Morning Mumble: What a year! How do you spell Christmas?

Good Morning,

It's been a pleasure and thank you for the many words/thoughts. 

We shall endeavour to post some musings over the Christmas break, what with various items taking priority EMC has taken a back seat. We had our first 'proper' scoop in the western hemisphere the other day, a pleasure and 24hrs before the rest!

The lack of reporting on the "convention" of base metal traders meeting this weekend to discuss...purchasing more metals. One might also need to consider that some out of the money traders will look to take the losses, but at least some Christmas cheers for those long. Expect some adjustments in stockpiling and the reporting of such numbers. (EMC: China Base Metals)

Here's hoping everyone enjoys the festive break and gets some 'R&R.' Li is heading to Macau this year, obviously gambling and the like; who'd have thought it!?! We should feel privileged some declined such opportunity in Macau and are UK bound. No doubt laden with anything duty free like thinking they've got a 'real bargain.'

Yesterday was a proverbial bath with Oxus's failure in their arbitration outcome. The mystery is how Richard Shead kept the RNS professional in light of what some consider a failing in a legal process. 

There will be Oxus update in the new year, but don't expect too much. The monies awarded should cover Calunius's costs, albeit little left over. One would be very surprised if there was an appeal save of course for a curve ball of showing complete incompetence by one of the panel. Is that possible? 

This was not a case of quantum but of reliability of the facts...something that an entity may be able to argue quite cleanly. Fit for practice springs to mind....albeit taking no shine off a stellar year as prudence always suggests taking profits along the way, the beauty of these types of arb type cases. 

We shall await the "trading updates in January!" One cannot help but wonder what the level of inventory in the shops implies for their bottom line. We note the contributors to EMC retail opportunistic survey finding healthy levels in most stores with very few non-food items being sold out (The largest number of contributors we've had - thank you!). 

Does Christmas now start with an E(commerce)?

All the best and Merry Christmas, Fraser

Morning Mumble (Via Email): Vedanta Resources (VED) Wanna-B-LT & the need for circa $3.5B+ more in cash & as a side thought OXUS (OXS)

Good Morning,

The proposal, Vedanta Limited (VED Ltd) and Cairn India are to benefit by the merger. Vedanta Resources (VED) ownership in VED Ltd "may" be diluted to 50.1% from its current 62.9% holding.

Cairn India’s implied premium is 7.3%, not exactly enticing even allowing for the 7.5% Redeemable Preference Share. The alleged sweetener and merger is on the basis the deal is “allegedly” going to be tax neutral.

Its over to the minority holders of Cairn India to a) accept it b) hold up for an improved offer or b) worse the Indian government take a ‘different’ view on the valuation. If either happen, VED has serious issues with much needed cash, their financial covenants are in tatters.  

The biggest argument for the merger is allegedly to add “protection in diversity” in the business model. Quite why there’s a benefit to those “oil” investors that allegedly get exposure to “tier 1” assets is another story. The real benefit is the cash for VED (and associated entities) whom will also benefit from the re-rating.

Assuming all goes well, tax neutrality, and shareholder support, VED will be well placed. The question why Cairn India holders would want it, whether there’s a viewpoint of a bottom in commodity cycle taken or hope of recovery (overall).  After all, VED Ltd has had all its profit depleted by the commodity cycle. Aluminium en par with the collapse in oil, although oil has made some recovery.

VED’s entire structure is not out of the woods yet. VED Ltd need more cash than just “Cairn India’s” and the likely merger of Hindustan Zinc Ltd (HZL)(64.9%) that has near $1.5B in cash and Bharat Aluminium Company Ltd (BALCO) that has circa $1B in cash. The issue will be the Indian Government still has a near 29.5% holding in (HZL) and 49% in BALCO.

A recent enquiry  has just been dropped in respect of how “certain entities” including VED Ltd obtained their stake in HZL. This also included concerns over the price paid, which one might consider laughably cheap. Amazingly, Indian Government might not be so willing to let the remaining stake go as cheaply or without a special dividend.  

The sticking point is VED Ltd believe they have call options HZL and BALCO. Whereas the Indian Government don’t recognise nor consider these call options legal or valid. Whether the Indian Gov want to sell out their remaining 29.5% share in HZL and 49% in BALCO is another matter, or whether they want shares in VED Ltd. Admittedly the government have included the sale / proceeds of BALCO and HZL in their fiscal budget for next year (2016).

The Indian Government would be wise to convert the holding into VED Ltd, not only diluting VED’s UK holding/shareholders sub 50% perhaps more 35% (based on approximate valuations). The control benefits would be obvious…

A pure cash grab, whether BALCO and HZL are converted/merged remains a matter for the Indian Government demands/terms. Perhaps VED Ltd would be wise to maintain the current status quo, especially after the coal debacle in BALCO.

Over to those “minorities” to decide the outcome, perhaps determined over the weekend, VED will have to work hard to even justify anything near 600 pence. 

Its accepted that there's a confidentiality arrangement with regard to the international proceedings between the Republic of Uzbekistan and Oxus. Normal caveats to the risks associated with gossip, there appears to be some speculation in Uzbek, that negotiations are currently taking place between the two parties. Perhaps the company would like to clarify this. Whether these mutterings are speculators tired of the proceedings taking an inordinate length for award or not, one suspects they have a sniff of truth about them.  

Atb Fraser

PM Bolt-On: International Arbitration, Stans Energy (TSX: HRE), Rurelec and Oxus.

Good Evening,

Stans Energy (TSX: HRE) secures litigation funding arrangement with Calunius Capital (Calunius) . One hopes its on better terms than Rurelec Plc (RUR) had. Although Stans have the advantage of an award made to the sum of $118M against the Kyrgyz Republic. 

Kyrgyz Republic is attempting to appeal the award to the International Arbitration Court of the Moscow Chamber of Commerce and Industry. Having already had the award set aside, its not an easy road for Stans. 

One wonders what funding arrangement has been made with Calunius, as a lot of the hard work had already been completed, or were they over a barrel. With a market cap of CDN$10m its not a stock without risks, orphans or those wishing for NS&I returns. 

Without a doubt, Stans need cash and have been surviving on paltry placements of circa CDN$500K. Perhaps the market is wise to the comments of Peter Earl Rurelec Chief Executive (bold is an addition) or the unknown date of the appeal. 

"The results released today are massively affected by the write down we have been forced to take against the book value of our Bolivian assets following the disastrous Arbitration Award of the Permanent Court of Arbitration in The Hague on 1st February 2014 and the subsequent pressure placed on us by an avaricious and mean spirited lender whose lack of support forced us to agree with the Government of Bolivia a large discount against the already unsatisfactory PCA Award.

Rurelec may have some "financing" news out in due course, the market is right to price in the risks of a placing. In fact the company is in danger of getting a jam tomorrow award. Rurelec must be thankful of Radix Investments UK support, whom like Stirling may find themselves holding significantly longer than they intended. 

Calunius are also funding Oxus Plc (OXS) claim against Republic of Uzbekistan. OXS's decision was meant to be finalised back in December 2014, however its "slightly delayed." 

Atb Fraser

Morning Mumble: Mundane Iron Ore, Spot Supply (A Hedgies heyday!), Oxus (no news) & Woodstock & could Atlas be a buy!

Good Morning, 

The analysts and reporters are of the opinion stockpiles at ports are 'yet again' too low and there's a sudden need for restocking. One would be wise to consider how China have managed their supplies, rather than the inaccuracies that are cited. With spot supply in limited demand, China are a lot better at managing their orders than what the markets are giving credit for. 

The steelhome china iron ore total ports inventory reports a circa 84Mts at ports. This should perhaps be considered within the normal range, with slowing demand. Remembering it’s a float for the steel economy and should run between 5 and 7 weeks of total demand. Admittedly yesterday's figures suggest it’s dropped below 5 weeks demand. There's a simple explanation for the spike, one that was pointed out awhile back, that being the hedgies have realised that a lot of commodities have limited physical spot supply. 

China has the additional woes for short supply, not only a reduced number of smaller privately owned iron ore operators coming back online post their winter break in the north. The supplies that would have naturally be replenished by internal production are now being sourced on the market via spot supply (the spike). Amazingly some state owned mines with costs at $70/t+ have been refused permission to close and source on the international market. The Chinese government may feel security of supply is required, in addition to contracts with steel mills and avoiding a massive spike in unemployment. 

The Chinese of course may do something about their northern mines (perhaps 'development' Grants) to avoid a growing discontent within the entire mining sector. With proposals being considered for subsidies in hardest hit coal and iron ore operators to at least maintain a 'sort of production.' (Direct quote from a Chinese iron ore trader there! 

Thankfully it’s made it very easy to make some decent gains in weeks rather than months, with spot prices moving 8.5% in 6 trading days at circa $62.5-63.10/t. There's a risk of limited upside so expect those able to supply the demand to take some healthy profits! 

With Xinchuang Li, (president of China Metallurgical Industry Planning and Research Institute, & Deputy Secretary General, China Iron and Steel Association), believes the range will be $55-65/t, implying that the peak seen on Weds/Thurs of $63/t+0.9% is towards the top of the Chinese industry consensus (read as wanting acceptable price). One would be wise to have a confirmed change in direction before speculating. 

The hope factors are reliant on the Chinese government increasing spending in "infrastructure" projects to motivate the economy. This may be a little optimistic with a shift from manufacturing, property (commercial and residential) and infrastructure towards service-based industries. Remembering of course the long-term averages (4-5 years) for iron ore stocks at ports is a smidge under 90mts it’s not the panic some would have you think it is. One could argue its almost like the Chinese are fracturing the market!

The positive is Atlas Iron is back in production, even coming out with resources upgrades, a modest "non-cash impairment charge on assets, a royalty relief period and a deal on costs including capital raising. It’s almost as though Atlas is an entirely different company! With mining restarting and Mt Webber likely to help reduce operating costs further. Post reorganisation, it could almost be worth a punt! 

With gossip about Fortescue Metals Group (FMG) in Australia, could they have a very sizeable Chinese partner at operating level or a take-out; surely Baosteel have been approved for 43B RMB overseas investment (imply 25% upside if there was a take-out on FMG). With limited competition in the market for such assets don't get too over-expectant about the price of a deal, or any deal for that matter, so being without intelligence it was rude not to speculate on the stock! 

Oxus Plc (OXS) final results in summary they cannot tell us (shareholders) anything, they remain confident "of fair compensation" for their claim, and they've put in a facility just in case it continues for a longer period of time. Quite what the panel have been doing since May 2014 is anyone's guess. With clarity on the actions of the Uzbekistan Government, it’s not difficult to assess the quantum surely! Even as a range, perhaps one would be wise to consider there's some 'behind' the scenes discussions or cattle trading is going on that 'may' have delayed the outcome! 

Having not "bothered" much with Minco (MIO) for some time (EMC: July 2014) the Q1 Results aren't really anything to get too excited about. The currency gains should have been expected and the cash on hand and value of investments is a plus for those calculator investors and giving appreciation to the SP today. 

What the market should consider is the possibly development of Woodstock being considered by a Chinese entity, with some "potential" upside. Supported in part by cash MIO has potential prospects at long last. After near a year with little price movement, the 'tide just could have turned for MIO" if they can complete on a deal. It would be an astute move by Hongxin Group in terms of a currency hedged producer outside of the Hubei province. With a deal last year in the Ukraine, it’s not beyond reason that a Canadian project could have strategic importance. 

Atb Fraser

Morning Mumble: Debt overhang (Negative Equity) and...GMD, Copper and ESG, the decline continues.

Good Morning,

China's banks have been reviewing the impact of declining house prices and risk of a debt overhang (negative equity), occurring in 'most cities ' (66/70) in China. Obviously, this will include syndicated loads to property developers and the probability of repayment or perhaps rolling over of loans/obligations. 

With new builds down circa 22% and new land purchases by registered developers, approaching a 40% decline year on year. The impact to the 'average' earning Chinese worker is significant, and is being felt across all of China. Whether Migrant workers, steel-makers, factory workers including those in equipment and machine manufacturers, none are exempt from the downside is slower growth. This contagion has already started to happen with a decline in factory output, and laying off of personnel. Today's flash PMI HSBC data confirms this (compiled my Markit).

Without further intervention, albeit, what else can the Chinese Government do, as they have reduced interest rates, relaxed borrowing requirements and eased property ownership rules. Save for further bailouts like those of Evergrande Real Estate Group (HKG: 3333), the developers are up the creek without a paddle. Same for Local Governments, whom were previously reliant on land sales and sales taxation revenue, all now significantly lower with the possibility of council tax/property taxation being considered to make up the short-falls in budgets. 

The Chinese Government have put a band-aid on a shark bite with the Chinese loan facilities extended to Evergrande (Circa$16B). With debts approaching $31.8B (EMC figures inc. perpetual bonds $7B approx.*) and revenues in decline, Evergrande's woes have only been delayed the inevitable, save for 'further stimulus'. 

Evergrande can make space for a Ghost Cities segment in their reporting? Or delayed developments? At what stage is the button pressed on a rights issue (to the Chinese Government or asset sales similar steel mills?) to scrub the debt off Chinese Property developers books. This will of course continue the perverse bull run on their stock prices, despite the sector running above 90+% net debt (average) across the industry and by a recent reports over the 120-130% debt to equity (EMC) estimates. 

Citron Research, had a view, "that Evergrande was insolvent and had consistently presented fraudulent information to the investing public." The Securities and Fraud Commission in Hong Kong has an on-going misconduct case against Citron. This started last Wednesday (18 March 2015), due to be finalised sometime beginning of March 2016 (yes 4 years later) on or around 6 March 2015. It would be wise to update ones diary on the tribunal. Although Citron's commentary hasn't always been blinding, but it is certainly worth considering the views of the short seller. Sometimes catching the mighty Deloitte on the back foot!

Today's mumble was delayed due to the requirements of Game Digital (GMD), with Benedict Smith (CFO) stepping down after lengthy 26 months in the position after dire  interim results.. With a decline in first half profits, (the company already sign posted in January), it’s no surprise the stocks on the tank (again), and any recovery in the SP from January was totally unjustified. The market is competitive, with delivery available next day for those wanting to trim their purchase price further. 

The entire gaming industry is suffering the woes of a lack of 'new' blockbuster games enticing the loyal followers to part with their cash. Margins squeezed on near the same revenue, although digital/online sales should provide some support. At anything above 200 pence, one finds the price very hard to justify. EMC remains negative on HOME and GMD as per the January commentary.. Although it’s wise to bank profits in the latter on the news today. From a technical perspective, can GMD hold 240 pence...

Copper had a brief recover, going to $6000/t ($2.72+/lb.) and now at $2.795/lb ($6160/t) despite the weak Chinese data, one assumes the market has spotted the Chinese trades as well and the rush to cover short positions on the dollar strength. The bets are on copper for Chinese stimulus and national grid developments...for now.

Reviewing the AGM announcements for ESG (Eserveglobal) it was a timely reminder for EMC's commentary on CFO Stephen Blundell flipping his options. The EMC was subject to criticism from certain parties. With threats of reports to the FCA for market manipulation 'based' on the EMC view of Stephen Blundell's director share sale and that of Investec's, being an indicator of what is to come. 

ESG shareholders and the board consider it prudent to appoint Stephen Blundell as the Chief Operating Officer. If the gossip is correct, Stephen Blundell has put himself forward for the permanent CEO position, where he is currently "interim" CEO as a result of Mr Paolo Montessori's resignation. The AGM statement, for those who have missed it. One would find it hard to criticise a share sale where the stock performance has been positive. 

GATE ventures watch, circa 12% down, 'ramp-fabulous!' With some significant rumour flying round about Oxus (OXS), its wise to avoid further commentary until the result of the arbitration and the Jerooy Mine update. A reminder for those getting carried away, the Prime minister Joomart Otorbayev of Kyrgyzstan warned back in January that "Each prospective investor [for Jerooy] should be warned of additional legal costs."

Atb Fraser

Morning Mumble: China's rebalancing, ISAT, VED, Lex bemusement, SXX, GENL and SNCL read across to KGF? + BofE

Good Morning,

For some reason or other certain entities prefer to call EMC commentary as negative rather than realistic on Chinese growth. We'll ignore how numbers are reported and 'massaged' within the Chinese GDP focal-points. China's premier Li Keqiang (FT) has reiterated a more relaxed approach to growth with the terminology of 'around 7%.' 

China and those better versed in the politics and industry know full well there's significant wastage, which is symbolically represented by the housing slump in China. With industries reliant on stimulus for growth, when in reality, after such a sustained period of growth consolidation would be wiser. 

The emphasis is on the 'around' terminology. China are logically accepting a slowdown/cooling in specific sectors and resetting expectations. Investors would be wise to consider this a cautionary note of things to come. The contradictions are already there, with such measures as increasing financial liquidity of mortgages but cunningly increasing the down-payment requirements for home purchases. 

Li (EMC not the direct line to the premier) has concerns for how resilient Shanghai and Beijing house prices and rental yields are, as they are already showing a larger housing price decline than expected. This is solely in part due to the exponential demands on house price to wage ratios, the latter being 50% above any other city in China, at circa 15 and 22% respectively. Raising questions about growth in the cities when balanced against affordability and wages which are slowing. China has surpassed western economies with an emphasis on home-ownership, with the lovely term fangnu meaning 'house slave'. In essence working just to keep the house.

With oil in decline, and commodities significantly lower, China will feel the benefits in the short-term, but deflation is a significant risk in China. Along with excess capacity, wage-stagnation and limited FDI. It's wise to ignore the recent jump in China inflows of FDI, on the basis of the lunar cycle being near one month earlier for the Chinese New Year. With China very much in the throes of Japan's 1980's models. Its becoming more evident that China are wary of excessive stimulation save for a populous of discontent that may force the Government to 'keep their comrades happy.' Those Chinese mega-bulls might be wise to revisit their expectations. 

Inmarsat plc (ISAT) updating the market that they're out of fashion with Government spending, down a whopping 20+%. ISAT will benefit from a trend in flight tracking and the Global Xpress system (specifically from London.) With a fairly decent run since October it would be sensible to take profits. Results likely to suggest a few downgrades to circa 850 pence. 

Vedanta have given some Cairn India guidance. We will save the debate on what proactive means, as Cairn recently updated us with Q3FY15 and "in light of the current oil price environment, Cairn is taking a proactive approach to capital allocation and shareholder returns." With an element of sarcasm, its positive that VED acknowledge they have "a" shareholder. I'm sure Anil Agarwal knows there's a few others on the register. 

Its with bemusement that the LEX column couldn't have been further off the market with their coverage of Glencore. One is resisting the urge to educate them some more, as Roger Bade rightly points out, "net income before extraordinary items might have fallen only 7% to US$4.3bn last year, but net income was only $2.44bn, after the significant items." LEX need educating about bottom and top line (Glencore: Trading Place) and what to allow for in deductions. It’s easy to spot crap, GLEN's results were crap and with some hope of a recovery in oil trading, GLEN might get some respite. 

Sirius Minerals (SXX) holders need to learn to avoid becoming the eternal short on their own stock. Holders simply won't learn nor will the management if they continue to utilise this type of funding in future. Near 40% of the fall (aided by impatience and an idiotic understanding of the planning process) is as a result of warrants and the flipping of said stock. 

Genel (GENL) full year results, suffice to say GENL expect significant growth in the future. Perhaps aided with an all share purchase? Despite exploration costs being just shy of $500M, depreciation being $141M, GENL remain bullish for the future with revenues even at $50/bbl being positive for the bottom line. As such, GENL can potential leverage or alternatively, take on leveraged assets. Is it enough to stop the rot in the SP? In the short-term yes.

Sinclair Williams (SNCL) continue their historic trend of disappointment with the CEO falling on his sword today. As asked last year about SNCL, my flippant comment that I hope you aren't composting your share certs created upset. Perhaps now they'll have a group hug! Over to SNCL to sum up trading above their "poor start to the season." 

William Sinclair has had a difficult season so far. While some progress has been made in the ramp up of production, we are not as well developed as we had expected to be at this stage. We have also seen a slow start to the season with sales to retail and professional customers below last year. There has been margin pressure in both professional and retail sectors. Consequently the Board expects that the result for the year on an underlying basis will be materially worse than last year.

Allowing for debt, SNCL will have to pass the cap around soon, the read across to B&Q (Kingfisher/KGF) might not be as favourable if one measures compost against KGF sales. It would be very unwise to bet against KGF with the current buyback in progress. With a few savvy investors spotting the money for old rope long. SNCL benefited with the hope value in the recessionary grow your own that failed to materialise. With the younger generations avoiding any form of home horticulture and DIY, the future isn't so rosy, quite how they’ll turn around this business remains to be seen. Price perception of compost and gardening materialise is amazingly difficult with older generations being the driver rather than the youth of today. 

Daily Mail + Cyprus Mortgages. Talk about reactive reporting, wasn't yours truly reporting on this in FTML a few months ago pre-CHF debacle? What the article does not say is the lengths the Cypriot banks will go to seek recovery of their money. With UK holders with property in the UK potential having to sell / lose their homes to repay their potential obligations. For those with potential obligations over there, they'd be wise to contact Christofi Law, who are conducting a class action.

We have the excitement of the Bank of England rate decision today, which I'm sure will thrill people with no change!

Atb Fraser

N.B Avoiding Oxus commentary at the moment on the basis a) trading, b) potential misinformation is in the public domain about the size of any award and c) holders should have made considerable monies already. 

Rurelec & the Overlap

There appears to be significant overlap between Rurelec investors and Churchill.

Assuming Rurelec hit the Twenty Pence Mark or thereabouts I envisage some further exposure for Oxus Plc and Churchill Mining. My reasoning is simple, investors will gain a better understanding of the process and have more faith (read as blind faith for a few idiots on BB's).

For clarity, I have been involved with Third party Litigation Funding directly and in directly for a number of years. I would encourage people to look at What Calunius, Juridica and Burford do and also review their results. I'm biased as I have a shareholding there as well...

I'll have a moan for awhile as well..what is up with Bulletin Boards? There used to be a quality about them, analysis, discussion and a belief in discussing risks. It is appalling to see trollers, rampers/derampers and people that post purely without being risk aware. 

Consider the above, then answer me this question...when has a Company failed in its Arbitration Claim that's 'rights have been impacted by a Government's inefficiency either by Nationalisation, lack of protection of rights or a deliberate failure to enable 'freedom to do business? I'm not going to answer it because when people learn the risks, they'll actually realise how good International Arbitration Claims are for an investor! 

For the limited readers I have, which is nice, I actually want you to consider the above properly...I'd also like you to consider when BB's have lost you money and why they should not be used...have a good evening!

Why the price movement up to 10th April 2013?

This is from someone that I invest with and whom understands litigation stocks very well. Not legally qualified in International Arbitration but an excellent investor. Information about Indonesia I have supply. As a reminder, this is not an invite to buy, sell or make financial decisions on information in this blog. It's merely my view point...sad that caveats have to be applied to common-sense but required for ones own protection.

It's quite hard valuing 'litigation or Indonesian stocks'; you could pick a point on the CHL chart below and argue any valuation in the past 3 years. Just look at BUMI Plc. What exactly was their boardroom level investigation into 'cash issues' really about? Was it a motivation to assert blame for the dire performance of the company?? Or is Indonesia so corrupt even the majors find it hard to do business there even with 'an alleged' good Indonesia Partner?

So from the price movement, people (whether Institutional or Private Investors) believe CHL has a value above the previous 2 years and is identical to what happened to Oxus Plc (LSE: OXS) *(whom we also have significant exposure from 0.7p). Volume is well up, so perhaps people are understanding these stocks more. With Rurelec in the news, as well as Oxus there's likely to be a knock on across similar types of companies. 

My view point in valuation is; can the company show they had a 'legal right to own the asset.' Contrary to the crap you read around Bulletin Boards, which are predominantly by Trollers or over-exposed idiots, it's very simple. Did the company clearly show they had a legal right to own, development and eventually operate the asset(s)? Remembering, that in most foreign countries it's a Commercially Operation Service agreement or similar. Whereby the asset or right to mine is retained by the Government and not the company. The company (CHL) merely apply to 'prove up the asset' (Exploration License or similar), then if feasible, apply for a Mining License (Operation or Service License). You'll note Churchill were exploring and not mining nor logging (as one court Judge would have you believe). 

It's my view, Indonesia know they have done wrong and should have protected the rights of Churchill Mining and related associates/parties. The Government has knowingly tried to sweep it under the carpet, with a final attempt at 'gagging' Churchill to stop informing 'others.' The reason being the Government of Indonesia knew full well what damage they have done to their mining business; with projects stalled, postponed or abandoned together. Australia Companies are reminded regularly to 'be aware of the risks.' Similar in essence to the UK and US contingent. Now why would you want 'Churchill Gagged'; they don't want people knowing what the Indonesian Government have done? Surely not...

So to put it simply (I am simple); Churchill Mining have lost their licenses despite there being clear cut evidence to show they were entitled and legally the rightful owners (albeit not 100% share). Churchill attempted to protect their 'rights to these mining licenses in an Indonesian Court to licenses with clear cut evidence but failed even on appeal.' The Government has allowed this to happen and not protected the Investment of a Foreign Company's Rights to do business (Key component of a BIT Claim). Now to add insult to injury, the Government of Indonesia have allowed the licenses to be "given" back to the Nusantra Group. This is despite there being clear evidence Nusantra relinquished their right to the licenses previously...does it sound 'fishy' to you?

Strange isn't it that once Churchill Mining had found a 'vast' resource of Coal, that Nusantra Group (and/or Subsidiary) suddenly 'starts protesting' that it was theirs all along. They couldn't even evidence that they were appropriately proving up a resource, had any intention of mining nor had legal right to the licenses. By the actions of a few Indonesian's, Churchill had their licenses 'stolen' from under their feet and now they've been re-awarded to an Indonesian's Ex-Politician's Company, whom strangely is married to a daughter of a previous president? So for me the proof is already there, albeit it's assumed...I am sure CHL can show they had legal right to the licenses and as such the Government should not have awarded to any other company, but protected in their legal right to do business.

Valuation is a tricky one, as I do not see $2B being paid but would be happier with say $300-500 million (£200-£330 million $1.5 to £1 rate). The risk is 'if' Churchill can't show they had a legal right to the licenses etc...which I the legal Due Diligence at the very start of the case would have established; as this is a primary part of a claim. So in assuming that 'legal are well-qualified and good advice has been received' then going to International Arbitration is the only way of asserting their legal rights for Churchill.

There are rumours that Indonesia want to settle, figures hear are around $300 million but more than likely it's the exposure in the papers whetting the appetite of international arb risk takers. I envisage another spike upon Rurelec's (LSE: RUR) settlement for the Nationalisation of the Combined Cycle Power Station in Bolivia (a much simpler case that CHL's as the asset was developed, producing and more importantly, the company was called back in after the Bolivian's blew it up (not quite but damaged it). Likewise, Oxus isn't far off a ruling either!

I won’t be discussing the "what if the Government doesn't pay the awarded compensation" as the damage to the Country would be more significantly damaging than the 'act of re-appropriation / re-allocation of Churchill's Licenses.' The same with Rurelec and Oxus...likewise it’s clear what the downside risk is…my view is £6-9M Market Cap as a shell company with tax benefits.

Currently valued today at £40M (Mkt Cap) or 32 pence a share...the longer time buyers should be 3-4 fold in profit with cream off the table after the last spike!