Cloudified Holdings Limited Regulatory News (CHL)

27 Mar 2009 07:00



Churchill Mining Plc

("Churchill" or the "Company")

Half Year Report

Ongoing exploration success at Churchill's East Kutai Coal Project ("EKCP") in Indonesia

Scoping and engineering work on possible mining and production scenarios at the EKCP 

Discussions with multiple coal industry-related parties regarding possible joint venture and project financing solutions for the EKCP

Heads of agreement signed with renowned contractor PT Leighton Contractors Indonesia

Churchill's second Indonesian project - the Sendawar Coal Bed Methane Project - continues to be of interest given the increasing cost of energy inputs. 

Cash resources totalling US$8.3 million at 31 December 2008

Churchill Mining Plc Managing Director - Paul G. Mazak +62 81510539186 /  + 62 21 39832398  paul.mazak@churchillmining.com

Blue Oar Securities  Shane Gallwey +44(0)20 7448 4000 Olly Cairns +61 (0)8 6430 1631

Pelham PR Candice Sgroi +44 (0) 20 7743 6376

CHAIRMAN'S STATEMENT

Dear Shareholder,

I am pleased to present Churchill Mining Plc's ("Churchill" or the "Company") Half Year Report for the six months ended 31 December 2008 following an active and successful period.

The period has been highlighted by:

a) Ongoing exploration success at Churchill's East Kutai Coal Project (EKCP) in Indonesia;

b) Scoping work on possible mining and production scenarios at the EKCP with particular consideration given to various tonnage throughputs, future coal pricing and project capital cost inputs; and

c) Discussions with multiple coal industry-related parties regarding possible joint venture and project financing solutions for the EKCP. 

As I noted at this juncture last year, the East Kutai Coal Project, located in Kalimantan approximately 110km north of Sangatta, is a discovery of world-class size. Churchill acquired a 75% stake in the project during 2007 and since then has been aggressively drilling the area for sub-bituminous thermal coal.

Using the field skills of our Jakarta-based consulting geologists at PT GMT Indonesia, coupled with feedback from our independent experts SMG Consultants, Churchill has now carried out more than 35,000 metres of drilling at the EKCP. This work has delineated a very large deposit containing a series of thick coal seams trending for more than 10 kilometres in a north/west to south/east direction. The bulk of this coal has been found in our PT Ridlatama Tambang Mineral concession, however, the surrounding tenements are still considered prospective and the EKCP deposit remains open in a variety of directions.

At the time of writing the EKCP had a JORC compliant resource of 1.4 billion tonnes. However, infill drilling, along with airborne topographical surveys are expected to lift and improve the categorisation of much of this resource. It will also allow Churchill to publish its maiden mining reserve soon and it is expected this reserve number will be substantially ahead of management's initial 100 million tonne target.

 

Given the drilling successes being achieved, Churchill moved to employ specialist engineering group PT Trans Tek Engineering (who are experienced in the Indonesian mining environment) to work with our internal team and begin mine design scoping work. A fillip to this has been a Heads of Agreement signed with renowned contractor Leighton.

The scoping work has and continues to look at variables such as mining parameters, potential haulage, and conveying routes, optimum production tonnages, port stockpile and handling facilities and power options.

Given the super-size scale of the EKCP project, Churchill has recognised the need for the introduction of one or more large partnering group/s to advance the project. Your company has consequently been actively engaging coal and energy-related groups with large balance sheets to examine potential entry points into this world-class enterprise.

To date our focus has been very much consumed by EKCP, however, Churchill's second Indonesian project - the Sendawar Coal Bed Methane Project - continues to be of interest given the increasing cost of energy inputs. The area sits in a coal basin with potential to host 5 trillion cubic feet of gas.

In September 2007 Churchill (70%) was granted a Coal Bed Methane license ("CBM License") for the project along with joint venture partner PT Ridlatama Mining Utama (30%) - the first of its kind to be granted by the Indonesian Government through direct appointment. The CBM license has given Churchill access to a substantial oil and gas database including seismic information and well details. This information continues to be interpreted under a joint evaluation study and we continue to talk to specialist CBM groups about potential involvement in this project. 

It would be remiss of me not to comment briefly on world economic affairs and how they relate to Churchill. Quite simply, like everyone in the world of resources, we have been negatively impacted by the global credit crisis and the corresponding downturn in commodities prices and particularly the value of the pound sterling. This slowdown in economic growth has most certainly temporarily depressed world thermal coal pricing and in this regard Indonesia's coal industry has not been immune. However, your Board remains optimistic about coal and its future in the mid-term. 

Quintessentially, we believe in the future of energy - and to this end coal is a cheap, known, abundant and safe energy fuel ideally suited for the populous developing Asian world.

Your Board is also mindful that EKCP, as it grows to world-class size, could also represent more than a just another coal deposit but a future strategic energy bank for developing nations. For this reason we remain very upbeat about the future amid the maelstrom of bad economic news.

In this financial reporting period the Company's functional currency changed from Pounds Sterling to United States Dollars. Concurrent with this change in functional currency, the Group adopted the United States Dollar as its presentation currency.

The loss for the half year was US$13,820,827 or (20.61c) per Ordinary Share. During the period the company has impaired the original carrying cost for the Sendawar CBM project for the amount of US$5,715,365. This amount reflects the original cost of the initial KP exploration licenses, prior to the granting of the new joint evaluation license by direct appointment in September 2007. During the half year the Company expended and capitalised a further US$220,614 under the joint evaluation license.

In addition the Company also incurred a loss on fair value of its investment in Spitfire Resources Limited for the amount of US$2,649,504 which is a reflection of the decline in world markets and the quoted prices of Spitfire shares and options on the Australian Securities Exchange (ASX). The Company has also been negatively impacted in its Sterling cash holdings by the unprecedented and significant decline in the Pound Sterling against the United States Dollar and booked a foreign exchange loss of US$3,347,532 in the half year.

During the period the company invested a further US$3.25 million in the ongoing exploration and pre-development activities at the East Kutai Coal Project reflecting the ramp up in exploration and drilling which has resulted in the release of the increased JORC compliant resource at the project.

The balance of operating expenditure is in line with the Company's stage of pre-development as it seeks the possible joint venture and project financing solutions to advance the project towards production. The Company has cash resources totalling US$8,325,147 at 31 December 2008.

In summary, Churchill remains committed to its core value of creating shareholder wealth. We believe despite the torrid economic climate your company is maturing rapidly and has never been at a more exciting juncture since listing in 2005.

On behalf of the Board I would like thank you, the Shareholders, for your support of the company's activities and I look forward to your ongoing support as we embark on another exciting chapter in Churchill's growth story in this next half year.

David F Quinlivan 

Chairman

INDEPENDENT REVIEW REPORT TO CHURCHILL MINING PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2008 which comprises the unaudited Group Income Statement, Group Balance Sheet, Group Cash Flow Statement, and Group Statement of Changes in Shareholders Equity and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2008 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market

BDO Stoy Hayward LLP

Chartered Accountants and Registered Auditors55 Baker St London W1U 7EU

27th March 2009

  GROUP INCOME STATEMENT (UNAUDITED) FOR THE 6 MONTHS ENDING 31 DECEMBER 2008

		6 months to	6 months to	Year ended
		31 Dec 2008	31 Dec 2007	30 June 2008
		Unaudited	Unaudited	Audited & Restated
	Note	US$	US$	US$
Continuing Operations
Revenue		-	-	-
Cost of Sales		-	-	-
Gross Profit /(Loss)		-	-	-
Other operating income		71,672	84,274	-
Other administrative expenses		(2,177,649)	(1,110,339)	(2,564,934)
Impairment of exploration assets		(5,715,365)	-	(904,757)
Total administrative expenses		(7,893,014)	(1,110,339)	(3,469,691)
Loss from operations		(7,821,342)	(1,026,065)	(3,469,691)
Finance income		246,084	108,666	513,381
Finance expenses - interest		(1,235)	(2,344)	(4,298)
Finance expenses - foreign exchange losses		(3,347,532)	(13,462)	(22,329)
Total finance expenses		(3,348,767)	(15,806)	(26,627)
Fair value gain on investments in associate		-	-	840,937
Fair value impairment on investments in associate		(2,649,504)	-	-
Deemed (loss)/profit on disposal of associate		(100,669)	-	62,536
Share of operating loss of associate		(146,629)	(10,590)	(207,566)
Loss on ordinary activities before taxation		(13,820,827)	(943,795)	(2,287,030)
Income tax expense	5	-	-	-
Loss on ordinary activities after taxation from continuing operations		(13,820,827)	(943,795)	(2,287,030)
Profit from discontinued operations		-	2,909,890	3,081,567
(Loss)/Profit for the period attributable to equity shareholders of the parent		(13,820,827)	1,966,095	794,537
Earnings per share for (loss)/profit attributable to the ordinary equity holders of the company
(Loss)/Profit per Share (cents)
Basic	3	(20.61c)	4.21c	1.42c
Diluted		(20.61c)	3.41c	1.24c
Earnings per share for (loss)/profit from continuing operations attributable to the ordinary equity holders of the company
(Loss) per Share (cents)
Basic	3	(20.61c)	(2.03c)	(4.07c)
Diluted		(20.61c)	(2.03c)	(4.07c)

Restatement - The comparatives for the year ended 30 June 2008 have been restated to reclassify $22,329 of foreign exchange losses from administrative expenses to finance expenses as this more accurately reflects the nature of the loss.

 

 

GROUP BALANCE SHEET (UNAUDITED) AS AT 31 DECEMBER 2008

					6 months to	6 months to	Year ended
					31 Dec 2008	31 Dec 2007	30 June 2008
					Unaudited	Unaudited	Audited
					US$	US$	US$
ASSETS
Current assets
Cash and cash equivalents					8,325,147	19,891,837	16,123,957
Trade and other receivables					676,210	1,126,813	576,838
Total current assets					9,001,357	21,018,650	16,700,795
Non-current assets
Property, Plant and Equipment					236,385	92,569	240,356
Intangible assets					11,210,093	11,056,343	13,560,718
Other financial assets					86,338	-	921,028
Investments in associates					1,036,051	3,956,621	4,199,040
Total non-current assets					12,568,867	15,105,533	18,921,142
TOTAL ASSETS					21,570,224	36,124,183	35,621,937
LIABILITIES
Current Liabilities
Trade and other payables					369,201	499,901	512,563
Loans and Borrowings					6,313	13,163	14,551
Total current liabilities					375,514	513,064	527,114
Non-current Liabilities
Borrowings					7,950	16,556	9,342
Total non-current liabilities					7,950	16,556	9,342
TOTAL LIABILITIES					383,464	529,620	536,456
NET ASSETS					21,186,760	35,594,563	35,085,481
CAPITAL & RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Share Capital					1,339,528	1,301,284	1,315,952
Share premium reserve					31,152,953	30,670,343	30,502,794
Merger reserve					6,827,772	6,827,772	6,827,772
Other reserves					1,553,863	1,490,136	2,305,492
Retained Losses					(19,687,356)	(4,694,972)	(5,866,529)
TOTAL EQUITY					21,186,760	35,594,563	35,085,481

  STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE 6 MONTHS ENDING 31 DECEMBER 2008

Consolidated	Share	Share	Merger	Retained	Other Reserves		Total
	Capital	Premium	Reserve	Losses			Equity
		Reserve			Foreign	Equity
					exchange	settled share
						options
	US$	US$	US$	US$	US$	US$	US$
Changes in equity for period to 30 June 2008
Balance at 1 July 2007	888,707	12,360,524	6,827,772	(6,661,066)	(62,991)	1,517,127	14,870,073
Profit for the year	-	-	-	794,537	-	-	794,537
Exchange differences on translation of foreign operations	-	-	-	-	315,335	-	315,335
Total recognised income and expenses for the year	-	-	-	794,537	315,335	-	1,109,872
Recognition of share based payments	-	-	-	-	-	122,370	122,370
Issue of shares	427,245	19,932,772	-	-	-	-	20,360,017
Share issue expenses	-	(1,790,502)	-	-	-	413,651	(1,376,851)
Balance at 30 June 2008	1,315,952	30,502,794	6,827,772	(5,866,529)	252,344	2,053,148	35,085,481
Changes in equity for period to 31 December 2008
Balance at 1 July 2008	1,315,952	30,502,794	6,827,772	(5,866,529)	252,344	2,053,148	35,085,481
Loss for the half year	-	-	-	(13,820,827)	-	-	(13,820,827)
Exchange differences on translation of foreign operations	-	-	-	-	(1,125,133)	-	(1,125,133)
Total recognised income and expenses for the half year	-	-	-	(13,820,827)	(1,125,133)	-	(14,945,960)
Recognition of share based payments	-	-	-	-	-	373,504	373,504
Issue of shares	23,576	650,159	-	-	-	-	673,735
Balance at 31 December 2008	1,339,528	31,152,953	6,827,772	(19,687,356)	(872,789)	2,426,652	21,186,760

  

GROUP CASH FLOW STATEMENT (UNAUDITED) FOR THE 6 MONTHS ENDING 31 DECEMBER 2008

						6 months to	6 months to	Year ended
						31 Dec 2008	31 Dec 2007	30 June 2008
						Unaudited	Unaudited	Audited
						US$	US$	US$
Cash flows from operating activities					4	(1,993,812)	(1,503,615)	(2,642,597)
Interest paid						(1,235)	(2,344)	(4,298)
Net cash flows from operating activities						(1,995,047)	(1,505,959)	(2,646,895)
Cash flows from investing activities
Finance Income						258,063	87,083	537,101
Payments for property, plant & equipment						(50,261)	(5,058)	(97,941)
Payments for exploration assets						-	(746,071)	(2,333,599)
Payments for exploration and evaluation						(3,361,610)	(922,794)	(2,931,953)
Acquisition of options in associate						-	-	(80,089)
Cash flows from investing activities						(3,153,808)	(1,586,840)	(4,906,481)
Cash flows from financing activities
Proceeds from issue of share capital						673,734	19,558,721	20,360,017
Share issue expenses paid						-	(1,394,508)	(1,376,850)
Proceeds from borrowings						-	-	1,860
Repayments of borrowings						(9,631)	(7,743)	(15,429)
Cash flows from financing activities						664,103	18,156,470	18,969,598
Net (decrease)/increase in cash and cash equivalents						(4,484,752)	15,063,671	11,416,222
Cash and cash equivalents at start of the period/year						16,123,957	4,814,704	4,814,703
Effect of foreign exchange rate differences						(3,314,058)	13,462	(106,968)
Cash and cash equivalents at end of period/year						8,325,147	19,891,837	16,123,957

  

NOTES TO THE INTERIM REPORT

1. BASIS OF PREPARATION

The accounts of the Group of the 6 months ended 31 December 2008 were approved by the Board on 27 March 2009. The interim results have not been audited, but were the subject of an independent review carried out by the Company's auditors, BDO Stoy Hayward LLP. The unaudited results do not constitute statutory accounts of the Company or the Group. These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of Churchill Mining PLC for the year ending 30 June 2009. The statutory accounts for the year ended 30 June 2008 have been filed with the registrar of Companies. The auditor's report on those accounts was unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.

The consolidated financial statements incorporate the results of Churchill Mining PLC and its subsidiary undertakings as at 31 December 2008, using the acquisition method of accounting. The corresponding amounts are for the year ended 30 June 2008 and the 6 month period ended 31 December 2007.

Effective 1 July 2008, the Company's functional currency changed from pounds sterling to the US dollar ("US$"). This change was made due to significant balances being denominated in US$ and the directors considered the USD$ to most faithfully represent the economic effects of the underlying transactions, events and conditions in the Company. Concurrent with this change in functional currency, the Group adopted the US$ as its presentation currency.

In accordance with International Accounting Standards, this change in functional currency has been accounted for prospectively by translating all items using the pounds sterling/US$ exchange spot rate on that date, being US$1.99351:£1. In the parent company accounts the resulting translated amounts for non monetary items at this date have been treated as their historic cost. Additionally the comparatives for the period ended 31 December 2007 and 30 June 2008 have been translated at this rate.

For the purposes of changing the Group's presentation currency, the comparatives for the period ended 31 December 2007 were translated using pound sterling/US$ exchange spot rate on that date, being US$1.99351:£1 while the comparatives for the period ended 30 June 2008 have been translated at the rate of US$1.99351:£1. There is no material difference between the average exchange rate for the period and the translation rate used.

 

2. DIVIDENDS

The Directors do not recommend the payment of a dividend for the period.

 

3. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period.

In order to calculate diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all dilutive potential Ordinary Shares according to IAS 33. Dilutive potential Ordinary Shares include share options granted to employees and Directors where the exercise price (adjusted according to IAS 33) is less than the average market price of the Company's Ordinary Shares during the period.

	6 months to	6 months to	Year ended
	31 Dec 2008	31 Dec 2007	30 June 2008
	Unaudited	Unaudited	Audited
	US$	US$	US$
(Loss)/Profit attributable to ordinary shareholders	(13,820,827)	1,966,095	794,537
	Number of Shares	Number of Shares	Number of Shares
Weighted average number of shares used in the calculation of basic (loss)/earnings per share	67,067,713	46,667,432	56,118,847
Effect of dilutive share options	6,064,379	10,983,027	7,832,055
Weighted average number of shares used in the calculation of diluted (loss)/earnings per share	73,132,092	57,650,459	63,950,902
Basic (loss)/earnings per share	(20.61c)	4.21c	1.42c
Diluted (loss)/earnings per share	(20.61c)	3.41c	1.24c
Earnings per share (Continuing Operations)
Loss from continuing operations	(13,820,827)	(943,795)	(2,287,030)
Basic loss per share (cents)	(20.61c)	(2.03c)	(4.07c)
Diluted loss per share (cents)	(20.61c)	(2.03c)	(4.07c)
Earnings per share (Discontinued Operations)
Profit from discontinued operations	-	2,909,890	3,081,567
Basic earnings per share (cents)	-	6.24c	5.49c
Diluted earnings per share (cents)	-	5.05c	4.82c

For continuing operations the effect of all potential ordinary shares arising from the exercise of options going forward is considered to be anti-dilutive.

The total number of shares in issue at 31 December 2008 amounted to 67,202,714. The total amount of options held over the shares at 31 December 2008 was 15,477,286. These options are exercisable at prices that range between 12p (8.3c) and 80p (55.3c). 

For the prior periods, the effect of 1,000,000 potential ordinary shares at 31 December 2007, and 3,850,000 potential ordinary shares at 30 June 2008 arising from the exercise of options is considered to be anti-dilutive and have been excluded from the above calculation. 

 

 

4. NOTES TO THE CASH FLOW STATEMENT

	6 months to	6 months to	Year ended
	31 Dec 2008	31 Dec 2007	30 June 2008
	Unaudited	Unaudited	Audited
	US$	US$	US$
Reconciliation of (loss)/profit on ordinary activities after tax to cash from operating activities
(Loss)/Profit on ordinary activities after tax	(13,820,827)	1,966,095	794,537
Share option expense	360,202	-	122,370
Net exchange differences	3,371,733	13,462	135,696
Depreciation	27,243	6,361	27,479
Impairment expense	5,715,365	-	904,757
Interest revenue in investing activities	(258,063)	(87,082)	(537,101)
Loss/(Gain) on fair value of financial assets	2,649,504	-	(840,938)
Gain on disposal of subsidiary	-	(3,202,209)	(3,354,750)
Deemed loss/(profit) on disposal of associate	100,669	-	(62,536)
Share of associate loss	146,629	10,590	207,566
Increase in accounts receivable	(111,351)	(129,809)	(191,961)
(Decrease)/Increase in creditors and accruals	(174,916)	(81,023)	152,284
Cash flow from operating activities	(1,993,812)	(1,503,615)	(2,642,597)

 

5. TAXATION

No taxation has been provided due to losses in the period. No deferred tax asset has been recognised for past or current losses as the recoverability of any such assets is not probable in the foreseeable future.

 

6. POST BALANCE SHEET EVENTS

On 20 March 2009 Churchill announced that Mr Jan Castro was appointed as a Director of the Company.

 

7. FORWARD LOOKING STATEMENTS

This report contains certain forward looking statements, which include assumptions with respect to future plans, results and capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Please refer to the Company's Admission Document available from the Company's web site for a list of risk factors. The Company's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this report are made as at the date of this report

 

8. INTERIM REPORT

Copies of this interim report for the six months ended 31 December 2008 will be available from the offices of Churchill Mining PLC, Suite 1, 346 Barker Road, Subiaco, WA, 6008, and on the company's website www.churchillmining.com

Shareholder Information on the Internet

The Company maintains a website which allows access to certain useful Investor information. The website address is www.churchillmining.com

ENDIR PUUCWWUPBUQM