| Fri 3 Jul 2009, 8:00 | | FSE - Firestone Energy Limited - On Track To Become The New Force In Coal: |
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FSE
FSE
FSE - Firestone Energy Limited - On Track To Become The New Force In Coal:
Finalisation Of Second Agreement With Sekoko Resources, Coal Resources
Increased To 2.9 Billion Tonnes & Operations Update
FIRESTONE ENERGY LIMITED
(formerly Centralian Minerals Limited)
(Registration number: ABN 058 436 794)
(SA company registration number: 200/023973/10
Share code on the JSE: FSE
Share code on the ASX: FSE
ISIN: AU000000FSE6
("FSE" or "the Company")
ON TRACK TO BECOME THE NEW FORCE IN COAL:
FINALISATION OF SECOND AGREEMENT WITH SEKOKO RESOURCES, COAL RESOURCES
INCREASED TO 2.9 BILLION TONNES & OPERATIONS UPDATE
Highlights:
- Finalisation of the second (revised) agreement with Sekoko Coal, over
four farms
- Extensive coal resource increase - total in-situ JORC compliant,
Indicated & Inferred coal resource, increased by 12% to 2.9 billion
tonnes (1.12 billion tonnes of saleable coal after washing) (excludes
further in-situ coal resources of 629 million tonnes announced on 12 June
20091)
- All coal contained within maximum 130m deep open pit operation from
surface
- 136 vertical drill holes over four farms - all holes have intersected
coal seams and orebody is open in all directions
- Plans well advanced for commencement of a small scale mining operation by
the end of 2009
- Negotiations on funding for BFS for large scale (minimum of 18 million
tpa) mining operation making good progress
Revised JV Agreement finalised over four farms
The Directors of Firestone Energy Limited ("Firestone or the Company") are
pleased to announce that the Company and Sekoko Coal (Pty) Ltd ("Sekoko") have
agreed to revised commercial terms in respect of their second Agreement over
the farms Smitspan 306LQ, Hooikraal 315LQ, Minnasvlakte 258LQ, and Massenberg
305LQ, announced to the ASX on 1 April 2009, following a 12% increase in the
coal resource tonnage from 995.9Bt to 1,122.8Bt of saleable coal after
washing.
"The resource upgrade for the four farms that comprise the second Agreement is
the result of a change to the method in which the tonnage of coal in each zone
is estimated; applying a discount yield factor to the tonnage, rather than the
volume of coal and shale in each zone, results in an increase in the resource
estimate by around 12%" Firestone CEO, Mr. Garth Higgo said.
"As a consequence and in fairness to our joint venture partner it was
necessary to renegotiate the principal commercial terms of the second
Agreement.
The revised terms are binding and will not change should further drilling
and/or the receipt of awaited coal quality analyses increase the resource
estimate or upgrade part or all of the resource to a higher resource
category."
1 Within the Vetleegte and Olieboomsfontein properties held under the first
Joint Venture Agreement with Sekoko Coal Pty Ltd.
Coal Resource
The resource has been estimated in accordance with the SAMREC and JORC codes
and the SANS 10320:2004 (South African National Standard) method of
classification of thick interbedded coal deposits using some 136 boreholes of
which 95 were recently drilled by Sekoko.
All recent boreholes intersected coal and were logged and sampled by suitably
qualified independent geologists. The recent borehole data, together with the
historic data, have been used to create geological models and allow estimation
of the coal resources.
The total coal resource estimate based on the data available at June 2009
(Venmyn) is tabled below whilst coal quality by resource category and farm is
tabled at the end of this announcement.
GTIS GTIS GTIS GTIS
Zone Coal TonnageSquared Coal TonnageSquared Coal
TonnageSquared
Farm Tonnage Ingerred Mt Indicated Mt Total Mt
Total Mt
Smitspan 306LQ 1,850.3 150.2 541.2 691.4
Hooikraal 315 LQ 136.5 74.3 21.0 95.3
Minnasvlakte 258LQ 736.6 225.9 51.1 277.0
Massenberg 305LQ 187.6 45.0 14.1 59.1
TOTAL 2,910.9 495.4 627.4 1,122.8
1 Waterberg coal typically occurs interlaminated with shale which for the most
part cannot be mined separately from the coal and thus the zone gross in-situ
tonnage is the tonnage of coal and shale.
2In the interest of balanced reporting it is the Company`s intention to also
report the gross in-situ tonnage of coal rather than the tonnage of coal and
shale. In order to estimate the gross in-situ tonnage of coal in each zone,
rather than the zone tonnage including the rock, each zone tonnage was
discounted by the percent yield at a relative density of 1.9gm/cc (in effect
removing the influence of the shale) to derive an estimate of the coal
tonnage.
Information in this report that relates to exploration results, coal resources
or reserves on the properties Smitspan 306LQ, Hooikraal 315LQ, Minnasvlakte
258LQ and Massenberg 305LQ is based on information compiled by Ms Catherine
Telfer who is employed by Venmyn Rand (Pty) Ltd and is a member of The
Australian Institute of Mining and Metallurgy and The South African Institute
of Mining and Metallurgy. Ms Telfer has sufficient experience which is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which she is undertaking to qualify as a
Competent Person as defined in the 2004 Edition of the "Australasian Code for
the Reporting of Exploration Results, Mineral Resources and Ore Reserves". Ms
Telfer consents to the inclusion in the report of the matters based on her
information in the form and context in which it appears.
Summary of revised Agreement
Under the terms of the revised Joint Venture Agreement, Firestone`s wholly
owned South African subsidiary, Lexshell 126 General Trading (Pty) Ltd
("Lexshell"), will establish a joint venture whereby Lexshell can earn an
initial 30% interest in the Properties in consideration for:
- a cash payment to Sekoko of ZAR13.5 million3 (approximately A$2.0
million) in cash;
- the issue to Sekoko of new shares in Firestone in the amount of ZAR293
million (approximately A$43.4 million) at an issue price of A$0.05 per
share, which amounts to approximately 868,176,563 Firestone shares;
- the reimbursement of expenditure of an amount not more than ZAR19.49
million (approximately A$2.89 million) which has been spent by Sekoko in
the exploration and development of the Properties; and
- following the approval of the Bankable Feasibility Study ("BFS") and
decision to mine by the Management Board of the joint venture, a
management fee of ZAR50 million (approximately A$7.41 million) be paid to
Sekoko (or its nominee) over a 7 year period from the date of commercial
production.
Firestone can earn a further 30% interest (for a total of 60%) upon
expenditure of ZAR50 million (approximately A$7.41 million) to complete the
BFS to a level enabling the establishment of a future commercial mining
operation.
The transaction will be conditional on (amongst other things), Firestone
completing a legal and technical due diligence on the Properties.
3ZAR is South African Rand. The exchange rate assumed for the calculation of
the number of shares is ZAR6.75:A$1.00.
Operations update and BFS
The exploration work programme and mining work programme undertaken by
Firestone`s joint venture partner, Sekoko, are at an advanced stage. Sekoko
anticipates receiving mining permit approval from the Department of Mining and
Energy (DME) by mid August 2009.
Plans are well advanced for the Joint Venture to commence a small scale mining
operation by the end of 2009, producing approximately 30,000 tonnes per month
of thermal coal primarily for potential sale to state electricity provider,
Eskom.
Sekoko had approached the Development Bank of South Africa (DBSA) for ZAR100
million funding for the small scale mining operation and the loan approval
process is at an advanced stage.
The selected mining area comprises a 4.5ha area of the Smitspan farm, with the
full sequence of 11 coal zones and a shallow overburden (approximately 25 - 30
metres with a low strip ratio of 0.7:1). The Joint Venture plans to mine
approximately 60,000 tonnes per month of run-of-mine coal, which after washing
will yield approx 30,000 tonnes per month of saleable product, of which about
a quarter would be high calorific value, low-ash product and three-quarters
would be suitable for use as power station feed. The commencement of the small
mine is subject to successful feasibility study sign-off and offtake
agreements.
The Company is also pleased to report it is making good progress toward
securing the A$25 million necessary to fund the BFS to commence large-scale
mining operation in the Waterberg. It is anticipated that funding
arrangements will be finalised within 2 months.
Commenting on the developments, CEO, Mr Garth Higgo said:
"We are excited by these developments and very pleased with the progress being
made by our Joint Venture partner, Sekoko Coal (Pty) Ltd4. The Joint Venture
holds the rights to one of the largest land holdings in the highly prospective
Waterberg coal region. The planned small scale mining operation will provide
the Joint Venture partners with a starter pit for the large scale mining
operation we plan to commence in 2011, capable of producing a minimum of 18
million tonnes of saleable coal. As well as providing us with an early
revenue stream, the works and activities associated with the starter pit will
help fast track, and provide greater confidence in the BFS".
"Becoming a fully fledged producer will elevate our standing with Government
agencies, which will help us in negotiating future off-take agreements and
infrastructure access. The pre-stripping and infrastructure associated with
the starter pit will help lay the ground work for the large scale mining
operations. Obviously, the additional knowledge acquired of the ore body will
provide us with greater confidence in metallurgical performance" Mr Higgo
said.
"We are working on securing an off-take agreement with State-owned power
producer Eskom to supply the power station, and have received expressions of
interest from local merchants in Waterberg and surrounding areas to buy coal"
said Tim Tebeila, Executive Chairman of Sekoko Resources.
Corporate Information
A notice of shareholder meeting to approve the transaction is currently being
finalised. It is anticipated that the shareholder meeting will be held in
late August 2009.
Coal Resources and Coal Qualities (after de-shaling)
Resource Zone GTIS AIR DRIED QUALITIES AT RD=1.9
Category Coal
Tonnage
Mt
CV Ash Vol Sulphur Moistu
(MJ/kg (%) (%) (%) re
(%)
Minnasvlakte
Indicated All 51.1 20.97 31.38 26.74 0.82 2.28
Inferred All 225.9 21.34 30.31 27.19 0.90 2.32
Total Average 277.0 21.27 30.52 27.10 0.88 2.31
Minnasvlakte
Smitspan
Indicated All 541.2 19.96 33.66 25.83 0.91 2.47
Inferred All 150.3 20.93 31.13 26.37 0.94 2.52
Total Average 691.5 20.16 33.14 25.94 0.92 2.48
Smitspan
Massenberg
Indicated All 14.1 17.29 39.93 20.84 0.65 2.44
Inferred All 45.0 17.30 40.23 20.72 0.66 2.50
Total Average 59.0 17.30 40.16 20.75 0.66 2.49
Massenberg
Hooikraal
Indicated All 21.1 21.50 28.74 22.25 0.62 2.50
Inferred All 74.3 22.14 27.16 22.26 0.64 2.56
Total Average 95.3 21.98 27.56 22.26 0.63 2.54
Hooikraal
TOTAL AVERAGE 1,122.8 20.39 32.53 25.74 0.88 2.44
RESOURCE
About Firestone Energy
Firestone Energy Limited is a Perth based exploration company listed on the
Australian Stock Exchange (ASX: FSE) and the Johannesburg Stock Exchange
(JSE:FSE).
Firestone is an exploration company that sources and develops viable mineral
projects with a particular focus at this time on coal prospects in the
Waterberg Coal Field, South Africa.
The Company has joint ventures with Sekoko Coal over six farms located in the
Waterberg coalfield in the Limpopo Province of South Africa. The six farms
cover an area of 65.7 km2 (6566.4 ha). This coalfield is becoming increasingly
important as coal reserves in the Witbank, Highveld and Ermelo coalfields of
the Mpumalanga Province, which currently supply the majority of Eskom`s coal
power stations, become depleted over the next 20-30 years.
4 About Sekoko Coal
Sekoko Coal (Pty) Ltd is a black-owned junior exploration company based in
South Africa. The Company`s primary goal is to explore for and develop coal in
the Limpopo Province, currently the focus is both in the Waterberg and
Soutpansberg/Tuli coalfields.
Pretoria
03 June 2009
Corporate Advisor and Sponsor
River Group
For more information please contact:
Garth Higgo
Chief Executive Officer
+61 (08) 9381-2755
www.firestoneenergy.com.au
Registered Office
63 Hay Street
Subiaco 6008
Western Australia
Facsimile: +61 (08) 9381 4799
Email: enquiries@firestoneenergy.com.au
Date: 03/07/2009 08:00:01 Produced by the JSE SENS Department.
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