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Churchill Mining shares lifted as arbitration proceedings move on

The recent sharp increase in the share price of Churchill Mining suggests investors are now dialling into the potential of what could be a bumper pay-out for the mining company if arbitration proceedings go its way.
Churchill Mining shares lifted as arbitration proceedings move on

The recent sharp increase in the share price of Churchill Mining (LON:CHL) suggests investors are now dialling into the potential of what could be a bumper pay-out for the mining company if arbitration proceedings go its way.

Shares trebled in value since the middle of last month to reach a high of 33.25p.

They started their journey upwards after an interim results statement at the tail end of last month, which updated investors on the primary focus of all the company's current energy: its ongoing claim against the Republic of Indonesia.

The firm is seeking compensation from the Republic after the expropriation of the firm's rights over the huge East Kutai coal mine in Indonesia, which has been modelled as having a pre-tax net asset value of a whopping US1.8 billion.

The project could generate 30 million tonnes of high grade thermal coal each year, for an initial 25-year life and generate cash flow of US$500mln per annum.

The legal dispute over the asset has been long and convoluted and the stock exchange statement on March 22 outlined the key moments in the case past, present and ahead.

Proceedings began in May last year when Churchill took the case to the International Centre for Settlement of Investment Disputes (ICSID) in Washington.

Notably, the case is now entering a "critical phase", says house broker Northland, and a key hearing will be one in Singapore beginning May 13 that will deal with the challenge from the Republic that the arbitration tribunal does not actually have jurisdiction to hear the firm's claim for compensation.

If this milestone hearing goes Churchill's way then the chance of recovering funds for shareholders improves, the broker reckons.

Other significant factors are that the company's Australian subsidiary Planet Mining Pty, which holds an interest in the coal project, has now also filed for arbitration at ICSID, and the case is now a single proceeding.

For the six months to December 31 last year, Churchill posted a loss before tax of US$4.5mln, compared to a loss of US$ 6.4mln in the same period a year earlier.

It remains well funded to pursue the arbitration, having US$6.2 million in the bank.

"The board will continue to focus on seeking a suitable remedy for shareholders and I thank shareholders for their continued support and will update on the company's progress during the second half of the year."

The world class East Kutai Coal project has a JORC resource of 2.730 billion tonnes, which consists of a measured resource of 693.3mln tonnes (Mt), indicated of 825.1 Mt and inferred of 1,211.8 Mt.

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