What’s Next For Churchill Mining Plc?

Mining minnow Churchill Mining (LSE: CHL) issued an update today regarding the progress of its arbitration case against the Government of Indonesia. 

The update concerned the recent document authenticity hearing, which was held between the 3rd and 10th August. The hearing included a number of expert witnesses and oral presentations. All of the witnesses for Churchill and related parties whom Indonesia requested for cross-examination attended the hearing.

However, not all of the witnesses for Indonesia whom Churchill requested attend the meeting showed up. One of Indonesia’s key witnesses, Isran Noor, declined to attend the proceedings, and as a result, the Tribunal ordered that Mr Noor’s witness statement be struck out and disregarded.

Now the Tribunal hearing has been completed, there will be the presentation of post-hearing briefs by both sides and the Tribunal will deliver its decision in due course. There is no set date for the Tribunal to deliver its decision on Indonesia’s dismissal application, although the decision is unlikely to be handed down for some months. 

Key development 

The decision by Isran Noor not to attend the hearing is a surprising development. Mr Noor held the office of Bupati (the head of local government) of East Kutai before his recent resignation. As a result, Mr Noor was considered to be one of Indonesia’s key witnesses — his non-attendance could help sway the Tribunal. 

Next steps 

This month’s document authenticity hearing is a key stage of Churchill’s battle against the Indonesian government. 

Churchill is fighting the Government of Indonesia over the unlawful revocation of the East Kutai Coal Project in East Kalimantan Indonesia, in which Churchill and its partner, Planet Mining Pty Ltd. held a 75% interest.

The Government of Indonesia has been trying to throw out Churchill’s claims against the mine on the grounds of document authenticity. When the results of the document authenticity hearing are finally released, they should settle the debate and allow Churchill’s claims against the government progress further. 

And there is a lot at stake here. Churchill spent $67m on exploration and feasibility studies at the East Kutai Coal Project, arriving at a potential resource estimate of 3.1bt. The company’s damages have been independently assessed at $1.3bn, around £833m. At time of writing, Churchill’s market cap is only £44m. 

Binary bet

As I’ve said before, Churchill’s shares are a binary bet right now. City analysts believe that if the company reaches a settlement with the Indonesian government, it could receive a cash lump sum of around $9.70 per share. Or, in sterling terms, approximately 670p per share. 

Nevertheless, it could take years for Churchill to reach a settlement, and the company’s cash balance is running out. Churchill’s cash balance has dwindled over the past four years to only £3m, down from £22m four years ago as the drawn out legal battle has sapped resources. 

High risk, high reward 

All in all, Churchill is a high-risk/high-reward play. If the company reaches a settlement, its shares could rocket. However, there's a high risk that Churchill could fail to negotiate a deal, run out of cash and become insolvent. 

So, Churchill's certainly not a company that's suitable for widows and orphans. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.