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FSE
FSE
FSE - Firestone Energy Limited - Quarterly activities report for the
period to 31 march 2011
FIRESTONE ENERGY 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")
ASX Release - 29th April 2011
QUARTERLY ACTIVITIES REPORT FOR THE PERIOD TO 31 March 2011
The Board of Firestone Energy Limited (ASX / JSE: FSE) is pleased to
provide shareholders with its Quarterly Activities Report for the 3
month period ended 31 March 2011.
HIGHLIGHTS
Significant Events
Metallurgical Coal - Drilling results from the Southern Farms,
especially Vetleegte, disclose a significant resource of
shallow open castable metallurgical coal;
Industrial Development Corporation of South Africa (IDC) - Set
to become a shareholder in FSE following execution of
definitive agreements between Sekoko Resources and the IDC;
Memorandum of Understanding - Binding off-take MOU signed with
Eskom; definitive agreement to follow award of mining right
expected by June 2011;
Shareholders Agreement - FSE reached full 60% earn in on all 8
properties in the Waterberg and the shareholders agreement is
signed to consolidate all three JV agreements;
Mining Rights - Completed audit at regional DMR and transferred
to National DMR for final consideration and approval. Still
expected by end of June 2011; and
Production - On target to begin overburden stripping in the
second half of 2011 and production in the first half of 2012.
Other highlights
FSE appoints Mr David Perkins, former Legal Counsel and Company
Secretary of JP Morgan Chase Australia, to Chair the Board
following resignation of Mr John Dreyer;
Sekoko nominate two highly experienced Directors to the Board
of FSE: Mr Matsidiso Peter Tshisevhe and Dr Pius Chilufya
Kasolo;
Water Use licence and full Environmental Impact Assessment
(EIA) submitted;
Major contractors for rail, wash plant and infrastructure
appointed;
An exclusive option to purchase Vetleegte surface rights
secured;
Cornerstone Investor activity and interest on-going; and
Power supply agreements signed.
Firestone Energy Limited - March 2011 Quarterly Activities Report
OVERVIEW
Firestone Energy, through its Joint Venture with Sekoko Coal
completed significant milestones, as detailed below, in the last
three months to still remain on target for production in April 2012;
Assisted Sekoko to sign definitive agreements with the IDC so
that the IDC becomes a shareholder in FSE;
Incorporated a project company to run the Waterberg Coal
Project through finalising the JV Shareholder Agreement between
Firestone Energy and Sekoko;
Finalised an off-take MOU with Eskom; and
Secured options for further surface rights to simplify access
issues.
WATERBERG COAL PROJECT
Project Update
During the quarter the Joint Venture appointed wash plant, rail and
infrastructure contractors. All contracts addressed the
requirements of the off-take MOU with Eskom and are subject to
confirmation of full funding. This will enable the Joint Venture to
finalise designs of the wash plant and road and rail infrastructure.
Long lead items have been ordered to ensure that the production date
of April 2012 as per the Eskom MOU is achieved. Mining contractors
have been shortlisted pursuant to a completed tender process. It is
anticipated that a mining contract will be awarded by June 2011.
This will enable overburden stripping to commence within 6 to 8
weeks of a mining contract appointment and subject to the award of
Mining rights.
Firestone Energy received analysis and reports disclosing that the
South Eastern properties have shallow open castable Metallurgical
Coal with appropriate phosphorus qualities to be used as reductants
in the steel and smelting processes. A preliminary report by SMS
Geological estimates that about 58mt (Non-JORC and Non-SAMREC) can
be accessed through open casting zones 3 and 2 in these Southern
Farms. Further in-fill drilling is being undertaken to bring the
resource to a JORC and SAMREC measured resource.
Firestone Energy is finalising a prime coal study within the
Smitspan open pit. The Definitive Feasibility Study completed in
October 2010 concentrated on power station coal. Parsons
Brinckerhoff has been engaged to complete a definitive economic
feasibility study for prime coal product that could potentially be a
semi-soft blend coking coal product, export product and/or high
Calorific Value product for the local market. We expect this study
to be completed by June 2011.
Regulatory Approvals
The Company is able to report that the Joint Venture has complied
with all the requirements of its application for a Mining Right.
The Joint Venture submitted the Social Labour Plan, held 3 public
participation meetings in accordance with the Mineral Act, completed
an EIA scoping study followed by the submission of the EIA itself in
January and in addition submitted an application for a Water Use
Licence. The Economic and Social Impact study has also been
completed by an independent consultant as per the requirements of
the Minerals Act. The joint venture has been unofficially informed
by DMR officials that it has complied with all the requirements of
Minerals Act in relation to the application for Mining Right.
The application for a Water Use Licence was submitted to the
Department of Water Affairs (DWAF) in February following extensive
consultations with DWAF and Trans-Caledon Tunnel Authority (TCTA)
who are consultants to DWAF and project managers of the Waterberg
Water Augmentation Scheme.
The DMR guideline is that an application for a mining right takes 9
months to approve and given that we submitted the mining right
application in July 2010 we were expecting approval by March 2011.
We have been informed by DMR that the detailed audit and
verification of the application of the mining right has been
completed by the Limpopo Province DMR and has been transferred to
the National DMR for award and approval. We have also been informed
that our Social and Labour Plan has been accepted. We expect the
Mining Right to be awarded by June 2011.
Following approval of mining rights we expect the EIA and Water Use
Licence to be immediately approved thereafter, thereby fulfilling
all the necessary regulatory approvals for mining in South Africa.
Marketing
Following 2 years of negotiation with Eskom which started with a
Request for Proposal (RFP) in the second half of 2009, our Joint
Venture partner, Sekoko Coal, signed a Memorandum of Understanding
with Eskom for the supply of energy coal on behalf of the project.
The project will supply 525,000 tonnes per annum for three years
from April 2012 and thereafter supply 1 million tonnes of coal per
annum for three years from April 2015 to March 2018 to Matimba power
station.
The Joint Venture has a further option to supply 1 million tonnes
per annum from April 2018, 2 million tonnes per annum from April
2019 and 2.3 million tonnes per annum for 13 years from April 2020
to March 2032. The MOU will convert to a Definitive Agreement
following the issue of the mining rights and confirmation to Eskom
that the joint venture has funding to complete construction of the
mine. The Joint Venture expects the conversion from MOU to Coal
Supply Agreement to occur around July 2011.
The Joint Venture is conducting further discussions with Eskom in
connection with the supply of further tonnage to power stations
other than Matimba.
The joint venture intends to approach Prime Coal users to discuss
off-take possibilities as soon as we know the qualities, quantities,
mining costs and yields.
Logistics
The Eskom MOU requires us to supply coal by rail. A Transnet
Freight Rail (TransNet) rail line (TFR line) to Eskom`s Waterberg
power stations exists. We are required to build our own rail siding
and a spur line that will connect to the existing TFR line. This
rail line also connects to Thabazimbi and provides potential for
transport to other markets and the Port. Our spur line will only be
7 kilometres to the TFR line. negotiations with TransNet are
progressing well and TransNet has offered its assistance and support
for finalisation of detailed plans to enable authorisation of
connecting to its rail line.
Negotiations to secure land on which rail siding will be laid are at
an advanced stage. The Joint Venture appointed Cabanga Concepts to
begin work on rail EIA in December 2010 and the first initial public
participation meeting has already been completed.
CORPORATE
Mr David Perkins, Mr Peter Tshisevhe and Dr Pius Kasolo were
appointed as Non-Executive Directors to the Board in January 2011
following the resignations of Mr Tim Tebeila, Mr John Dreyer and Mr
John Wallington. Mr David Perkins was appointed as Chairman of the
Board following the departure of Mr John Dreyer.
IDC
The IDC has signed definitive agreements with Sekoko Coal that will
enable the IDC to become a shareholder in the Waterberg Coal Project
and also a shareholder in Firestone Energy. The IDC will own 33% of
Sekoko`s shares in FSE and 33% of Sekoko`s 40% in the project. IDC
will pay for this investment by injecting a maximum of ZAR250million
(approx A$35.7 million) that will be partly used as an equity
contribution for mine construction and partly used to maintain the
IDC/Sekoko shareholding rights in FSE. ZAR30million (approx A$4.3
million) of this funding is going to flow the project as soon as
regulatory approvals (see below) have been approved. The remaining
funds will be unlocked by the award and issue of Mining Rights by
the DMR.
The IDC, as a 100% South African State owned self funding
institution, requires FIRB approval in Australia prior to it owning
shares in an Australian company. The application for this Australian
regulatory approval has been lodged by the IDC with Australian
authorities and is expected to be approved within 30 days (mid May
2012) of it being lodged. This is the only condition outstanding on
the IDC/Sekoko agreement prior to the funds flowing to the Waterberg
Coal Project.
Shareholders Agreement
Following completion and approval of the Detailed Feasibility Study,
the Boards of FSE and Sekoko Coal took a decision to proceed with
the Waterberg project. This culminated in the incorporation of a
company owned 60% by FSE and 40% by Sekoko Coal. A Shareholder
Agreement detailing governance and structure of the company was
negotiated and signed in February 2012.
The effect of this is that the 3 joint ventures covering 8 farms
will be consolidated into one incorporated joint venture company.
All joint venture assets including the prospecting rights and mining
rights will be transferred from Sekoko Coal to the joint venture
Company following application and approval as per the Section 11 of
the MPRDA.
As at the 31st of March 2011 the Company had a positive cash balance
of A$1.3million.
Firestone Energy Limited 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 three 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:
2,627 million ordinary shares
Major Shareholders:
Sekoko Resources (Pty) Ltd
Colbern Fiduciary Nominees Ltd
Bell Potter Nominees Ltd
Directors and Officers:
Non Executive Directors:
David Perkins (Chairman)
Sizwe Nkosi
Colin McIntyre
Pius Kasolo
Peter Tshisevhe
Company Secretary
Jerry Monzu
Contact:
Unit B9, 431 Roberts Road
Subiaco, Western Australia 6008
Tel: +61 (0)8 9287 4600
Web: www.firestoneenergy.com.au
For further information please contact:
Jerry Monzu
Company Secretary
Tel: +61 8 9287 4600
www.firestoneenergy.com.au
Pretoria
3 May 2011
Sponsor
River Group
Date: 03/05/2011 07:33:01 Produced by the JSE SENS Department.
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