Churchill Mining (LON:CHL) – SPECULATIVE BUY: Initiation
Market Cap: £47.7m; Current Price: 36p
A mining litigation play with huge upside
NORTHLAND CAPITAL PARTNERS VIEW: Churchill Mining is a mining litigation play. The Company spent over US$67m on exploration and feasibility studies on its 75% owned 3.1bt East Kutai Coal Project (EKCP), located in Indonesia. In May 2010, the East Kutai Regent purported to have cancelled the four mining licences that made up the EKCP following claims that Churchill and its former joint venture partner, Ridlatama Group, had undertaken mining/exploration without a permit in a forested area and separately that the Company/Ridlatama had forged its licence documents. This decision was against administrative regulations and Churchill rejected the Regent’s claims. Following a lengthy legal process in Indonesia that sided against Churchill, the Company has been pursuing a damages claim in International Arbitration at the International Centre for Settlement of Investment Disputes (ICSID) for over three years and is now at a stage where there will be a Document Authenticity Hearing on 3rd August 2015 in Singapore. Churchill anticipates that a decision on authenticity of the licences will be reached early next year and expects a favourable outcome. If favourable, the next stage of the process will be a full “merits” hearing to assess full liability and quantum, likely to be around the middle of 2016. Churchill expects a decision to be made on this by the end of 2016. The Company’s damages have been independently assessed at US$1.3bn. Based on the binary nature of the potential value driver for Churchill Mining and the potential for very high rewards, we initiate coverage with a SPECULATIVE BUY rating.
Premier African Minerals (LON:PREM) – SPECULATIVE BUY: RHA update
Market Cap: £15m; Current Price: 2.7p
From Friday: Production of first concentrate
- Premier African Minerals has completed first coarse grade concentrate production at the RHA Tungsten Mine, located in Zimbabwe. Fine tuning and optimisation of the plant ongoing.
- Third and final tranche of Darwin loan note approved. Warrants exercised. Conversion and final settlement of Darwin loan notes issued in February 2015.
NORTHLAND CAPITAL PARTNERS VIEW: Premier African Minerals has now made the transition from developer to producer with the production of first coarse grade concentrate from the RHA Tungsten Mine. The fines concentrate is expected to begin production in the next few days and following that the shipment of the first concentrate will be the next major milestone. Another important development is the conversion of the February loan notes that means that there will be no further dilution from Darwin until October 2015, when the April loan notes are due to be rapid. Though if Prem repays these loans from cash flow, there will be no further dilution from Darwin.