The board of Churchill Mining (LON:CHL) has told investors that it has very recently become aware that forestry permit applications, for two of the four licences that comprise the East Kutai coal project, were rejected in 2010.
It said that last month’s administrative tribunal made reference to the letters, which were dated 31 March 2010 and 21 April 2010. In a statement this afternoon Churchill said that the board was not aware of the existence of such letters prior to the Administrative Tribunal's ruling.
It now has copies of the letters, which state that the applications for forestry-use permits in respect of two of the four EKCP Licences, PT Investmine Nusa Persada and PT Ridlatama Trade Powerindo, have been rejected.
“The board believed that the applications for forestry-use permits, and the question of whether such permits were in fact necessary, were still being considered by the relevant authorities,” Churchill said. “It now appears that the applications are no longer under consideration.”
The letters cite the alleged overlap between the EKCP Licences and licences held by the Nusantara Group as the reason why the applications cannot be considered and were therefore rejected, Churchill said. It also reiterated that it rejects any suggestion of overlap, and it expects the issue to be addressed in the forthcoming appeal at the Administrative High Court in Jakarta.
Churchill stressed that these are the two southernmost permits of the EKCP, and don’t host any identified reserves or resources.
It said that the board is investigating whether similar letters exist, in relation to the other two EKCP licences. Meanwhile it continues to liaise with the Ministry of Forestry to ascertain whether forestry-use permits are in fact required.
“The board is concerned that management did not make it aware of the existence of these rejection letters until very recently,” Churchill said.
David Quinlivan, Churchill’s chairman, is currently conducting a thorough audit of the Jakarta office with the assistance of selected advisers.
Churchill said he is also working with Ridlatama - Churchill’s Indonesian partners - to try to understand fully how this situation has arisen, and to gain assurance that there are no further documents of significance of which the Churchill’s board is not aware of.
Importantly Churchill set out its current position in light of this latest development.
The rejection of the forestry-use permits is unrelated to the separate question of whether the EKCP licences are valid, according to Churchill’s Indonesian associated office of the company's solicitors. It said that a party may retain production licences without a forestry-use permit, although it cannot conduct mining activities under the production licence within a designated forestry area.
Churchill added that it is engaging with the Ministry of Forestry regarding the rejection letters and it will take all steps to resolve the issue, including, if necessary, applying for new forestry-use permits.
As far as Churchill is concerned it said that the apparent rejection of two of the permit applications does not affect current activities at the EKCP, because it has not yet commenced mining activities at the site.