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UPDATE: Churchill Mining appoints new Indonesian investors to board

Published: 06:19 06 Jun 2011 EDT

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Churchill Mining (LON:CHL) told investors that its new Indonesian investors have been appointed to the board of directors.

Between them the two Indonesian executives, Rachmat Gobel and Fara Luwia, have bought just over 19 million new shares in the company. 

They were purchased at 40 pence each – a 60 percent premium at the time of the agreement – and the deal means the pair own around 16 per cent of Churchill.

The stock purchase is viewed as a significant endorsement of the company and the potentially world-class East Kutai coal project – which has become entangled in legal problems.

"We remain delighted to gain the reach and experience of Mr. Gobel and Ms. Luwia as they join us, both as investors and board members,” chairman David Quinlivan said.

“Although Churchill is already well funded, the constructive injection of capital, and the associated premium paid, demonstrates their support for the project.  In addition, we are excited that Mr. Radke is joining the board and bringing to Churchill the depth and breadth of his corporate, legal and market expertise."

The placing of new shares with the two new investors raised £7.7 million, which will be put towards the development of the East Kutai project.

The cash will see the company through a tricky period of its development as it fights a legal rearguard over its East Kutai coal project in the East Kalimantan region of the country. Indeed analysts believe the two influential business people Churchill has brought on board could provide some much needed local expertise. 

Rachmat Gobel controls a well-known and highly respected Indonesian company, called PT Gobel International, which has an impressive track record of partnering international companies, Churchill said.

Gobel a director for several companies and he is also vice chairman of the Advisory Board of the Indonesian Chamber of Commerce and Industry, the vice chairman of the Employers' Association of Indonesia.

Luwia is the president of PT Goldkey Property, which handles large commercial property and land deals in Indonesia.  

Churchill also revealed that Pala Investments – one of Churchill's largest shareholders – has appointed Gregory Radke to represent it on Churchill’s board. Radke will be a non-executive director.

The market’s response to today’s update was positive, with the shares rising 2.5 pernce, or just over 5 per cent, to 50 pence. It builds on a rally that has seen the stock almost double in value in the past three months.

“Whilst Churchill had previously established an advisory board, the direct involvement, in a non-executive capacity, of Mr Gobel and Ms Luwia in particular adds more direct local experience,” said Andrew McGeary, an analyst at City broker Northland Securities. 

“This looks to be key in resurrecting confidence and driving the project forward. 

“Given the additional shares, the company looks to have a market cap of around £58 million, which represents a good recovery from its lows of £18 million. 

“While we welcome the move we retain our caution on the shares given the uncertainty surrounding the on-going legal case over the title of the East Kutai assets.”

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