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Auditor qualifies opinion on Resources Prima's accounts, raises doubt on going concern status

RESOURCES Prima Group's independent auditor, Baker Tilly, has qualified its opinion on the Indonesian coal mining company's 2017 accounts and raised a significant doubt about the company's ability to remain a going concern.

Baker Tilly said that its opinion was qualified with regards to the accounts of discontinued unit PT Rinjani Kartanegara, which went bankrupt in 2017. Rinjani underwent a scheme of arrangement in August 2017, and following that loss of control, Resources Prima's management could not obtain audited financial statements for Rinjani for the period between Jan 1, 2017 and Aug 24, 2017. A reported US$14.8 million loss from discontinued operations in Resources Prima's accounts were therefore based on unaudited numbers from Rinjani.

The auditor also highlighted significant doubt about the company's ability to remain a going concern.

During the financial year ended Dec 31, 2017, the group incurred a net loss from continuing operations and discontinued operations of US$1.06 million and US$14.79 million respectively, Baker Tilly reported. Resources Prima also carried a total net liability of US$151,000 as at Dec 31.

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"These factors and contingent liabilities indicate the existence of material uncertainties which may cast doubt about the ability to continue as going concerns," Baker Tilly said in its report.

The auditor also noted cashflow pressures. With the folding of Rinjani, Resources Prima's remaining subsidiary is the coal hauling business, PT Energy Indonesia Resources (EIR), which has a key coal hauling service agreement with one PT Coalindo Adhi Nusantara (CAN). But the average quantity of coal hauled under that agreement has turned out to be significantly less than the 100,000 tonnes per month stipulated due to ongoing heavy rainfall and poor condition of the coal hauling road.

Separately, Resources Prima on Wednesday evening said that EIR has been advised by CAN that all coal hauling activities will be shut down from Sept 5 to Sept 17 due to a full stockpile and sporadic fires within the stockpile. CAN therefore requires time to clear the stockpile and extinguish the fires.

Resources Prima said that it is in discussions with CAN on possible recourse resulting from the said disruption as well as disruptions in August. It is also exploring how EIR can be protected against such disruptions in the future and will meet CAN in this regard, the company added.

Despite the auditor's concerns, Resources Prima's directors believe that the going concern assumption is still appropriate. Key to that stance is an investment commitment that the company obtained in August 2018 from substantial shareholder Ang Liang Kim for not less than S$4 million via a S$2 million convertible loan and rights issue. With the investment agreement, the company should be able to pay off debts that fall due in 2018.