The Evil Diaries: Faites vos jeux

Evil discusses Asia Resource Minerals and Churchill Mining…

Well, well, well. Nat Rothschild has underwritten a $100m placing at 25p a share for Asia Resource Minerals (ARMS). This is a big premium to the price ruling before the RNS this morning and, even now, the stock stands at a substantial discount to the issue price. Nat either fancies taking a lot more stock on board or he wishes to rescue his family’s name from this imbroglio or both. I think that if I were a holder I would sell on this rise but bear in mind the possibility that coal in Indonesia might nonetheless yield a dividend. All of which impacts upon Churchill Mining (CHL)’s legal and financial position – which I have of course covered elsewhere.

As it happens, a special correspondent, a solicitor by upbringing, has drawn my attention to events in and around Churchill Mining and comments that “the issues to be considered at the hearing in July include:

“— whether or not the documents impugned by the Republic of Indonesia are authentic;
— whether or not key documents such as mining licences and other documents of title that were issued by authorised representatives of the Republic of Indonesia bearing mechanically generated facsimile signatures are binding on the Republic of Indonesia; and,
— the positions in law (including Churchill’s position on estoppel regarding documents impugned by the Republic of Indonesia) of both Churchill and the Republic of Indonesia.”

He adds that a huge amount of detail is available here: https://icsid.worldbank.org/apps/ICSIDWEB/cases/Pages/casedetail.aspx?CaseNo=ARB/12/40%20and%2012/14

I have not immersed myself in all of this, but ROI do appear to be founding (or basing their case) on technicalities that may be of questionable relevance in the light of the parties’ subsequent acts and omissions. Churchill, whose funds are not unlimited, see this as a delaying tactic. It seems to me that what lies behind Churchill’s recent change of lawyers is frustration at ROI’s success in having all this addressed as a separate, preliminary matter.”

My correspondent is optimistic as to the eventual outcome proving to be in Churchill’s favour and here refers to the fact that Clifford Chance have taken over the conduct of the case. Clifford Chance are world class chargers and will get through Churchill’s cash as quickly as possible. However, they clearly have a high reputation in this field of work and they will have to deal with ROI who are obviously dead set upon being as unreasonable as possible. (I have so remarked before but extending credit to these far off places only works for as long as the far off place reckons that it is sucking money in faster than it pays out: generally, across the world, we are now well into the second phase. This is known as a credit squeeze.)

At 13p, Churchill is capitalised at around £16m as against net cash which is of the order of £1m. So there will presumably have to be a placing or two.

Churchill is of course not alone in seeking a just result the effect of which, were the outcome beneficial or, in this case, merely just, would be hugely to boost its share price. The potential punters for this sort of proposition are currently tied up with Oxus Gold (OXS) and are unlikely to yield to Churchill’s charms just yet. This suggests that a purchase of Churchill shares right now would be sensible. On the other hand the declaration of a result will be many months away, it being accepted that the ROI has no intention whatsoever of settling matters earlier than the eye-balling just before the Court’s gates open. Faites vos jeux.