Cloudified Holdings Limited Regulatory News (CHL)

20 Nov 2007 07:02

Churchill Mining plc20 November 2007 20 November 2007 CHURCHILL MINING PLC ("Churchill" or "the Company") Preliminary Results for the period to 30 June 2007 Churchill Mining Plc is pleased to announce its preliminary results for the yearended 30 June 2007. A full copy of this report is available at the Company'swebsite, www.churchillmining.com. Highlights East Kutai Coal Project o Formal sale and purchase agreement for 75% of the project entered into during May 2007 o Resource / reserve target area defined o Drilling at the northern end has produced seam thicknesses of up to 19m o Signed first coal supply agreement to supply 840,000t of coal per annum with Indonesian Power Producer Sendawar CBM Project o Coal Bed Methane (CBM) discovery o Consortium formed with Indonesian partner o Joint Evaluation Agreement (JEA) licence awarded from Indonesian Oil and Gas government regulator Post period highlights South Woodie Woodie o Completed a detailed phase of airborne and ground geophysical exploration work o Sold 80% of project to Australian company Spitfire Resources (subject to ASX listing) David Quinlivan, Chairman of Churchill commented, "We have made good progress atEast Kutai and Sendawar, and with our focus on these large-scale energyprojects, the Board decided it prudent to divest an 80% interest in the SouthWoodie Woodie Manganese Project in Australia to Spitfire Resources Ltd. Thesupply agreement with the Indonesian Power Producer is a significant step in thedevelopment of East Kutai, alongside the success at Sendawar, where Churchillwas awarded the first JEA from the Indonesian government regulator. With thecurrent global demand for coal, we are looking forward to the development ofthese projects over the next 12 months." Churchill Mining Plc Blue Oar Securities Parkgreen CommunicationsPaul Mazak / James Hamilton Romil Patel Justine Howarth+61 (0)8 9388 0377 +44(0)20 7448 400 +44 (0) 20 7851 7480 paul.mazak@churchillmining.com Olly Cairnsjames.hamilton@churchillmining.com +61 (8) 6430 1631 Chairman's Statement Dear Shareholder, I am pleased to present Churchill Mining Plc's 2007 Annual Report and FinancialStatements following an active and successful 12 months. During the year, we continued to build our asset base in the high-growth carbonenergy sector with the acquisition of a 75% interest in the exciting East KutaiCoal Project (EKCP), located approximately 110km north of Sangatta in theprovince of Kalimantan, Indonesia. This project, which sits in a very under-explored part of Kalimantan, lies 55kmfrom a major new coal discovery at Pakar which, as at December 2006, had a JORCcompliant reserve of 270 million tonnes of coal. Churchill is taking an aggressive approach to exploring the EKCP. The companynow has a field team in excess of 100 personnel in place with drilling rigsrelocated during the year from our existing Sendawar project to undertakedrilling. The initial results of this drilling have been most encouraging, andwe are confident of defining a JORC compliant resource in the 2008 financialyear. This year the Company also signed a Heads of Agreement with Indonesian powerutility company, PT Ridlatama Bangun Mandiri (PT RBM), to supply approximately840,000 tonnes of coal a year for 30 years to feed two planned power stationsthat the utility is building near the project. PT RBM is also investigating thepotential of building other larger plants within Kalimantan. This Heads of Agreement will convert to a final coal-purchase agreement once aJORC compliant resource of a minimum of 30 million tonnes has been defined. Thenew power plants are located in a region with a rapidly expanding populationbase and growing energy needs. The addition of the East Kutai Project to our portfolio follows last year'sacquisition of the Sendawar Project, also in Kalimantan, where we continued tomake solid progress during the year. Together with our consultants, GMT Indonesia, the Company conducted geophysicalsurveys during the year to identify the most promising areas for test drillingand improve exploration success rates. Importantly, the Sendawar project hasshown the potential to host a large coal bed methane resource and the Companyhas engaged CBM specialists to investigate this potential. Because of our focus on these large-scale energy projects at Sendawar and EastKutai, the Board decided to divest an 80% interest in the Company's South WoodieWoodie Manganese Project in Australia to newly established Company, SpitfireResources Ltd, which is undertaking an AUD$4million IPO and listing on theAustralian Stock Exchange. Spitfire has the option to purchase the remaining 20%in the project for AUD$3million providing it spends AUD$1.5million onexploration within 18 months of listing. Assuming a successful AUD$4million IPO, Churchill will retain a major interestin Spitfire, becoming its biggest shareholder with 49% of the shares on issue atlisting. Churchill will also be entitled to production royalties from theproject should a mine be developed in the future. Investor interest in the manganese sector is currently very high following thestrong recovery in manganese prices seen during 2007 and the response toSpitfire's IPO plans has been enthusiastic. In a year of many changes, your Company continues to remain committed to itscore value of creating shareholder wealth: the acquisition of East Kutai andassociated major drilling campaign; the investigation of CBM potential atSendawar; and the successful spin-off of the South Woodie Woodie Project will, Ibelieve, all contribute strongly towards achieving this objective. The global demand for coal, and indeed all commodities, shows few signs ofslowing in the near future and our intention is to capitalise on this byexpediting the development of our projects. I would like to take this opportunity to thank our Executive Directors, JamesHamilton and Paul Mazak, for their commitment and dedication. I would also liketo thank our Indonesian operating team and consultants, in particular PaulBenjamin, Brett Gunter and Andreas Rinaldi. We've also been fortunate to benefitcorporately from the input of Melissa Sturgess who recently has relocated toLondon. The Board also wishes to welcome Faroek Basrewan as a Director of theCompany. Finally, on behalf of the Churchill Board I would like to thank you, theShareholders, for your support of the Company's activities and I look forward toyour ongoing support as we embark on another exciting period of growth in 2008. David F QuinlivanChairmanChurchill Mining Plc Review of Operations BACKGROUND Churchill Mining Plc listed on the Alternative Investment Market (AIM) of theLondon Stock Exchange in April 2005 and is committed to growing Shareholdervalue by becoming a leading minerals explorer and future miner at a time ofaccelerating commodities demand. Churchill's business plan is to leverage off the strong growth in demandcurrently being experienced in China and India for commodities which are used asfeedstock in the ever expanding energy industries. The execution of this business plan was instigated with the acquisition of theSendawar Coal Project, located in East Kalimantan, Indonesia, as well ascontinued exploration of the South Woodie Woodie Manganese Project in WesternAustralia. Subsequent to the end of the 2007 financial year, the companydivested an 80% interest in this asset to Spitfire Resources Ltd - a new Companywhich is scheduled to list on the ASX in December 2007. Additionally, in May 2007, Churchill entered into a formal sales agreement withPT Techno Coal Utama Prima, to acquire 75% of the East Kutai Coal Project - alarge coal project also located in Indonesia. Churchill's management continues to assess further opportunities in Australiaand southern Asia to acquire quality projects consistent with the Company'sbusiness plan. SENDAWAR CBM PROJECT BACKGROUND Churchill acquired the Sendawar Coal Project in East Kalimantan, Indonesia, inApril 2006 after several months of due diligence. The Sendawar Project, which is about 800km2 in size, sits in a world-renownedcoal province whose production output has been estimated to be growing atapproximately 20% per annum. Strategic attractions of Kalimantan as a resource development opportunity forChurchill include: • Strong global demand for both metallurgical and thermal coal, which has risen sharply due to unprecedented demand from many parts of Asia; • Governmental mandates in the Asian region to substitute existing oil-fired power stations; • The increasing attraction of Kalimantan coal to purchasers because of its low ash and low sulphur content in combination with Indonesia's close proximity to markets; and • Well developed and well understood exploration, mining and transport logistics in the Region, given the major domestic and international coal mining investments made in Kalimantan during the first half of the 1990s and onwards. Early sampling of coal found at the Sendawar project indicates that it has ahigh calorific value (above 6,300Kcal/kg), is low in moisture and has high fixedcarbon levels. Work began at Sendawar by examining already identified coal outcrops. Thisdelivered coal but not in economic quantities and consequently the Companyconducted ground resistivity surveys to identify further drill targets. Subsequent to this process, and together with the collection of furtherhistorical drilling data, Churchill's geologists have realised the potential ofthe greater Sendawar region to contain very large amounts of Coal Bed Methane. Consequently, the Company is examining joint venture opportunities to continuecoal exploration at Sendawar while prioritising its focus on CBM. To this end,the Company began discussions with an Indonesian partner called PT RidlatamaMining Utama, (RMU) which together form the "Ridlatama Consortium" - and thegroup at the date of this report was to be awarded a CBM Joint EvaluationAgreement ("JEA") license in Kalimantan, Indonesia. Following the successful appointment of the JEA from the Indonesian Oil and Gasgovernment regulator, DIRJEN MIGAS, Churchill and RMU will create a JointOperating Company (JOC) and will conduct a full investigation of the 800km2block in the Kutai Basin, East Kalimantan. The Company would then proceed to aProduction Sharing Agreement (subject to the Company's satisfaction with theJoint Evaluation Study) with the Indonesian Government at the appropriate time.Churchill will hold 70% of the JOC and RMU 30%, with expenditure by each partyproportional to their holding. EAST KUTAI COAL PROJECT BACKGROUND During March 2007, Churchill signed an exclusivity agreement with PT Techno CoalUtama to conduct due diligence exploration on a further Indonesian thermal coaldevelopment at East Kutai. The East Kutai Coal Project (EKCP) area coversapproximately 575km(2), made up of four blocks, and is situated 110km north-westof the main population centre of Sangatta. Churchill was attracted to the East Kutai opportunity by the recentre-evaluation of the potential of East Kutai as a coal target. The catalyst hasbeen a new discovery called Pakar, made by a private Indonesian group, whichsits approximately 55km south-west of Churchill's ground and which, as atDecember 2006, had a JORC compliant reserve of 270 million tonnes of thermalcoal. The Pakar resource is believed to be open in a variety of directions andis still being drilled. PROJECT ACQUISITION In May 2007, Churchill entered into a formal sales agreement with PT Techno CoalUtama Prima to acquire 75% of the East Kutai project. Churchill has now fullycompleted the transaction and has taken control of the EKCP for an initialpayment of US$250,000 and a final payment of US$750,000. No Churchill shareswere issued as part of the consideration for the EKCP. EXPLORATION Work conducted in East Kutai by consulting group PT Rimeneco Geological andMining Services in December 2006 and January 2007, identified numerous outcropsof coal in the area ranging in thickness from two to seven metres and hosted ina sequence of tertiary sediments cropping out in the area. Churchill relocated drill rigs from the Sendawar project to begin the duediligence drilling and in April 2007 announced that 8 out of 10 holes drilledhad intersected coal with best intercepts including coal seams of 19.25m, 13.8mand 9.35m thickness. A total of 3,891m has been drilled since the commencement of the programme andto date, 36 holes have been drilled with the most recent bore holes having aspacing of between 750m and 1,000m between centres. Current target seams for aJORC compliant resource are all dipping at less than 10 degrees and drillingrates will increase when infill block-drilling begins. Additionally, over 250 coal outcrops have been mapped on the EKCP, with coalthicknesses up to more than 20m in outcrop. Mapping will continue as thedrilling proceeds to assist in seam correlations and define further extensionsto the coal-bearing stratigraphy. INFRASTRUCTURE & PERSONNEL All exploration camps and facilities are in place and the Company now has afield team of over 100 personnel including 12 geologists, drilling contractorstaff, community liaison and local development officers, logistical support andlocally sourced non-skilled personnel working on the Project. OFFTAKE AGREEMENT In June 2007, Churchill signed a Heads of Agreement ("HOA") with Indonesianpower utility company PT Ridlatama Bangun Mandiri (PT RBM) to supply thermalcoal for 30 years to feed two power stations that PT RBM is building inKalimantan, Indonesia. PT RBM is an independent power producer owned 55% by PT Indonesia Power (awholly owned subsidiary of Indonesia's state owned electricity utility, PLN)with the remainder owned by private investors. PT RBM was recently grantedlicence approval to build the power stations and construction will start at thebeginning of 2008. The plants are expected to be on-stream by mid-2010. PT RBMis also investigating the potential of building other larger plants withinKalimantan. These first-stage plants will be built at a cost of approximately US$60 millionat Muara-Marah, a provincial town located approximately 15km east of Churchill'sEast Kutai coal discovery. The location for the plants was chosen because ofEast Kutai's rapidly expanding population base and its growing energy needs. Under the HOA - which will convert into a final coal-purchase agreement once aJORC compliant mining reserve of a minimum of 30 million tonnes has been defined- Churchill will supply approximately 840,000 tonnes of coal per annum for 30years, with prices based on a 5% discount to the prevailing market price. Test work on coal discovered by Churchill at its East Kutai project to date hasfound it to have an average calorific value of 5,340kcal/kg. Investigations madeby Churchill show that similar type coals are currently trading forapproximately US$30 per tonne. THE ROAD AHEAD Aside from the potential ability to turn its EKCP into short-term income revenuevia its HOA with PT RBM, the Company ultimately believes the future of theProject is a super-scale export operation, mining and shipping large tonnages ofcoal to Asian customers. For this reason the Company is looking to dramatically accelerate its drillingrates in 2008 and will shortly be seeking funds to employ more teams to actionthis plan. The Company plans to announce a volumetric calculation to the marketin January 2008 and then proceed with infill drilling to steadily work up a JORCcompliant resource in preparation for feasibility and marketing studies. PRINCIPAL RISKS AND UNCERTAINTIES There are risks associated with the exploration industry. The Board regularlyreviews the risks to which the group is exposed and endeavors to minimise theserisks as far as possible. The following summary, which is not exhaustive,outlines some of the risks and uncertainties facing the group at its presentstage of development: • The exploration for and development of mineral depositsinvolves risks, which even a combination of careful evaluation and knowledge maynot eliminate; • The group's future success is substantially dependant on the continued services and performance of its key personnel. The Company's aim is to ensure that key personnel are rewarded for their contribution to the group and are motivated to enhance the return to Shareholders; • There is underlying commodity price risk associated with the Company's exploration activities. The group endeavors to make what it considers to be prudent assumptions for all relevant commodity project investment decisions; • The group has operations in Indonesia where there may be a number of associated risks over which it will have no control. These may include economic, social or political instability, terrorism, currency instability, changes of laws affecting foreign ownership, government participation, taxation and exploration licensing; and • Some or all of the exploration licenses issued in respect of the group's projects may be subject to conditions which, if not satisfied, may lead to revocation of such licenses. SOUTH WOODIE WOODIE MANGANESE PROJECT BACKGROUND The South Woodie Woodie Project area covers approximately 490km(2) and islocated in the highly prospective East Pilbara Manganese Province in WesternAustralia, about 1,200km north-east of Perth and some 50km south of the WoodieWoodie Manganese Mining Centre. Although manganese was first discovered in the Project Area at Enacheddong Creekin 1977, there was no systematic exploration of the area until Churchill(through its subsidiary Planet Mining Limited) acquired the rights to 80% of theproperty and subsequently 100% in 2005. Since that time, Churchill has undertaken various exploration programmes aimedat identifying new targets for manganese mineralisation. EXPLORATION The Enacheddong Creek Prospect was discovered in 1977 by the Australian and NewZealand Exploration Company after they completed an airborne infra-red aerialphotography survey. Reconnaissance mapping and channel sampling identified outcrops of manganeseover a strike length of 700m with grades of between 31% and 54% manganese,however no follow up work was done and since that time there has been no furtherwork reported. Following on from its 6,600km airborne magnetic and radiometric survey over theentire South Woodie Woodie Project last year, the Company has used a deepground-probing technology from Canadian company Geotech Airborne, calledVersatile Time-Domain Electro Magnetics ("VTEM") to target the northern third ofits tenement position. The VTEM survey was flown at a line spacing of 100m and 30m ground clearance totest for sub-surface conductors. Interpretive work by Perth-based consultancyResource Potentials identified 38 conductive units of which 14 were chosen forimmediate follow-up exploration by a dipole-dipole induced polarisation ("IP")ground survey. The survey, which was conducted by specialist IP group, Zonge,found that 8 of the 14 VTEM conductors had strong chargeability responses. It is well documented that some of the deposits at the Woodie Woodie ManganeseMining Centre have coincident EM and IP responses. Accordingly, a first phase7,000m RC drilling programme has been planned to test these 8 targets. ACQUISITION BY SPITFIRE RESOURCES LTD Given the increased prospectivity of South Woodie Woodie and Churchill'sincreasing focus on its Indonesian coal and coal bed methane projects, theCompany has recently (subsequent to the end of the financial year) decided todivest 80% of the project to Australian company Spitfire Resources Ltd ("Spitfire"). Spitfire will have the option to purchase the remaining 20% equityin the project for AUD$3 million after spending AUD$1.5 million on explorationwithin 18 months of listing. The consideration to Churchill for South Woodie Woodie will be 25 million newordinary shares in Spitfire, making Churchill Spitfire's largest Shareholder. Spitfire plans to list on the Australian Stock Exchange ("ASX") via an AUD$4million Initial Public Offering (IPO) later this year. The disposal of SouthWoodie Woodie will allow Churchill to focus on its Sendawar and East Kutai coalprojects in Indonesia, whilst retaining a substantial stake in Spitfire and thegrowth potential of the South Woodie Woodie Project. Churchill will also be entitled to retain a manganese production royalty shoulda mine be developed in the future. The production royalty is price indexed so asto ensure Churchill retains substantial leverage to any future mining cash flow. Paul G MazakManaging Director INCOME STATEMENTFOR THE YEAR ENDED 30 JUNE 2007 CONSOLIDATED 2007 2006 Restated £ £ CONTINUING OPERATIONSRevenue - -Cost of sales - -GROSS PROFIT/(LOSS) - - Other operating income - 10,613 Administrative expenses (1,266,440) (2,211,019)LOSS FROM OPERATIONS (1,266,440) (2,200,406) Finance income 158,916 67,826Finance costs (943) -LOSS ON ORDINARY ACTIVITIES BEFORE TAX (1,108,467) (2,132,580) Taxation - -LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF (1,108,467) (2,132,580)THE PARENT LOSS PER SHAREBasic (pence) (2.4865) (10.6785)Diluted (pence) (2.4865) (10.6785) BALANCE SHEETAS AT 30 JUNE 2007 CONSOLIDATED COMPANY 2007 2006 2007 2006 Restated Restated £ £ £ £ ASSETSCurrent assetsCash and cash equivalents 2,415,189 5,229,499 1,859,649 5,083,096Trade and other receivables 195,895 92,907 2,594,663 191,486Total current assets 2,611,084 5,322,406 4,454,312 5,274,582 Non-current assetsProperty, plant and equipment 49,550 15,839 - -Intangible assets 5,336,317 3,329,450 110,055 218,832Investments in subsidiaries - - 2,946,301 3,464,611Total non-current assets 5,385,867 3,345,289 3,056,356 3,683,443TOTAL ASSETS 7,996,951 8,667,695 7,510,668 8,958,025LIABILITIESCurrent liabilitiesTrade and other payables 518,918 284,389 51,427 175,309Borrowings 6,366 - - -Total current liabilities 525,284 284,389 51,427 175,309 Non-current liabilitiesBorrowings 12,426 - - -Deferred tax - - - -Total non-current liabilities 12,426 - - -TOTAL LIABILITIES 537,710 284,389 51,427 175,309NET ASSETS 7,459,241 8,383,306 7,459,241 8,782,716 CAPITAL & RESERVES ATTRIBUTABLE TOEQUITY HOLDERS OF THE COMPANYShare capital 445,800 445,800 445,800 445,800Share premium reserve 6,200,382 6,200,382 6,200,382 6,200,382Merger reserve 3,425,000 3,425,000 3,425,000 3,425,000Other reserves 729,435 545,033 761,033 545,033Retained losses (3,341,376) (2,232,909) (3,372,974) (1,833,499)TOTAL EQUITY 7,459,241 8,383,306 7,459,241 8,782,716 CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2007 CONSOLIDATED COMPANY 2007 2006 2007 2006 £ £ £ £ Cash flows from operating activities (923,853) (586,058) (279,911) (301,996)Interest expense (943) - - -Net Cash flows from operating activities (924,796) (586,058) (279,911) (301,996) Investing activities Interest received 182,324 67,826 161,749 64,441Payments for property, plant and equipment (42,278) (12,534) - - Payments for exploration assets (125,389) (213,981) - (110,054)Payments for exploration and evaluation (1,717,526) (470,901) (106,880) (17,777)Payments for investment in subsidiaries - - (595,379) (850,132) Payments for loan to subsidiaries - - (2,197,589) (30,552)Cash flows from investing activities (1,702,869) (629,590) (2,738,099) (944,074) Financing activitiesProceeds from issue of shares - 5,800,000 - 5,800,000Share issue expenses paid (150,000) (105,959) (150,000) (105,959)Proceeds from borrowings 18,792 - - - Cash flows from financing activities (131,208) 5,694,041 (150,000) 5,694,041 (Decrease)/Increase in cash and cashequivalents (2,758,873) 4,478,393 (3,168,010) 4,447,971 Cash and cash equivalents at start of year 5,229,499 751,106 5,083,096 635,125 Effect of foreign exchange rate differences (55,437) - (55,437) - Cash and cash equivalents at end of year 2,415,189 5,229,499 1,859,649 5,083,096 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007Consolidated Share Share Merger reserve Accumulated Foreign Equity Restated capital premium losses exchange settled share total equity reserve reserve options reserve £ £ £ £ £ £ £Changes inequity forperiod to 30June 2006Balance at startof the year 110,800 816,341 - (100,329) - - 826,812 Loss for theyear - - - (2,132,580) - - (2,132,580) Total recognisedincome and expense - - - (2,132,580) - - (2,132,580)for the yearRecognition ofshare based - - - - - 545,033 545,033paymentsIssue of shares 335,000 5,640,000 3,425,000 - - - 9,400,000 Expenses ofshare issues - (255,959) - - - - (255,959) Balance at 30June 2006 445,800 6,200,382 3,425,000 (2,232,909) - 545,033 8,383,306 Changes in equity for period to30 June 2007Balance at startof the year 445,800 6,200,382 3,425,000 (2,232,909) - 545,033 8,383,306 Loss for theyear - - - (1,108,467) - - (1,108,467) Exchangedifferences on - - - - (31,598) - (31,598)translation offoreign operationsTotal recognisedincome and expense - - - (1,108,467) (31,598) - (1,140,065)for the yearRecognition ofshare based - - - - - 216,000 216,000payments Balance at 30June 2007 445,800 6,200,382 3,425,000 (3,341,376) (31,598) 761,033 7,459,241 Net expense recognised directly in equity forthe year is £31,598 (2006: £Nil) Company Share Share Merger reserve Accumulated Foreign Equity Restated capital premium losses exchange settled share total equity reserve reserve options reserve £ £ £ £ £ £ £Changes in equityfor period to 30June 2006Balance at start ofthe year 110,800 816,341 - (29,070) - - 898,071Loss for the year - - - (1,804,429) - - (1,804,429) Total recognisedincome and expense - - - (1,804,429) - - (1,804,429)for the yearRecognition of sharebased payments - - - - - 545,033 545,033 Issue of shares 335,000 5,640,000 3,425,000 - - - 9,400,000Expenses of shareissues - (255,959) - - - - (255,959) Balance at 30 June2006 445,800 6,200,382 3,425,000 (1,833,499) - 545,033 8,782,716 Changes in equityfor period to 30June 2007Balance at startof the year 445,800 6,200,382 3,425,000 (1,833,499) - 545,033 8,782,716Loss for theyear - - - (1,539,475) - - (1,539,475) Total recognisedincome and expense - - - (1,539,475) - - (1,539,475)for the yearRecognition ofshare based - - - - - 216,000 216,000payments Balance at 30June 2007 445,800 6,200,382 3,425,000 (3,372,974) - 761,033 7,459,241 Key Notes NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 1. Basis of preparation These financial statements have been prepared on the basis of a going concernand in line with International Financial Reporting Standards (IFRS) and IFRICinterpretations issued by the International Accounting Standards Board (IASB)adopted by the European Union and in accordance with applicable United KingdomLaw. The adoption of all of the new and revised Standards and Interpretationsissued by the IASB and the International Financial Reporting InterpretationsCommittee (IFRIC) of the IASB that are relevant to the operations and effectivefor annual reporting periods beginning on 1 July 2006 are reflected in thesefinancial statements. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision only affects that period, or in the periodof revision and future periods if the revision affects both current and futureperiods. 2. First time adoption of International Financial Reporting Standards (IFRS) Reconciliation and explanatory notes on how the transition to IFRS has affected profit/(loss) and net assetspreviously reported under UK Generally Accepted Accounting Principles (UK GAAP) are given below. No BalanceSheet Reconciliation as at 1 July 2005 has been shown due to there being no measurement changes from theadoption of IFRS: INCOME STATEMENT RECONCILIATION Restated CONSOLIDATEDFOR THE YEAR ENDED 30 JUNE 2006 Sub-note UK GAAP Adjustments IFRS £ £ £ Revenue - - -Cost of sales - - -GROSS PROFIT/(LOSS) - - - Other operating income 10,613 - 10,613Administrative expenses (1,665,986) - (1,665,986)Share based payments i - (545,033) (545,033)LOSS FROM OPERATIONS (1,655,373) (545,033) (2,200,406) Finance income 67,826 - 67,826LOSS ON ORDINARY ACTIVITIES BEFORE TAX (1,587,547) (545,033) (2,132,580) Taxation - - -LOSS FOR THE YEAR (1,587,547) (545,033) (2,132,580) BALANCE SHEET RECONCILIATION Restated CONSOLIDATEDAS AT 30 JUNE 2006 Sub-note UK GAAP Adjustments IFRS £ £ £ ASSETSCurrent assetsCash 5,229,499 - 5,229,499Receivables 89,052 - 89,052Total current assets 5,318,551 - 5,318,551 Non-current assetsReceivables 3,855 - 3,855Property, plant and equipment 15,839 - 15,839Intangible assets ii 6,504,000 (3,174,550) 3,329,450Total non-current assets 6,523,694 (3,174,550) 3,349,144TOTAL ASSETS 11,842,245 (3,174,550) 8,667,695 LIABILITIESCurrent liabilitiesPayables 284,389 - 284,389Total current liabilities 284,389 - 284,389TOTAL LIABILITIES 284,389 - 284,389NET ASSETS 11,557,856 (3,174,550) 8,383,306 CAPITAL & RESERVES ATTRIBUTABLE TO EQUITYHOLDERS OF THE COMPANYShare capital 445,800 - 445,800Share premium reserve 6,200,382 - 6,200,382Merger reserve 3,425,000 - 3,425,000Other reserves i, ii 3,174,550 (2,629,517) 545,033Retained earnings i (1,687,876) (545,033) (2,232,909)TOTAL EQUITY 11,557,856 (3,174,550) 8,383,306 BALANCE SHEET RECONCILIATION Restated COMPANYAS AT 30 JUNE 2006 Sub-note UK GAAP Adjustments IFRS £ £ £ ASSETSCurrent assetsCash 5,083,096 - 5,083,096 Receivables 47,995 - 47,995Total current assets 5,131,091 - 5,131,091 Non-current assetsReceivables 143,491 - 143,491Intangible assets 218,832 - 218,832Investments 3,464,611 - 3,464,611 Total non-current assets 3,826,934 - 3,826,934 TOTAL ASSETS 8,958,025 - 8,958,025 LIABILITIESCurrent liabilitiesPayables 175,309 - 175,309Total current liabilities 175,309 - 175,309TOTAL LIABILITIES 175,309 - 175,309NET ASSETS 8,782,716 - 8,782,716 CAPITAL & RESERVES ATTRIBUTABLE TO EQUITYHOLDERS OF THE COMPANYShare capital 445,800 - 445,800Share premium reserve 6,200,382 - 6,200,382 Merger reserve 3,425,000 - 3,425,000 Other reserves i - 545,033 545,033 Retained earnings (1,288,466) (545,033) (1,833,499) TOTAL EQUITY 8,782,716 - 8,782,716 First time adoption of International Financial Reporting Standards (IFRS) Adjustments Explanations of the adjustments made to the UK GAAP Income Statement and BalanceSheet are as follows: (i) IFRS 2 "Share-based Payment" requires the Group to expense the fair valueof the options granted for the amount of £545,033 during the year ended30 June 2006. The impact in the Income Statement is the recognition of theexpense item Share Based Payment with the corresponding entries in the BalanceSheet under Other Reserves and Retained Earnings. (ii) Under IAS 38 the Group is required to reverse the prior revaluation ofthe South Woodie Woodie Project recorded under UK GAAP. The impact uponadoption of IAS 38 is £3,174,550 with a reduction in other reserves and acorresponding reduction in other intangible assets. Consolidated 2007 2006 Restated £ £3 Loss per Share EarningsLoss attributable to ordinary Shareholders (1,108,467) (2,132,580) Consolidated 2007 2006 Number Number Number of sharesWeighted average number of shares used in the calculation of basic loss per share 44,580,000 19,970,959 Consolidated 2007 2006 Restated pence pence Basic loss per share (pence) (2.4865) (10.6784) Diluted loss per share (pence) (2.4865) (10.6784) The effect of all potential ordinary shares arising from the exercise of optionsgoing forward is considered anti-dilutive. 13,864,200 (2006 : 6,000,000)potential ordinary shares have been excluded from the above calculation as theyare anti-dilutive. 4. Segment Information Based on risks and returns the Directors consider that the primary reportingformat is by business segment. The Directors consider that there are twobusiness segments, being exploration of coal (in Indonesia) and manganese (inAustralia) with the head office (corporate in the United Kingdom). The secondaryreporting format is by geographical analysis. The operations are based in threemain geographical areas, being the UK, Australia and Indonesia, which isconsidered to be the same as the primary reporting format. The UK is the homecountry of the Parent Company. Segment assets and capital expenditures areallocated based on where the assets are located. CONSOLIDATED 2007 Loss on Assets Liabilities Capital Depreciation Ordinary Expenditure Activities £ £ £ £ £United Kingdom - Head office (538,474) 1,892,120 51,427 - - Australia - Exploration manganese (285,360) 794,988 59,500 183,920 3,639Indonesia - Exploration coal (442,646) 5,309,843 426,783 1,834,261 4,928 Sub-Total (1,266,480) 7,996,951 537,710 2,018,181 8,567 Interest revenue 158,916 - - - - Interest expense (943) - - - - (1,108,507) 7,996,951 537,710 2,018,181 8,567 CONSOLIDATED 2006 Restated Loss Assets Liabilities Capital Depreciation on Ordinary Expenditure Activities £ £ £ £United Kingdom - Head office (853,267) 5,126,824 175,306 - - Australia - Exploration manganese (296,740) 446,179 99,357 300,902 2,029Indonesia - Exploration coal (1,050,399) 3,094,692 9,726 163,346 305Sub-Total (2,200,406) 8,667,695 284,389 464,248 2,334 Interest revenue 67,826 - - - - Interest expense - - - - - (2,132,580) 8,667,695 284,389 464,248 2,334 Company Company 2007 2006 2007 2006 Number Number £ £ 5. Share Capital, Share Premium and Merger Reserve Allotted, called up and fully paid At start of year 44,580,000 11,080,000 445,800 110,800 Additions - 33,500,000 - 335,000 At end of year 44,580,000 44,580,000 445,800 445,800 Date Details Authorised Allotted, called up Share Restated shares and fully paid premium Merger reserve Number Number £ £ £ 01/07/2005 Opening balance 1 July 2005 1,000,000,000 11,080,000 110,800 816,341 - Placement at 25p per share02/12/2005 (cash) - 2,200,000 22,000 528,000 - Purchase of mining assets28/12/2005 (non-cash) - 300,000 3,000 72,000 - Purchase of shares in PT Indonesia Coal Development03/04/2006 (non-cash) - 10,000,000 100,000 - 3,425,000 Placement at 25p per share03/04/2006 (cash) - 21,000,000 210,000 5,040,000 - 03/04/2006 Expenses on placement at 25p per share (cash) - - - (255,959) - 30/06/2006 Closing balance 30 June 2006 1,000,000,000 44,580,000 445,800 6,200,382 3,425,000 01/07/2006 Opening balance 1 July 2006 1,000,000,000 44,580,000 445,800 6,200,382 3,425,000 30/06/2007 Closing balance 30 June 2007 1,000,000,000 44,580,000 445,800 6,200,382 3,425,000 Consolidated Company 2007 2006 Restated 2007 2006 Restated £ £ £ £ 6. Notes to the Cash Flow Statement Reconciliation of loss on ordinary activitiesafter tax to net cash from operatingactivities Loss on ordinary activities after tax (1,108,467) (2,132,580) (1,539,476) (1,804,429) Share option expense 216,000 545,033 216,000 545,033 Depreciation expense 8,584 2,334 - - Impairment expense 234,813 - 1,113,689 - Impairment of goodwill - 1,025,000 - 1,025,000 Net exchange differences 55,437 - 55,437 - Interest revenue in investing activities (182,324) (67,828) (161,749) (64,441) Decrease/(Increase) in accounts receivables (127,714) (59,103) 10,070 (16,869) Increase/(decrease) in creditors and accruals (20,182) 101,086 26,118 13,710 Cash flow from operating activities (923,853) (586,058) (279,911) (301,996) 7. Post Balance Sheet Events On 3 August 2007 the company issued 96,000 ordinary shares pursuant to theexercise of share options. On 15 September 2007 the company announced that the Company and its Indonesianpartner, PT Ridlatama Mining Utama (RMU), which together form the "RidlatamaConsortium", have been awarded Indonesia's first Coal Bed Methane (CBM) JointEvaluation Agreement ("JEA") license in Kalimantan, Indonesia. On the 4 October 2007, the Company announced that its 100% controlled subsidiaryPlanet Mining Pty Ltd has reached agreement to sell 80% of the South WoodieWoodie Manganese Project to an Australian company Spitfire Resources Limited ("Spitfire"). Spitfire will have the option to purchase the remaining equity inthe project after spending AUD$1.5 million on exploration. Spitfire plans tolist on the Australian Stock Exchange ("ASX") via an AUD$4 million InitialPublic Offering (IPO) later this year. The Disposal will allow Churchill tofocus purely on its Sendawar and East Kutai coal projects in Indonesia whilstretaining a substantial stake in Spitfire. On 22 October 2007, the Company issued 200,000 ordinary shares pursuant to theexercise of share options. On 9 November 2007, the Company issued 200,000 ordinary shares pursuant to theexercise of share options. During the period PT Indonesia Coal Development purchased a 75% beneficialinterest in four KP licenses that make up the East Kutai Coal Project forUSD$1,000,000. The Company made a payment of USD $250,000 prior to 30 June 2007with the balance paid in the 2007/2008 financial year. 8. Dividend The Directors do not recommend the payment of a dividend. This information is provided by RNS The company news service from the London Stock Exchange