Emeco?s Indonesian subsidiary pursuing legal action

(1 June 2012)--In February 2011, Emeco announced a debtor impairment in its Indonesian business. The debtor involved was a small mining contractor operating at a mine site owned by PT Kideco Jaya Agung (Kideco). At the time, Emeco?s Indonesian subsidiary, PT Prima Traktor lndoNusa (PTI), entered into a Binding Letter of Intent with Kideco. Under the terms of the Binding Letter of Intent, PTI continued to make its equipment available at the mine, enabling Kideco to continue production in that section of the mine, and Kideco undertook to pay PTI directly for equipment rental charges incurred. Equipment remained working at the site for approximately two months under this arrangement during which time rental charges of US$1.95 million were incurred.

Since the termination of its operations at the site, PTI has been pursuing Kideco to recover this debt. It is Emeco?s view that Kideco?s obligations under the Binding Letter of Intent are clear and unambiguous. As PTI has to date been unsuccessful in recovering the debt, it commenced a debt recovery action against Kideco in the District Court of South Jakarta on 21 March 2012 seeking to have the Court enforce Kideco?s obligations under the Binding Letter of Intent. This action is progressing through the Indonesian Court system.

Subsequent to the initiation of the debt recovery action against Kideco, PTI received an English language translation of a claim yesterday initiated by Kideco in the District Court of Tanah Grogot alleging it has suffered loss and damage in the order of US$22.3 million for which it alleges PTI is responsible. Emeco believes that this claim against PTI is baseless and without merit.

The damages claim relates to consequential losses which Kideco alleges arose from a disruption of its port operations. Kideco claims these disruptions occurred as a result of some PTI equipment falling from a barge which was owned and operated by an independent contractor which PTI had engaged to carry out the demobilisation of PTI?s equipment which had been in use at the Kideco site.

Emeco notes that in its statement of claim against PTI, Kideco acknowledged the enforceability of the Binding Letter of Intent but disputes the US$1.95 million amount claimed by PTI, claiming that the rental charges payable to PTI are US$1.6 million. PTI is carrying an asset of US$1.95 million on its balance sheet in relation to this outstanding receivable.

The Kideco claim will be challenged and defended vigorously in the courts and the claim against Kideco for full payment of the rental charges owed under the Binding Letter of Intent will be pursued.(ends)