| Thu 29 Oct 2009, 16:31 | | FSE - Firestone Energy Limited - Firestone Energy Limited - Sept 2009 Quarterly |
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FSE - Firestone Energy Limited - Firestone Energy Limited - Sept 2009 Quarterly
Activities Report
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")
Firestone Energy Limited - Sept 2009 Quarterly Activities Report
About Firestone Energy:
Firestone Energy is an independent Australian exploration company focused on
developing coal projects in South Africa. The company is currently exploring the
richly endowed Waterberg coal field in the Limpopo Province of South Africa.
The Company is committed to value-added growth through becoming an independent
coal and energy producer at its projects in South Africa.
The Company has entered into two joint ventures with Sekoko Resources, a South
African black empowerment company (BEE) and Sekoko has two directors on the
Board of Firestone Energy.
Corporate Details:
ASX: FSE
JSE: FSE
Issued Capital:
2,331 million ordinary shares
Major Shareholders:
Sekoko Resources (Pty) Ltd
Colbern Fiduciary Nominees Ltd
Bell Potter Nominees Ltd
Directors and Officers:
Non Executive Directors
John Dreyer (Chairman)
Timothy Tebeila
Amanda Matthee
Colin McIntyre
Managing Director (wef 1 Nov)
John Wallington
Company Secretary
Simon Storm
Contact:
Level 1, 63 Hay Street
Subiaco, Western Australia 6008
Tel: +61 (0)8 9381 2755
Web: www.firestoneenergy.com.au
Firestone Energy Limited (ASX/JSE: FSE) is pleased to report that during the
quarter ended September 2009 substantial progress has been made in the
development of the Waterberg Coal JV project in Lephalale, Limpopo Province,
South Africa.
HIGHLIGHTS FOR THE QUARTER
A$25m capital raising completed to fund BFS
Second JV underway with a significant increase to coal resource in addition to
first 2 farms and J/V.
New Chairman and Managing Director appointed
PFS and new resource calculation near completion
Mining Permit for Small Scale mine approved
100% strike rate of Coal in all 122 holes drilled
Northern Territory - Australia
- The two exploration licenses (ELs 7810 and 10166) near Tennant Creek in the
Northern Territory which have been managed by Emmerson Resources Ltd, on
behalf of the Company are to be relinquished.
Exploration
- Prior to the establishment of the second joint venture, Firestone Energy`s
joint venture partner, Sekoko Coal has drilled 122 bore holes on the six
farms bringing the total of drilled holes to 163 holes. All the holes
drilled intersected coal and were logged and sampled by suitably qualified
geologists. The diameter of the core holes drilled by Sekoko is 86mm. The
results from the laboratories have been expedited and an updated resource
classification will be published within the next quarter.
- The Board has approved a contract for the Infrastructure Engineering and
Design for the mine. It is estimated that this will be completed by mid
2010.
- Firestone and its JV partner, Sekoko, have made tremendous progress with
the pre-feasibility study and all indications are that this will be
completed by the end of this calendar year.
Firestone Energy Limited - Sept 2009 Quarterly Activities Report
Overview
While global financial and commodity conditions remained challenging during the
September 2009 Quarter, Firestone Energy Limited (ASX/JSE: FSE) was active on a
number of fronts.
The main focus of activity was completing preparations and compilations of
various supporting documentation and/or report for the Mining Right Application.
Pre-feasibility Study
Work is progressing on schedule in most of the areas of the PFS with many
sections nearing completion. Pre-Feasibility Study approaches completion with
draft reports being currently reviewed.
Firestone Energy`s joint venture partner, Sekoko Coal has been advised by the
municipal authorities that these Waterberg new coal projects are highly regarded
as important future contributors to the local economy and are a key part of the
regional development strategy. This very strong local support from the Lephalale
Local Municipality and the Waterberg District Municipality is expected to assist
in expediting the Permitting issues and the Mining Right Application approval.
Potential Markets
Firestone Energy is also looking to capitalise on the current power crisis in
South Africa. Firestone Energy/Sekoko JV properties are strategically located
power stations with Exxaro`s Grootegeluk Colliery in close proximity to two of
Eskom`s coal-fired power stations, Matimba and Medupi (currently under
construction and expected completion in 2011), may make transportation costs
from the mine attractive to Eskom.
Corporate
During the reporting period, the Company announced that joint venture partner,
Sekoko Coal Pty Ltd, has been granted mining approval from the South African
Department of Mining and Energy (DME) to commence an initial small scale mining
operation from the company`s Waterberg coal project in South Africa. Permits are
also in place to construct a box-cut/small-scale mine and develop a trial open
cut and underground mining operation. It is planned to commence mining
operations by beginning of 2010 and will eventually build up to a rate of 60,000
ROM tonnes per month, which after washing would yield approximately 30,000
tonnes per month of saleable coal. The small scale mine will be low cost open
cut mining and mining contractors will be used for the operations. The Company
continues to work towards securing an off-take sales agreement with South
African State owned power utility, Eskom.
The Company also received shareholder approval for a milestone transaction
acquiring a 2.9 billion tonne additional resource. As announced on 3 July 2009,
the second JV agreement with Sekoko Coal is over four farms - Smitspan 306LQ,
Hooikraal 315LQ, Minnasvlakte 258LQ, and Massenberg 305LQ - with an estimated
combined coal resource tonnage of 2.9Bt (1,122.8Bt of saleable coal after
washing). Under the terms of the Joint Venture Agreement, approved by
Shareholders, Firestone`s wholly joint venture whereby Lexshell will now earn an
initial 30% interest in the Properties in consideration for:
- 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 (as
approved by Shareholders today);
- a reimbursement of expenses to Sekoko of up to ZAR 32.99 million (approx
A$5.1 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 has the opportunity to earn a further 30% interest (for a total of
60%) upon expenditure of ZAR 50 million (approximately A$7.41 million) to
complete a Bankable Feasibility Study enabling the establishment of a future
commercial mining operation.
Funding
During the quarter, the Company received A$2.68 million of funding through
convertible loans from sophisticated and professional investors. Interest of 9%
per annum was payable on the loans. The lenders agreed to apply the proceeds of
repayment of the loans to subscribe for fully paid ordinary shares in Firestone
at a price of A$0.04 per share. This also occurred during the quarter and 67
million ordinary shares were issued. The funds were applied for progressing the
Company`s Waterberg Coal joint venture with Sekoko Coal (Pty) Ltd and for other
short term working capital requirements.
In addition, during the quarter the Company announced that it had executed
binding documentation for a fully underwritten $25m capital raise involving the
issue of convertible notes with a conversion price of A$0.04 cents per share.
BBY Limited is the Underwriter to the entire Issue.
Firestone intends to allocate the net proceeds of the raising towards:
- The Bankable Feasibility Study for a large scale 18Mt per annum coal mining
operation at the Company`s Waterberg coal project in South Africa.
- Meeting all financial commitments due to its Joint Venture partner, Sekoko
Coal (Pty) Limited.
- Additional working capital requirements.
Key terms of the Convertible Note
The following is a summary of the key terms of the Convertible Notes.
Issuer Firestone Energy Limited
Security Unsecured
Issue Price A$500,000 per Convertible Note
Interest Rate 10% p.a. payable semi-annually
Term 3 years from the date of issue
Issue Size Up to A$25 million
Conversion Process Holders of Convertible Notes may elect to
convert them at any time prior to 2.00pm AWST
on the last day of the term.
Conversion Factor On conversion, each Convertible Note will
convert into 12.5 million fully paid ordinary
shares (at an effective issue price of A$0.04
per share). The shares will rank equally with
the existing fully paid ordinary shares in
Firestone except in respect of the
restrictions on transferability noted below.
Board Appointments
During the reporting period, the Company announced the appointment of Colin
McIntyre, who is a is a highly experienced and credentialed mining engineer,
mining manager and company director, bringing to the Firestone Board 35 years
experience in the mining industry, including fourteen years with Western Mining
Corporation.
The Company also announced that John Dreyer, a current non executive Director of
the company, had accepted the role as non executive Chairman. Mr Dreyer`s
leadership and considerable mining and corporate experience will be invaluable
as Firestone Energy continues to develop its South African projects. Mr Dreyer
is a lawyer by profession and has held a number of senior executive positions
through his career, including the position of an Executive Director of Anglo
American Platinum, Corporation. In 2004 Mr. Dreyer retired from Anglo Platinum
and joined Pangea Diamond Fields as a director and shareholder. He was
instrumental in the listing of that company on AIM (LSE). Prior to joining
Anglo, Mr. Dreyer was Chief Executive Officer of Tavistock and JCI Coal, and was
previously Managing Director of Shell South Africa. He is also a former Director
of the Richards Bay Coal Terminal Company.
Following the resignation of Mr Garth Higgo, the Company has been fortunate to
secure the services of Mr John Wallington as Managing Director from 1 November
2009. Mr Wallington, who is based in Johannesburg, brings a wealth of coal
experience to this new executive position. For the last 11 years of his 27 years
with Anglo Coal, he has held senior executive positions in Anglo Coal including
Senior Vice President (1997 - 2001) and CEO (2001 - 2008). A mining engineer by
profession, Mr Wallington has extensive practical, technical and corporate
experience that is necessary to oversee the implementation and final development
of the BFS for FSE`s coal assets in the famous Waterberg Coal Region located at
the north end of South Africa.
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 inter-bedded 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 Rand) is
tabled below whilst coal quality by resource category and farm is tabled at the
end of this announcement.
Farm GTIS GTIS GTIS GTIS
Zone Coal Coal Coal
Tonnage1 Tonnage2 Tonnage2 Tonnage2
Total Mt Inferred Indicated Total Mt
Mt Mt
Smitspan 1,850.3 150.2 541.2 691.4
306LQ
Hooikraal 136.5 74.3 21.0 95.3
315LQ
Minnasvlakte 736.6 225.9 51.1 277.0
258LQ
Massenberg 187.6 45.0 14.1 59.1
305LQ
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.
Coal Resource Estimate Gross Tonnes In Situ
Inferred Mt Indicated Mt Total Mt
Vetleegte 304LQ 170.4 458.9 629.3
Information in this report that relates to exploration results, coal resources
or reserves is based on information compiled by Mr Dawie van Wyk who is employed
by GeoCoal (Pty) Ltd and is a member of the South African Council for Natural
Scientific Professions. Mr van Wyk has sufficient experience which is relevant
to the style of mineralisation and type of deposit under consideration and to
the activity which he 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". Mr van Wyk consents to the
inclusion in the report of the matters based on his information in the form and
context in which it appears.
John Dreyer
Chairman
For further information please contact:
Mr. John Dreyer Tel: +61 8 9381 2755
Chairman Fax: +61 8 9381 4799
Pretoria
29 October 2009
Sponsor and Corporate Advisor
River Group
Date: 29/10/2009 16:31:01 Produced by the JSE SENS Department.
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