SINGAPORE - Mining company Rich Capital has received copies of Rich-Link Construction Pte Ltd's (RLC) email application to L&G Insurance Broker for an advance payment guarantee of S$2 million related to a development project in Batam.
It also received a letter from L&G Insurance Broker confirming that the insurer has approved in principal to proceed with obtaining the advance payment guarantee, the group said in an early morning bourse filing on Friday (June 14).
RLC, an associate company of Rich Capital's non-independent, non-executive chairman Wang Zhen Wen, had previously received the $2 million advanced payment from Rich Capital without an advance payment guarantee.
It said that it needed time to shortlist a few insurance brokers and had only recently shortlisted L&G Insurance Broker to apply for the advance payment guarantee.
RLC said the duration of the advance payment guarantee is for a period of one year from Nov 13, 2018 to Nov 12, 2019, because the advance payment shall be set off against approved progress claims over one year, instead of the 40 monthsprovided for in the contract.
The associate company was awarded a $125 million contract by Rich Capital's indirectly owned subsidiary PT Oxley Karya Indo Batam (PT OKIB) for a phase of Rich Capital's property development project in Batam, Indonesia.
The letter of award provides that PT OKIB shall make an advance payment to RLC, equivalent to $1.25 million, or 10 per cent of the contract sum of $12.5 million, when RLC submits an advance payment guarantee.
However, RLC asked for an advance payment of $2 million to be made even though it had not provided the advance payment guarantee.
The company's audit committee discovered the lack of an advance payment guarantee on May 29, and the company subsequently took steps to correct the lapse.
Rich Capital shares were down 33.33 per cent or $0.001 at $0.002 as at 10.21am.