Asia Resource Minerals : Interim Results and Q2 Production Report

28 August 2014

For Immediate Release

Asia Resource Minerals plc ("ARMS" or the "Company")

Interim Results and Q2 Production Report

H1 2014  Highlights:

·     Production up 5% to 12.1mt (2013: 11.5mt)

·     Production cost of sales of $38.2/t (2013: $37.1/t)

·     Average selling price of $56.5/t (2013: $61.4/t)

·     Underlying EBITDA of $91m (2013: $80m)

·     Operating profit of $3m (2013: loss $11m)

·     Costs impacted by higher haulage distances and strip ratio in second quarter.

·     Fuel ratio continues to be reduced through both unit cost and usage improvements

·     Roles of ARMS CEO and PT Berau Coal Energy Tbk ("Berau") President Director combined to create a leaner and more efficient management reporting structure

·     New Chairman and a revised Board

·     Full year costs remain on track to be lower than full year 2013 level of $38.6/t

Strategy to deliver shareholder value:

·     £1.15 per share special dividend paid to shareholders, equivalent to $472m

·     Negotiations successfully concluded with Ministry of Energy and Mineral Resources in Indonesia and production cap increased by 1.85mt to 24.2mt for 2014

·     Agreement signed in August 2014 with our largest mining contractor BUMA to reduce mining rates by 15% at Lati, effective in retrospect from 1 January 2014.

·     More progress expected on fuel savings in H2

·     Increases in H1 strip ratio expected to reverse in H2 through focus on higher margin mining areas

·     Capital Expenditure for 2014 likely to be $25-30m against original budget of $41m

·     Bond refinancing options under active consideration

Amir Sambodo, Chief Executive Officer of ARMS, said "Despite the continued weakness in global coal markets, I am pleased to report a solid set of interim results. I can reassure shareholders that despite the changes at management and Board level over recent months, we remain resolutely focused on the continued delivery of our strategy, in particular reducing costs. I am confident that the successful implementation of our cost reduction initiatives will deliver value to shareholders."

Notes:

1.     Operating profit/(loss) is after charging $72 million (H1 2013: $72 million) in respect of the unwind of fair value adjustments created as a result of the acquisition of PT Berau.

2.     EBITDA represents profit before: net finance items, net taxation, depreciation and amortisation. It is calculated as follows:

3.     Underlying loss is calculated as follows:

* The accounting profit on disposal is $45m, which is the net of the $351m profit on disposal stated above and the $306m reclassification of change in fair value of available for sale financial asset.

4.     After charging $33m (H1 2013: $34m) in respect of the unwind of fair value adjustments created as a result of the acquisition of PT Berau.

5.     Basic loss per share is calculated as loss for the financial period divided by the weighted average number of ordinary shares in issue for the period.

6.     Underlying loss per share is calculated as underlying loss divided by the weighted average number of ordinary shares in issue for the period

7.     2013 comparative has been restated for restricted cash. Refer to note 17.

REVIEW OF THE SIX MONTHS ENDED 30 JUNE 2014

Financial Results

EBITDA for the period was $134m (H1 2013: $74m) which includes a $45m accounting profit on the disposal of PT Bumi. Underlying EBITDA which excludes exceptional and other non-recurring items was $91m (H1 2013: $80m). Operating profit for the period was $3m (H1 2013: loss $11m).

Underlying earnings fell primarily due to a reduction in the thermal coal average selling price in the period from $61.4/t to $56.5/t, offset by lower G&A and marketing costs.

Group net debt at the end of the period was $91m (2013: $405m (restated)). However, this was post the receipt of the $501m proceeds from the PT Bumi disposal, but before the distribution to shareholders of $472m. The net debt balance would have been $563m if the distribution had been made before 30 June 2014.

Cash flow from operations decreased by $115m to $74m, due to a benefit in 2013 through working capital changes, notably the deferral of payments to suppliers.

Approximately 85% (H1 2013: 85%) of total coal sales went to exports, with approximately 15% (H1 2013: 15%) to domestic Indonesian customers.

Production Update

After extensive discussions with the Ministry of Energy and Mineral Resources in Indonesia regarding PT Berau Coal's production quota for 2014, the quota has been increased by 1.85mt to 24.2mt for 2014. The Company remains on track to achieve that level of production.

Production growth during the first half was in line with our full year target of 24.2mt, However, waste and coal haul distances were higher than the previous year.  The waste distance was driven by longer leads to out-of-pit dumps and coal distance increased as a result of longer hauls at Lati. Both waste and coal distances were lower than target. Strip ratio also increased due to a change in mix of production from Binungan 7 to Lati. Lower than planned sales during the second quarter also negatively impacted strip ratio as the focus temporarily shifted to overburden removal.

During the first half of the year there have been no significant interruptions for weather related events.

Work has commenced on the upgrade of the Binungan Coal Handling and Processing Plant (CHPP) and Suaran Port facility to allow the capacity of the Binungan mining operations to increase from 9mt to 18mt per annum.  Given the longer term objective to move production to the lower cost Binungan area this project is strategically important to Berau Coal and expected to be completed by Q3 2015.

Cost Reduction Update

Agreements have been achieved for rate reductions with a number of mining contractors, and an agreement has been signed with BUMA, Berau Coal's largest mining contractor for a 15% rate reduction at Lati.  Given continued weakness in the coal price Berau Coal is seeking further cost relief from contractors in order to continue operations in some pits.  In the event this relief is not forthcoming, operations in some pits may be suspended and operations moved to lower cost mining areas.

Fuel costs continue to be a major focus both from a unit cost perspective and usage.  Berau Coal renegotiated its main fuel supply contract to double the level of discount it was receiving, resulting in a significant reduction in unit costs. Benefits from the new arrangement are expected to manifest in H2.  Fuel additives are fully deployed at all Berau Coal mines resulting in a 3% reduction in fuel usage. Berau is continuing to investigate measures to control and measure its fuel usage with the focus on improving its fuel management systems.

Barging performance in H1 has seen a significant increase in productivity versus the previous year.  This is largely as a result of the reduction in the size of the barge fleet by 4 units and a 12% increase in barge payload due to the dredging of the river at Lati and the use of larger barges at Suaran. The expiry of hire contracts on existing barges at the end of 2014 should allow a larger improvement in barge payloads thereafter.

Despite the savings, overall production costs increased during the period to $38.2/t (2013: $37.1/t). As mentioned above, this was mainly due to a higher strip ratio of 8.8 bcm/t (2013: 8.7 bcm/t), and increased hauling distances. Higher dead freight than 2013 also meant higher costs for transhipment.

Capital Structure

ARMS announced on 12 August 2014 that in respect to the proposed placing by Berau Capital Resources II Pte. Ltd. ("Berau Capital"), of $450m of Guaranteed Senior Secured Notes due 2019 ("the Notes"), it was decided to postpone the placing, due to adverse market conditions.

The use of proceeds of the proposed notes was intended for the redemption in full of the $450m outstanding 12.5% Guaranteed Senior Secured Notes due 8 July 2015.

ARMS and its subsidiary PT Berau Coal Energy Tbk, intend to proceed with their refinancing plans when market conditions permit, and will update shareholders on its progress in due course.

Outlook

Conditions remain very tough for thermal coal with market still in over-supply and more production growth forecast for 2014. Long term contracts and take-or-pay agreements are also continuing to slow the reduction in capacity needed to boost the coal price.

In terms of guidance for the full year, as mentioned, we remain on track for 24.2mt of production. Full year costs remain on track to be lower than full year 2013.

Capital expenditure for 2014 is likely to fall within a range of $25-30m against an original budget of $41m. The capital expenditure figure as at 30 June 2014 was $14m.

Business Unit Performance

The following information is on a 100% mine level basis, for the 6 months ended 30 June 2014. The comparatives are for the 6 months ended 30 June 2013 for the Profit and Loss account, and as at 31 December 2013 for the Balance Sheet.

Berau

Berau's assets are located in the north eastern part of Kalimantan and consist of three operating mines, namely Lati, Binungan and Sambarata.

Berau had a strong operating performance for the first half of the year with production up 5%. Total coal mined was 12.1 million tonnes for the first half of 2014 compared with 11.5 million tonnes in the first half of 2013. The increase in coal mined is primarily from existing pits.

Berau's average selling price for the first half was $56.5 per tonne (H1 2013: $61.4 per tonne). Production cost of sales at Berau was $38.2 per tonne (H1 2013: $37.1 per tonne).

The average stripping ratio for the period was 8.8 bcm per tonne compared to 8.7 bcm per tonne for the first half of 2013.

Berau is on track to deliver 24.2mt of production for the year.

In terms of sales by destination, 44% of sales went to China (including Hong Kong),11% to India and 30% went to the rest of Asia (including Taiwan and South Korea), with the remaining 15% sold domestically into Indonesia.

1.     Bank cubic metres (bcm) of overburden removed per tonne of coal mined.

Key information

1.     Bank cubic metres (bcm) of overburden removed per tonne of coal mined.

Production Report for the Second Quarter ended 30 June 2014 (unaudited)

Notes:

Numbers have been rounded to one decimal place in the above table. As the total numbers in the previous table do not use rounding conventions, small rounding variances may occur.

Principal risks and uncertainties

Our Group is subject to a variety of risks and uncertainties which are the result not only of the environment in which we operate but also of other factors over which we have little or no control. The principal risks and uncertainties facing the Group were set out in detail in the Business Review section of the Annual Report 2013 on pages 38 to 41 and remain appropriate in 2014. Key headline risks set out in the 2013 Annual Report (which is available on our website: www.asiarmplc.com) relate to the following:

·     Coal Contract of Works (CCoW)

·     Coal Price

·     Coal Mining Operations

·     Financial

·     Political Environment in Indonesia

·     Management

Statement of Directors' responsibilities

The Directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·     an indication of important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·     material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors confirm that to the best of their knowledge the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as a whole as required by DTR 4.2.4.

The Directors of ARMS plc are:

·     Amir Sambodo (appointed 11 April 2011)

·     Sir Richard Gozney (appointed 21 February 2013)

·     Alexander Ramlie (appointed 14 June 2012)

·     Dr Wallace King (appointed 6 June 2014)

·     Bob Kamandanu (appointed 6 June 2014)

A list of current Directors is maintained on the ARMS plc website:www.asiarmplc.com

On behalf of the Board on 28 August 2014

Amir Sambodo

Chief Executive

Report on the condensed consolidated interim financial statements

We have reviewed the condensed consolidated interim financial statements, defined below, in the half-yearly financial report of Asia Resource Minerals plc for the six months ended 30 June 2014. Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

In forming our opinion on the condensed consolidated interim financial statements, which is not modified, we have considered and draw attention to the adequacy of the disclosure made in the basis of preparation note concerning the Group's ability to continue as a going concern. As a consequence of the Group not refinancing $450m Guaranteed Senior Secured Notes which mature on 8 July 2015, as at the date of approval of these condensed consolidated financial statements, the Group does not have committed borrowing facilities to meet its working capital requirements for at least the next 12 months. This condition, along with the other matters explained in the basis of preparation note within the condensed consolidated interim financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The condensed consolidated interim financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

The condensed consolidated interim financial statements, which are prepared by Asia Resource Minerals plc, comprise:

·      the consolidated income statement and statement of comprehensive income for the six months ended 30 June 2014;

·      the consolidated balance sheet as at 30 June 2014;

·      the consolidated statement of changes in equity for the six months ended 30 June 2014;

·      the consolidated statement of cash flows for the six months ended 30 June 2014; and

·      the explanatory notes to the condensed consolidated interim financial statements.

As disclosed in note 2 to the financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The condensed consolidated interim financial statements included in the half-yearly financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

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.

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 consolidated interim financial statements.

The half-yearly financial report, including the condensed consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

London

28 August 2014

Notes:

(i)            The maintenance and integrity of the Asia Resource Minerals plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(ii)           Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

The accompanying notes are an integral part of these condensed consolidated financial statements

Items in the above statement are disclosed net of tax.  The income tax relating to each component of other comprehensive income is disclosed in note 7.

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

* The 2013 opening balance numbers have been restated to reflect the impact of IAS 19 (revised) and combining the share based payment reserve with the accumulated losses.

The accompanying notes are an integral part of these condensed consolidated financial statements.

* The 2013 numbers have been restated to reflect the impact of restricted cash. Refer to Note 17.

The accompanying notes are an integral part of these condensed consolidated financial statements.

1.       General information

Asia Resource Minerals plc ('the Company') is the ultimate parent company of the Asia Resource Minerals plc group of companies ('the Group'). It is incorporated, domiciled and registered in England and Wales as a public company limited by shares. The ordinary shares of the Company are traded on the London Stock Exchange and its registered office is at Atlas House, 3rd Floor, 173 Victoria Street, London SW1E 5NH. Its main subsidiary, PT Berau Coal Energy Tbk, ('PT Berau') is the parent of a group of coal mining companies and is listed on the Indonesia Stock Exchange. The Company also held an investment in PT Bumi Resources Tbk ('PT Bumi') which it sold on 25 March 2014.

2.       Basis of preparation

The condensed consolidated interim financial statements for the six months ended 30 June 2014 were authorised for issue in accordance with a resolution of the Board of Directors on 28 August 2014. They do not comprise statutory financial statements within the meaning of Section 434 of the Companies Act 2006. The condensed consolidated interim financial statements are unaudited but have been reviewed by the auditors, PricewaterhouseCoopers LLP ("PwC").  The audited financial statements for the year ended 31 December 2013 were approved by the Board of Directors on 11 April 2014 and have been filed with the Registrar of Companies.  The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements for the six months ended 30 June 2014 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. They should be read in conjunction with the audited financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRSs as adopted by the European Union.

The condensed consolidated interim financial statements are presented in millions of United States Dollars ("$").

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2013. Certain assumptions have been modified in line with the changing economic environment.

Recoverable amount of goodwill and property, plant and equipment

Judgement is required in the assessment of the recoverable amount of goodwill and property, plant and equipment. The directors have updated their 2013 year-end assessment of the recoverable amount of goodwill and property, plant and equipment as at 30 June 2014 and are satisfied that no impairment charge is required.

Whilst the near term coal prices have fallen since the 2013 year-end, the longer term coal price is considered more stable by key market commentators. Based upon current initiatives, management is confident that the Group will reduce costs in the medium term through enhanced mining operations. However a more sustained, longer term decline in coal prices may cause the forecast recoverable amount of the Group's assets to be reduced, unless further efficiencies can be achieved. We will perform a further review in the autumn as part of our annual and longer term planning process. Refer to note 11.

Taxation

The Group's subsidiary in Indonesia pays tax under a number of different regulations and laws, which are subject to interpretation. These regulations and laws can change frequently and the judicial system does not have well developed rules of precedent, which may result in increased scrutiny of past years' returns and additional taxes may be assessed based on new interpretations of the legislation and tax position. Management's interpretation of such legislation and judgements in relation to tax positions may be challenged by the relevant authorities.

As at the date of these financial statements, the Group's subsidiary, PT Berau has received several tax assessments that are not finalised and are still in the process of discussion and resolution, the outcome of which are not presently determinable. Management believes that its interpretation of the legislation is appropriate and that the tax position included in these financial statements will be sustained.

Notwithstanding, the postponement of the refinancing, the directors have a reasonable expectation that the refinancing will be forthcoming on acceptable terms when market conditions permit, based on the Group's discussions with banks, bondholders, ratings agencies and other advisors.  Accordingly the Directors, having made appropriate enquiries, have a reasonable expectation that the company will obtain adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the condensed consolidated financial statements.

3.       Accounting policies and presentation

The accounting policies and presentation adopted are consistent with those applied in the Asia Resource Minerals plc consolidated financial statements for the year ended 31 December 2013.

The following IFRSs or IFRICs that are effective for the first time for this interim period and do not have a material impact on the Group are:

·      Amendments to IFRS 10, IFRS 12 and IAS 27 'Investment Entities'

·      IFRS 10 'Consolidated financial statements'

·      IFRS 11 'Joint arrangements'

·      IFRS 12 'Disclosure of Interests in Other Entities'

·      Amendments to IAS 27 'Separate Financial Statements'

·      Amendments to IAS 28 'Investments in Associates and Joint Ventures'

·      Amendments to IAS 32 'Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities'

·      Amendments to IAS 36 'Recoverable Amount Disclosures for Non Financial Assets'

·      Amendments to IAS 39 'Novation of Derivatives and Continuation of Hedge Accounting'

·      IFRIC 21 'Levies'

The Group did not early adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is after 1 January 2014.

The Group continues to monitor future developments in discussion by IASB.  Although still under debate, potential changes to IFRS 10, IAS 27 and IAS 28, relating to the unit of account for investments could have a significant impact, requiring the Group to reassess its basis for measuring impairments. Current proposals state that the fair value measurement of cash generating units (CGUs) for impairment testing when those CGUs correspond to a quoted entity should be the product of their quoted price multiplied by the quantity of instruments held, rather than the current method used by the Group of discounted cash flows.  If the fair value of PT Berau was measured on the basis of multiplying the quoted price by the number of shares held, the value would be $242m (31 December 2013: $451m), compared to a carrying value of goodwill of $518m (31 December 2013: $518m).

4.       Segmental analysis

In accordance with the provisions of IFRS 8 'Operating Segments', the operating segments used to present segment information were identified on the basis of internal reports used by the Asia Resource Minerals plc's Board of Directors to allocate resources to the segments and assess their performance. Asia Resource Minerals plc's Executive Committee of Board of Directors is the Group's "chief operating decision maker" within the meaning of IFRS 8.

The Board of Directors considers the business from a product perspective and has determined that the Group has one single reportable segment, being coal mining.  Information on financial performance and net assets is presented in the income statement and balance sheet and information on underlying earnings and underlying EBITDA is presented in note 6.

5.       Other exceptional costs

As discussed in the Asia Resource Minerals plc 2013 Annual Report and Accounts, new management at PT Berau conducted an extensive review of the financial position of PT Berau in March 2013 and identified significant expenditure, which had no clear business purpose. Previous management at PT Berau had attributed these costs to hauling roads and other construction in progress, land related payments, consulting services and acquisition related goodwill. The expenditure was predominantly incurred in 2012, however expenditure of a similar nature was also incurred in January and February 2013 under previous management and accordingly this has also been presented as other exceptional costs. These amounts are shown separately in the Consolidated Income Statement to separate them from costs incurred in the ordinary course of business.

6.       Underlying earnings and underlying EBITDA

The Group presents underlying earnings and underlying earnings before interest, tax, depreciation and amortisation ("underlying EBITDA") as additional measures to provide greater understanding of the underlying business performance of its operations. Underlying earnings and underlying EBITDA exclude separate items which are those items of financial performance that the Group believes should be separately disclosed.

Separate items include when applicable, impairment of goodwill and other assets, costs of acquiring and integrating acquisitions, costs of disposal of a business, fundamental restructuring of business, profit or loss on disposal of a business or significant other asset, material claims and settlements, other exceptional costs and significant gains and losses on derivative instruments.

The adjustments made to net earnings to arrive at underlying earnings and underlying EBITDA are explained below:

1 Underlying EBITDA represents the whole Group.

7.       Taxation

Tax on the loss for the period comprises both current and deferred tax as well as adjustments in respect of prior periods. Tax is charged or credited to the consolidated income statement and consolidated statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the tax is also included directly within equity.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted, or substantively enacted, by the end of the reporting period.

Deferred tax liabilities are offset against deferred tax assets within the same taxable entity or qualifying local tax group where there is both the legal right and the intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Significant judgement is required in determining the Group's income tax liabilities. In arriving at the current and deferred tax liability the Group has taken account of tax issues that are subject to on-going discussions with the relevant tax authorities. Calculations of these liabilities have been based on management's assessment of legal and professional advice, case law and other relevant guidance. Where the expected tax outcome of these matters is different from the amounts that were recorded initially, such differences will impact the current and deferred tax amounts in the period in which such determination is made.

No income tax has been charged or credited directly to components of other comprehensive income or directly to equity during this or the preceding period.

8.       (Loss) / Earnings per share 'EPS'

The calculation of earnings per ordinary share is based on profit attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares in issue during the year. In addition to the earnings per share required by IAS 33 "Earnings per Share", underlying EPS has also been calculated and is based on earnings excluding the effect of separately disclosed items. It has been calculated to allow shareholders to have a better understanding of the trading performance of the Group. Details of the underlying EPS are set out below:

9.       Sale of shares in PT Bumi and return of cash

The Group owned an interest of 6,061,699,637 ordinary shares in PT Bumi that are quoted on the Indonesia Stock Exchange and are denominated in Indonesian Rupiahs. This shareholding was initially classified as an investment in associate, however after the loss of significant influence on 30 September 2012, it was reclassified as an available for sale asset. 

The shares in PT Bumi were sold in their entirety on 25 March 2014 for an amount of $501m to the Bakrie Group. This resulted in a profit on disposal of $45m before attributable disposal costs ($12m in year to 31 December 2013 and $2m in 6 months to 30 June 2014) and after the recycling of the change in fair value of the available for sale asset from other comprehensive income to income statement of $306m as required by IAS 39. Following the receipt of the sale proceeds from the disposal of PT Bumi, the Group announced that it would be returning cash to shareholders.

The Return of Cash which was approved at the Company's general meeting on the 27 June 2014, provided shareholders with two options.  The income alternative was the option where shareholders received a C share with a nominal value of 0.0001p on the 30 June 2014.  180,559,084 C shares were issued in this respect. A distribution of $354m has been recorded in the Consolidated Statement of Changes in Equity with a corresponding entry to other payables, until the payment is made to shareholders after the 30 June 2014.  Each C shareholder received a cash dividend of £1.15 per share on 8 July 2014 as explained in Note 16. Following payment of the dividend, post the balance sheet date, these shares were automatically reclassified into deferred shares with negligible value and voting rights

Shareholders who elected for the capital alternative received a redeemable B share with a nominal value of £1.15 on the 30 June 2014.  60,397,983 B shares were issued from the share premium account, amounting to $118m; and an advanced capital redemption reserve was created in anticipation of the proposed buy back after the balance sheet date. A distribution of $118m has been recorded in the Consolidated Statement of Changes in Equity with a corresponding entry to other payables, until the redemption of shares is made to shareholders after the balance sheet date. These shares were redeemed for £1.15 on 1 July 2014 and payments made to B shareholders on 8 July 2014 as explained in Note 16.

10.     Fair value measurement

IFRS 13 requires enhanced disclosures about the fair value measurements of financial assets and liabilities and where assets and liabilities are held at fair value, further information is required on the valuation methodology used to assess the fair value in reference to the fair value hierarchy.

The carrying amounts of financial assets held at fair value are set out below:

An analysis of the financial assets carried at fair value by reference to the fair value hierarchy is set out below:

1 The available for sale financial asset consisted of 6,061,699,637 ordinary shares in PT Bumi that were quoted on the Indonesia Stock Exchange and were denominated in Indonesian Rupiah (IDR).  The valuation at 31 December 2013 was calculated based on the closing bid price for PT Bumi ordinary shares and the closing bid US dollar exchange rate against the IDR on the last working day prior to 31 December 2013.  The available for sale asset was sold on 25 March 2014.

2 The financial asset at fair value through profit or loss is an early repayment option embedded in the 2015 and 2017 Senior Secured Notes drawn down by PT Berau.  The fair value represents the value of a call option that arises due to the difference between the market rate of interest that PT Berau could have borrowed at the period end and the actual rate of interest paid on each note, based on an option pricing model.  The change in valuation between reporting periods has been recognised in the Consolidated Income Statement in the line 'movement on financial instruments at fair value through profit or loss'. The key inputs into the option pricing model are interest rate volatility and the actual US treasury rates representing the risk free rate which are based on observable market values; the time value of money which is based on the redemption dates; and the refinancing rate, which is considered to be the key unobservable input that significantly affects the fair value. If the refinancing rate increased by 100 base points then the derivative would decrease by $1.0m (31 December 2013: $1.2m), and if the refinancing rate decreased by 100 base points then the derivative would increase by $1.2m (31 December 2013: $1.4m).

There were no transfers between Levels 1, 2 or 3 during the period.

10.       Fair value measurement continued

The carrying amounts and fair values of borrowings are as follows:

The fair value of the following financial assets and liabilities approximate their carrying amount:

·      Cash and cash equivalents

·      Restricted cash

·      Trade and other receivables

·      Trade and other payables

11.     Impairment

The carrying value of the Group's goodwill of $518m arose on the acquisition of PT Berau on 4 March 2011. The Group's interim impairment review resulted in no impairment charge for the period.  PT Berau's recoverable amount has been assessed based on fair value less costs of disposal using discounted cash flows.  Expected future cash flows are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including coal reserves and production estimates, commodity prices, discount rates, future operating costs and capital expenditure.

The key assumptions relating to the calculation of PT Berau's fair value less costs of disposal are production volumes; operating costs; discount rates and most critically the long term thermal coal price. The medium term (2015 to 2019) forecast benchmark thermal coal price is within the range supported by market analysts of $80 to $107 per tonne (2013: $85 to $105 per tonne) in nominal terms. This price is then adjusted for various coal quality parameters, such as calorific value, moisture and sulphur content, to derive the expected realised selling prices on a free on board (FOB) basis.

The excess of recoverable amount over carrying value is $55m (31 December 2013:  $201m).  Whilst the Directors remain confident in the assumptions used in determining the recoverable amount, it is estimated that a 1% adverse change in the thermal coal price in nominal terms would lead to the elimination of the current headroom.

12.     Consolidated cash flow analysis

13.       Contingent asset

On 26 June 2013, the Company and Rosan Roeslani, the former President Director of PT Berau, entered into a settlement agreement providing for the return of $173m to PT Berau, either as assets or cash.  This amount is considered as a contingent asset as recovery is not certain and therefore it is not appropriate to recognise as a receivable.

14.     Commitments

At 30 June 2014, the Group had the following outstanding capital commitments:

15.     Related parties

In the 2013 Asia Resource Minerals plc Annual Report and Accounts, the related party note included a voluntary disclosure of transactions for which there was no clear business purpose and where the ultimate beneficiary was unknown.

The most significant related party transactions, not relating to the separation transaction, in the six months to 30 June 2014 were with Bakrie related entities in relation to fuel supply and mining contractor services. These contractual arrangements are in the ordinary course of business and are considered by management to be on acceptable commercial terms. Ongoing transactions in the same period with the Recapital related companies, controlled by Rosan Roeslani, all in the ordinary course of business, have been and are continuing to be reduced. After 7 March 2013, Recapital related entities ceased to be related parties of ARMS under IAS 24. After 25 March 2014, following the completion of the separation transaction, entities relating to the Bakrie family ceased to be related parties of ARMS under IAS 24.

Related party debtors at 30 June 2014, included $7.1m (2013: $7.1m) due from PT Bukit Mutiara, an entity controlled by Recapital. Although no longer considered a related party under IAS 24, this amount is overdue and provided for whilst the company pursues repayment.

16.     Subsequent Events

All C shares issued to shareholders who elected to receive the income option at the General Meeting on 27 June 2014, were reclassified into Deferred Shares on 1 July 2014.  A dividend of $354million in respect of these shares became payable on 1 July 2014 and were paid to shareholders on 8 July 2014.

All B shares issued to shareholders who elected to receive the capital option at the General Meeting on 27 June 2014, were redeemed by ARMS on 1 July and proceeds paid to shareholders of $118m on 8 July 2014.

17.     Reclassifications and restatements

Notes:

1.   Certain short term bank deposits of $21m at 31 December 2012, which reduced to $16m by 30 June 2013 are held to secure performance bonds required by customers in the ordinary course of their business. These have been reclassified as restricted cash due to the expected length of time before these deposits can be accessed.

-ENDS-

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