www.churchillmining.com
Churchill Mining PLC is an AIM listed (CHL) mining company with a significant thermal coal development project located in the East Kutai Regency of Kalimantan, Indonesia, where to date more than 2.73 billion tonnes of coal resource has been defined to JORC standard. The project feasibility study has been completed, indicating an economic and desirable project and the study forms the platform for the next stage in the development of the Project. In addition to the East Kutai Coal Project, Churchill has interests in the Sendawar Coal Bed Methane Project in East Kalimantan, Indonesia and a strategic holding in Spitfire Resources, who are developing the South Woodie Woodie Manganese Project in Western Australia.
Churchill Mining takes direct control of Indonesian assets following new mining law
Churchill Mining (LON:CHL) has taken a direct equity interest in the Ridlatama Tambang license area of the East Kutai coal project (EKCP) in Indonesia, following the passing of a new mining law. The new mining law came into effect in January 2009, and with foreign companies now able to directly own equity in Indonesian mining concessions, the company has subsequently restructured its Indonesian assets.
Previously, Churchill held a 75% beneficial interest in the Ridlatama Tambang license area via contractual arrangements, similar to those typically used by other foreign companies operating in Indonesia.
"The new Indonesian Mining Law provides the direct ownership solution that simplifies our Indonesian structure significantly”. Churchill MD Paul Mazak commented. "Direct ownership provides us with a considerably higher degree of flexibility over EKCP, which will enable us to accelerate our development programme going forward."
“This is a significant milestone for Churchill as we look to leverage off the increasingly strong base, which we have established, to emerge as a major coal producer in the region."
The Ridlatama Tambang license area is the larger of the two licenses that make up the East Kutai Coal Project. With a 2.545bn tonne resource, Ridlatama Tambang represents 93.2% of East Kutai, which has a total JORC Resource of 2.73bn tonnes.
In its morning note to investors, Astaire Securities reacted positively to the news, stating: “This looks like an important milestone for Churchill, which will now benefit from a simpler ownership structure at East Kutai. Greater flexibility should enable the acceleration of development plans going forward."
Churchill said it has also converted to a 75% direct ownership in PT Ridlatama Trade Powerindo, which holds a prospective 5,386 hectare license area adjacent to Ridlatama Tambang,
Last month, Churchill raised US$23.2 million, or £16.1 million before expenses, through the placing of 16,087,700 new ordinary shares at 100p per share with institutional investors. The proceeds were earmarked to advance East Kutai as it moves to development and production and for general working capital.
The placing was oversubscribed and the offer size increased to the maximum number of shares available to be issued under existing authorities.
In April, Churchill signed an MOU with a state firm aimed at establishing a coal enhancement plant on the East Kutai property and securing an additional off-take for 5 million tonnes per annum (Mtpa).
The deal was signed with PLN-Batubara (PLN-B), a subsidiary of Indonesian state electricity firm PT Perusahaan Listrik Negara (PLN). Under the MOU, PLN-B will review the purchase of up to 5Mtpa of coal from Churchill. This additional coal production would be over and above the 20Mtpa already planned for mining in the northern area the project, significantly increasing Churchill's forecast coal sales.
The partners will establish a joint study group to focus on the use of the PLN's coal drying and enhancement technology (Licol) for use with coal from East Kutai. Initial testing on Churchill's coal with the Licol process has already successfully upgraded Churchill's sub-bituminous coal to coal with bituminous characteristics, increasing its value.
Upon successful conclusion of the review, PLN-B would build an initial commercial Licol coal enhancement plant module of 250,000tpa at its cost, to be followed by additional modules to enable the production of up to 5Mtpa of enhanced coal.
A week prior to announcing the MOU, Churchill appointed Credit Suisse as strategic advisor with regard to the development of East Kutai. The Zurich-based group is a major player in the Indonesian market and has been involved in some massive deals involving coal assets in the country. The appointment should help turn Churchill into a major exporter of thermal coal to the expanding Asian energy market.
Credit Suisse will work with Churchill to complete a strategic review process, evaluating options for financing the project, which will include the development of East Kutai with a joint venture partner or the conclusion of a long-term off-take agreement.
