Cloudified Holdings Limited Regulatory News (CHL)

5 April 2011

CHURCHILL MINING PLC

("Churchill" to "the Company")

Update on Ridlatama's forestry-use permits

Churchill Mining announced on 14 March 2011 that clarity was being sought as to whether the EKCP Licences covered forestry areas and whether forestry-use permits were required. 

Background to Ridlatama's applications for forestry-use permits

Indonesian Ministry of Forestry Decree No 79/Kpts-II/2001 dated 15 March 2001 and the forestry Block Map (Map No 1816) attached to this Decree show that part of the EKCP Licences relate to production forestry areas and would require Ridlatama / Churchill to obtain forestry-use permits. A more recent written statement, however, from the Regional Forestry Office in Sangatta dated 24 August 2009 states that the Regional Forestry Office considered the EKCP Licences to be in non-forestry areas.

In the absence of clarity surrounding whether or not Churchill / Ridlatama required forestry-use permits for the EKCP Licences, on 9 September 2009 Churchill / Ridlatama applied to the Ministry of Forestry for forestry-use permits covering the EKCP Licences.

Those applications for forestry-use permits are supported by a recommendation by the Bupati dated 3 September 2009 and subsequently by:

·; a recommendation by Planology at the Forestry Office of the Provincial Governor dated 2 October 2009;

·; a recommendation by the Governor of East Kalimantan dated 22 March 2010; and

·; a recommendation by the Director General of the Ministry of Energy and Mineral Resources dated 2 September 2010.

Forestry-use permit applications update

On 3 March 2011 the Administrative Tribunal ruling made reference to the existence of letters dated 31 March and 21 April 2010 from the Ministry of Forestry which rejected Ridlatama's forestry-use permit applications. 

Prior to the Administrative Tribunal's ruling, the Board was not aware of the existence of such letters. Since reference to these letters was made in the Administrative Tribunal ruling, the Board has been seeking to ascertain the position in relation to these letters.

The Board has now been provided with copies of two letters, dated 31 March and 21 April 2010, 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 respectively, (these being the two southernmost licenses on which there is currently no identified reserve or resource) have been rejected. The Board is investigating whether similar letters in relation to the other two EKCP Licences exist.

The Company / Ridlatama continue to liaise with the Ministry of Forestry to ascertain whether forestry-use permits are in fact required. 

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. 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 being the reason why the applications cannot be considered and were therefore rejected. The Company rejects any suggestion of overlap and expects this issue to be addressed in the forthcoming appeal of the decision of the Administrative Tribunal. 

Current position

The Board is liaising with the Ministry of Forestry and Ridlatama to ascertain the exact position in relation to the four applications for forestry-use permits. The Board's position on these new facts is as follows:

·; The Indonesian associated office of the Company's solicitors, Herbert Smith LLP, has advised the Company that the Ministry of Forestry's rejection of the forestry-use permits is unrelated to the separate question of whether the EKCP Licences are valid. 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.

·; The Company is engaging with the Ministry of Forestry regarding the rejection letters and will take all steps to resolve the issue, including, if necessary, applying for new forestry-use permits.

·; Churchill / Ridlatama have not yet commenced mining activities at the EKCP site, and, therefore, the apparent rejection of two of the permit applications does not affect current activities at the EKCP.

The Board is concerned that management did not make it aware of the existence of these rejection letters until very recently. The Company's Chairman is currently conducting a thorough audit of the Company's office in Jakarta with the assistance of selected advisers, and is also working with Ridlatama 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 Board is unaware.

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