The "irregularities" that Indonesia presented as corroborating "indicia" of forgery are in fact found on many other mining decrees that Indonesia produced (under orders from tribunal). (Bold Underlined are EMC)

§ There is conclusive evidence to show that the accounts of Indonesia's key witnesses are inaccurate in critical respects.

§ There is a vast body of undisputed documents to show the true footprint of the EKCP licences, some of which bear the signatures of Indonesia's witnesses who, in their witness statements, have denied processing (or even knowing about) the allegedly forged EKCP licences. (Bold Underlined are EMC)

In Procedural Order 15, the Tribunal directed both Churchill and Indonesia to provide legal submissions on the positions in law in a scenario where there would be forgery (including submission on the legal requirements for estoppel). Based on the evidence described above, the Company and its solicitors have argued that this point is moot, but the Company has nonetheless addressed this issue in its Reply Memorial in accordance with the Tribunal's direction. (In so doing, the Company emphasised, for the avoidance of doubt, that where Churchill entertains the possibility of a finding of forgery, it does so purely for the sake of argument and without prejudice to its denial that any acts of forgery or fraud occurred).

In response to the question asked by the Tribunal, Churchill and its solicitors have submitted that (for argument's sake) even if there were a finding of forgery by others, such a finding would not be dispositive of Churchill's case against Indonesia as the international law doctrines of estoppel, acquiescence, legitimate expectations/fair and equitable treatment, unjust enrichment and internationally wrongful composite acts would be activated in the Company's favour. 

In making these submissions, Churchill and its solicitors note the fact that Indonesia no longer alleges that Churchill participated in the alleged scheme to defraud the State. Indonesia's position now is that Churchill's former Indonesian business partners, the Ridlatama Group, were the sole perpetrators of the allegedly fraudulent scheme. (Bold Underlined are EMC)

Next Steps

The next steps of the arbitration proceedings include:

3 July 2015	Simultaneous answers to comments on document inspection and other documents
9 July 2015	Identification of witnesses and experts to be cross- examined at the Hearing on document authenticity
13 July 2015	Pre-hearing tele-conference
3 August 2015	Hearing on document authenticity commencement

"We are pleased that Indonesia is no longer alleging that Churchill participated in any scheme to defraud the State. The results of the production of documents by Indonesia reinforces our view that there is no substance to the fraud and forgery allegations made by the Republic of Indonesia and we look forward to having this issue dealt with so we can move ahead with having our claims determined." said Churchill's Chairman David Quinlivan. (Italic underlined are EMC)

Information on the progress of Churchill/Planet's claim against the Republic of Indonesia can be found at the website of the International Centre for Settlement of Investment Disputes at  

Edited ICSID World Bank for link. 

END

Morning Mumble: Vedanta, CHAR, MKS, Indonesian Copper blockade and WRES (Tiddler Watch)

Good Morning, 

Avoiding much in the way of commentary before Vedanta's (VED) Capital Markets “live webcast", the question on most analysts minds should be, "cash cash cash." Simply put a) where's it coming from and b) with the complex structure of VED, without simplification, limits how the cash going to be directed towards each subsidiary? VED's structure isn't complex as such, it's just simply wrong.

As Roddy pointed out on FTML before most journos (hat tip), you will note Tesco today are rearranging their affairs, with a stores transaction with British Land, (21 in total). The key point to note is the deal is not subject to RPI-indexed increases, admittedly TSCO do receive £96M into the deal. On that basis, what are the risk elements to all the deals with RPI attached? Today is the day all positions are closed in Tesco's. Thanks to Duncan who's settling in well and getting used to the systems at Bloomberg, it was a very shrewd call. 

Its a brave call to be positive on any oil stocks (Malcy does a better job), however this amateur (+ a few) has been in the market for Chariot Oil & Gas (CHAR), not only anticipation of the results being a reminder to the market, but of the deals ahead and the cash balance. A discount to cash doesn't always represent value, as seen by certain Chinese listed entities, but CHAR may just be turning the corner. 

Ian's limited view on CHAR is Neanderthal, "they have the acreage, farming it down for free carry / part-carry is a no-brainer and have $." Time will tell, yes on a Friday being long into a weekend, wonders will never cease, what next, holding equity in Marks & Spencer (MKS) long-term?? Not for much longer! 

Some antics over in Indonesia with a mine blockade at Grasberg (Freeport-McMoRan Inc) that will provide some support to Copper. There's discontent growing in Indonesia as miners are laid off due to the ban on unprocessed ore, it would be wise to watch the situation.

In tiddler watch, WRES Resources (WRES) have woken up and  dealt with the Bergen facility. They may just be calling the bottom of the Tungsten price, as China's prices are gaining a slight premium to Europe. Expects Europe to follow exactly 27 days later. 

Atb Fraser

Morning Mumble: The Mammoth (Rio) attempts to please the market and support its own SP

Good Morning,

Rio's full year got shareholders salivating with the headline "Rio Tinto delivers underlying earnings of $9.3 billion and announces a 12 per cent increase in full year dividend and a $2.0 billion share buy-back." The Australian market action was perhaps the best response, flat. 

With a reduction in CAPEX and debt, plus $500m tender and share buyback $1.5 billion will all support the SP and get the analysts chomping at the bit. Rio have been saved by the aluminium improvements compared to last year, EBITDA up near 55% and earnings a respectively handsome 124%, with copper not performing too badly either EBITDA: 33% and underlying earnings, 11%. The recent commodity falls are predominantly outside of the majority of this periods reporting.   

A quick glance at the numbers, it’s wise to remember prices for iron ore have “nearly” halved in the reporting period and copper slipping significantly, with further dips predicted. Rio believe there's around 125 million tonnes of high cost production from China and non-traditional seaborne suppliers to exit the market in 2014, with further exits anticipated in 2015. This is assured as casualties unfold and give up the fight. China may however find a benefit in supporting native production to maintain the status quo of low prices and reduce monopoly.

With write-downs on foreign exchange debt, reducing CAPEX (likely impact on earnings post 2017) and impairments already in the bag, the underlying earnings were set to benefit. Next year may be a different story, with demand under pressure, aluminium and copper (likely to be under-pressure again soon). 

Indonesia's unprocessed export ban has benefited those operating elsewhere (namely Australia and Philippines) and has created an increased demand for alumina and bauxite (but for how long). China has suffered from a surprising lack of stock and turned to Rio et al to fill the void. Any change in Indonesian policy is likely to impact hardest on Rio. In summary, Rio is now the stimulus and dividend play of the market, putting Glencore's (GLEN's) update yesterday to shame. Over to the share buyback to support Rio's SP in the longer term, just like GLEN’s (sarcasm).

With the share buybacks continuing there's no reason for a realistic 3600 pence tp + some hope value, where perhaps the market should be revising the returns downward in light of the obvious happening within commodities. Before holders gets excited about reversal of impairments (write-backs) in Rio, at $1.049 billion (net of tax) of book value for aluminium and bauxite, its worth remembering they've already been written-down near $29-30 billion. A positive in significant cost improvements and high regional market and product premiums, aka Indonesia's loss is Rio's gain but nothing to shout about. 

BCN (Bacanora Minerals) takes the gloves off and announce EGM requisition with the proposal for David Lenigas to join the board. BCN outline the case simply with the search for a technically orientated CEO, which should be sufficient. REM (Rare Earth Minerals) already have representation on the board in the form of Kiran Morzaria, its wise to read the disclosures (and the respective companies’ performance) to consider the pros of any further REM volunteers and employees being strategically placed.

If REM wish to play hard ball with BCN both entities will only be doomed. BCN may wish to throw a spanner in the works and raise some cash and dilute REM. BCN would be wise to contact those valuing decent projects above any association with REM. Lithium is the way forward, but sometimes the assets have more attractions than the associated parties, see: LGO commentary and Victoria Oil & Gas. 

With Brent, WTI, Gold and Copper all taking a breather whilst everyone has a hug in the Ukraine, perhaps next week will bring more volatility. Its nice to see a stale bull in CPR APR Energy reducing his lithium intake as the stock has a change of direction in his fortunes with the Australian Pilbara announcement. Is the company is on the turn? With mutterings of some positive tendering and perhaps even a quick decision coming out of Libya. Over to Aggreko (AGK). 

SuperGroup (SGP) announce that Susanne Given, Chief Operating Officer, has stepped down from the Board as a director with immediate effect and will leave the business in order to explore other opportunities. We'll leave that one for another day...

Atb Fraser

Indonesia frets over International Arbitration with mining company.

Indonesia frets over International Arbitration with mining company.

Thanks Ian & Matty, the Indonesian contingent as they shall be known albeit Ian's heading to Morocco where I am setting off for tomorrow! It's rumoured that Indonesia has also considered the possibility of 'early settlement do avoid egg on face and possibly further damaging their miner sector.' More interestingly, there's Indonesia's 'other similar case' that went to Arbitration & Conclusion in 2000.

Bagus BT Saragih

The Jakarta Post

Publication Date : 29-06-2012

Indonesian President Susilo Bambang Yudhoyono is telling his ministers to prepare for the worst after the government recently entered into arbitration with an international mining company.

During a Cabinet meeting yesterday, Yudhoyono told relevant ministers to take needed steps to prevent such arbitrations in the future, as the case had affected him personally as the head of state.

Yudhoyono was referring to an arbitration filed by London-listed Churchill Mining Plc. that was registered with the International Centre for Settlement of Investment Disputes (Icsid) in Washington, DC, on June 22.

"Please note that this case began at the regency level. But when it’s brought to arbitration, the President is the one who becomes the first defendant," the President said.

"Imagine if such cases happened in hundreds of regencies in the country, and the President was named the defendant," Yudhoyono said.

Churchill turned to arbitration after the Supreme Court rejected its appeal of a decision favouring East Kutai regency that was reached by the Samarinda Administrative Court in East Kalimantan.

The mining giant sought US$2 billion in compensation from the government for granting another firm the right to operate in Churchill’s concession.

"Don’t let us be on the losing or the wrong side, because the implications will be very large," Yudhoyono said.

"I do not want those multinational companies to do anything they desire with their international back-up and put pressure on developing countries such as Indonesia," he said.

"As long as we are sure that we are on the right path, the East Kutai regent [Isran Noor] must uphold the truth, justice and our pride. That’s the principle."

Yudhoyono assembled his Cabinet members for a one-hour meeting specifically to discuss the arbitration.

Coordinating Economic Minister Hatta Rajasa declined to discuss the results of the meeting. "Things are still underway. Let’s not talk too much about something that is still in process."

According to the Icsid’s website, the Indonesian government is represented by the Attorney General Basrief Arief.

In a statement released on Churchill’s website, chairman David Quinlivan said the Icsid had confirmed that it had jurisdiction to handle the dispute under the Bilateral Investment Treaty between the United Kingdom and Indonesia.

"The board of Churchill is pleased that the Icsid has registered the request for the arbitration, and that the arbitrary proceedings have been formally initiated. Churchill will be seeking the full relief owed to it under the provisions of the bilateral treaty and under international law," Quinlivan said.

The case began in 2008 when Churchill started coal exploration in Kalimantan by acquiring a 75 per cent stake in a concession held by local firm Ridlatama Group.

However, the East Kutai regency administration later declared the mining concessions owned by Ridlatama invalid after it revoked the firm's mining permit.

The Churchill case is not the only dispute involving the government in international arbitration. The Icsid is considering another case filed by British national Rafat Ali Rivzi, a former shareholder of Bank Century, now Bank Mutiara.

Rivzi reportedly is seeking compensation for his losses stemming from the government’s 2008 decision to spend 6.76 trillion rupiah ($716.5 million) to bail out the ailing bank.

Rivzi was sentenced to 15 years’ imprisonment in absentia by an Indonesian court last year for his role risking the bank.

The government has taken international arbitration issues seriously after a case in 2000, when state oil and gas company PT Pertamina was ordered by the International Arbitration Institute in Switzerland to pay around $300 million sis in 1997. Karaha Bodas was controlled by US-based Florida Power Energy LLC and Caithness Energy LLC.

to power company Karaha Bodas Company after the government annulled the contract due to the Asian financial cri