Churchill Mining Interview Transcript with David Quinlivan, Executive Chairman
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Harry Norman: Hallo. This is Harry Norman for Proactive Investors and welcome to another Proactive audio interview.
Today is the 27th of September 2011 and I'm talking with David Quinlivan, Executive Chairman of Churchill Mining, listed on the AIM market, mining sector; stock ticker CHL; share price 16.25 pence; market cap 19.65 million pounds sterling; web address churchillmining.com.
David thank you very much for joining us for this interview.
David Quinlivan: My pleasure Harry.
Harry Norman: Could you provide a summary of the results of the appeal to the Administrative High Court in Jakarta and was there any new information considered to support Churchill’s case?
David Quinlivan: Unfortunately the High Court affirmed the decision of the Administrative Tribunal in its entirety without providing any detailed reasons or basis for doing so.
The High Court didn’t give its reasoning nor did it deal with the new points raised in the appeal that were not previously raised. Churchill was looking for the High Court to give its own grounds of reasoning instead of simply adopting the lower court’s decision.
Harry Norman: Who does the Administrative High Court believe owns the East Kutai Coal Project David?
David Quinlivan: Harry it was not the role of the High Court to rule on who owns the East Kutai Coal Project.
The appeal to the High Court in Jakarta was launched to seek to overturn the decision by the Administrative Tribunal in Samarinda, East Kalimantan, in relation to the relocation of the four mining licences that comprise the East Kutai Coal Project. This is the project that Churchill has a 75% interest in.
Both Nusantara and Churchill contend that they have licences over the East Kutai Coal Project area. There is as yet no clear legal process to resolve directly the priority between these licences. Churchill continues to believe that its claim is valid and to pursue all avenues to demonstrate this.
Harry Norman: Could you provide an update on the current appeal to the Supreme Court of Indonesia?
David Quinlivan: The company filed its notice of appeal for all four cases on the 15th of September 2011 and yesterday lodged the memorandum of appeal to the Supreme Court of Indonesia.
The company strongly objects to the original ruling of the Administrative Tribunal in Samarinda and remains committed to protecting its interests in the East Kutai Coal Project and seeking an appropriate remedy for its shareholders.
Harry Norman: The Indonesian Supreme Court reviews all relevant information available to it and has a series of prior cases where it overruled High Court decisions. Do you feel that there is a case for Churchill in this instance?
David Quinlivan: There are three grounds for an appeal to the Supreme Court and these are that the judges at the lower courts have 1) not had the authority to hear the case, or the case exceeds their authority, 2) misapplied or violated the prevailing laws, or 3) failed to meet the requirements contained in the prevailing laws which provide for an annulment of such failure.
The company’s position in the first place is that the Bupati has misapplied the Minerba Law and good corporate governance.
This is also a ground for the current appeal. The Samarinda Administrative Court and the Jakarta High Administrative Court have misapplied the same law in rendering their decisions.
While it’s difficult to anticipate the Supreme Court’s decision we believe Churchill has a credible case to submit to the Supreme Court.
Harry Norman: How confident are you that the company will be successful in the Supreme Court and do you have an idea on the likely timeframe for a decision?
David Quinlivan: Harry the company strongly disagrees with the original Administrative Tribunal decision and has sought and followed legal advice of international and Indonesian counsel in relation to protecting its interest in the East Kutai Coal Project.
While it’s difficult to anticipate the Supreme Court’s decision following its assessment of the facts, Churchill maintains its argument that the [Bupati] has misapplied the Minerba Law and good corporate governance in revoking the licences and we’re hopeful that the Supreme Court will agree with Churchill’s position.
At this point we don’t have any indication on the likely timeframe but will keep shareholders advised as appropriate.
Harry Norman: For the appeal do you intend to follow the same strategy for the Supreme High Court as you did for the Administrative High Court? And if yes do you think the outcome will be different and if so why?
David Quinlivan: The strategy is essentially the same. That is we will be rebutting all decisions of the Samarinda Administrative Court and the Jakarta High Court.
It’s difficult to predict the outcome. However since the judges at the Supreme Court are generally more senior and have more experience than the judges at the lower court we’re hopeful that they will come to a different conclusion than the lower courts.
Harry Norman: Is there a successful precedent for your case?
David Quinlivan: Harry we’re not aware of any precedents that are similar to our case from a mining perspective. However there is precedent for plaintiffs who’ve won at the Supreme Court despite the fact that they’ve lost in the lower courts.
Harry Norman: Who are Nusantara and can they now legally take possession of and develop the East Kutai Coal Project David?
David Quinlivan: Harry we understand Nusantara is an Indonesian group that held exploration KPs over similar areas to the East Kutai Coal Project and that these Nusantara licences had expired prior to the granting of the licences to Ridlatama. These are the licences that Churchill has a 75% interest in.
More recently the [Bupati] issued exploration IUPs to Nusantara which are valid for two years with one year granted for exploration phase and one year granted for construction phase.
There appears however to be a period of over two years during which the Nusantara Group does not appear to have had any valid licences around the East Kutai Coal Project area.
It appears that Nusantara was granted some type of extension to the original licence in 2008; two years after Nusantara’s original licence had expired.
Churchill believes that its licences relating to the East Kutai Coal Project take priority over Nusantara and the extension granted to Nusantara in 2008 should not have been issued. Churchill continues to consider appropriate avenues to address this point.
Irrespective of this the company still has a presence at the East Kutai Coal Project site and regular involvement with the local community.
Harry Norman: If the appeal to the Supreme Court is unsuccessful, what’s next? Is there any possibility of claims using a bilateral international treaty?
David Quinlivan: Should the company be unsuccessful the company would look to be seeking a judicial review of the Supreme Court decision.
The company would also review its options in relation to international arbitration and where necessary instruct international counsel to conduct a thorough and detailed review of the company’s investments in Indonesia to determine if it’s a qualifying investment under the relevant bilateral investment treaty.
Harry Norman: On the more important note of restoration of licences, is there still some possibility that this would – or could – be settled out of court? If so, is this still the case?
David Quinlivan: Harry at this point there’s no progress on any out of court settlement but we’ll certainly keep shareholders informed if there is any such development.
Harry Norman: Are Churchill’s new Indonesian shareholders assisting with the legal processes and with any processes outside the courtroom David?
David Quinlivan: Harry our new Indonesian shareholders and Churchill board members, Rachmat Gobel and Fara Luwia, have been assisting the legal process and advising various levels of government in relation to the issues that Churchill faces. They continue to be active in supporting the work towards a favourable outcome for Churchill in the East Kutai Coal Project.
Harry Norman: Could you provide more information in relation to the legal dispute with the Ridlatama Group? What have they allegedly done wrong?
David Quinlivan: The dispute relates to alleged breaches of the investors’ agreements entered into between Churchill’s subsidiary PT Indonesia Coal Development and members of the Ridlatama Group.
Churchill believes that the Ridlatama Group has breached various provisions of the investors’ agreements including warranties in relation to the East Kutai Coal Project not being the subject of any third party claims.
Churchill will pursue legal action in both Indonesia and Singapore against the Ridlatama Group, its shareholders and its principals, in accordance with the dispute resolution provisions contained in the investors’ agreements.
While Churchill’s claims against Ridlatama relate in part to information that emerged in the Administrative Tribunal hearing earlier this year, the claims do not prejudice the appeal of the Administrative Tribunal decision that’s currently in progress.
Harry Norman: Have all relationships now broken down with the Ridlatama Group completely?
David Quinlivan: Harry Churchill and Ridlatama have both rejected the conclusions of the Administrative Tribunal and continue to work together in relation to the current appeal to the Supreme Court of Indonesia.
Harry Norman: If Churchill Mining is successful in its action with the Ridlatama Group what outcome will actually be achieved and have you any idea how long this may take?
David Quinlivan: Churchill has sought to recover monetary compensation against the Ridlatama Group. If successful, Churchill would be able to enforce any award or judgment for monetary compensation against the various members of the Ridlatama Group.
Proceedings before Indonesian courts and arbitral tribunals in Singapore may take up to one year to conclude and for decisions to be obtained.
Harry Norman: What is the approximate cash burn on the legal cost and what is Churchill Mining’s current cash position?
David Quinlivan: Harry the company has incurred legal expenses of approximately 1.4 million US Dollars for the period from January to June 2011 in relation to the Administrative Tribunal action and subsequent appeals.
The company remains well funded with 19.7 million US Dollars cash on hand as at 19th September 2011.
Harry Norman: Could you advise on what is happening with the project and with securing land between the proposed mine and the port? Are there any current activities at site or is everything on hold David?
David Quinlivan: Harry we continue to look at the various options in relation to securing land between the proposed mine and the port but there’s been no substantive progress on this.
The company still has a presence at the East Kutai Coal Project site and regular involvement with the local community but there are currently minimal operational activities at the East Kutai Coal Project site.
Harry Norman: Can you explain to shareholders why options at 50p were awarded to the directors and management of Churchill?
David Quinlivan: Harry the issue of incentive options to directors and management has always been and will continue to be part of our normal remuneration policy.
The directors have included a reasonable premium over the prevailing share price and the level of options issued as a percentage of shares on issue remain well within institutional and investor guidelines.
Harry Norman: While the legal proceedings continue is Churchill mining evaluated any other projects or assets David?
David Quinlivan: Harry the company remains open to considering other projects or assets but has not conducted any recent evaluation with management’s time being currently focused on resolving the issues with the East Kutai Coal Project.
Harry Norman: Remember Proactive Investors is not an investment advice service. Make sure you register at proactiveinvestors.co.uk for our weekly newsletter which will keep you informed about our articles, interviews, and events. Thank you for listening.
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