| Thu 1 Mar 2012, 10:53 | | FSE - Firestone Energy Limited - Activities Update |
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FSE
FSE
FSE - Firestone Energy Limited - Activities Update
FIRESTONE ENERGY LIMITED
(Incorporated in Australia)
(Registration number ABN 058 436 794)
Share code on the JSE Limited: FSE
Share code on the ASX: FSE
ISIN: AU000000FSE6
(SA company registration number 2008/023973/10)
("FSE" or "the Company")
ACTIVITIES UPDATE
In recent announcements the Board of Firestone Energy Limited (ASX/JSE: FSE)
("Firestone" or the "Company") has indicated that certain key developments were
under negotiation and were expected to be announced in the short term.
On 15 September 2011 Firestone announced that it had commenced negotiations with
a multinational power company.
On 31 October 2011, in the Quarterly Report for the quarter ending 30 September
2011 Firestone announced that it had agreed to renegotiate its Memorandum of
Understanding (MoU) with Eskom to achieve increased tonnages and longer supply
period.
Also on 31 October 2011 Firestone advised in that Quarterly Report that the
combined effect of the significant developments which it was negotiating was to
delay the anticipated start date for delivery of coal from the Smitspan Project.
At the time of those announcements the board had anticipated that by this time
it would have been in a position to provide a definitive statement as to
Firestone`s short-term and medium-term developments. As this is not possible the
Company wishes to update Shareholders, in addition to the overview given in the
Quarterly Report of 31 January 2012, with this interim activities report.
Eskom MoU
Negotiations with Eskom have progressed substantially in accordance with the
Company`s expectations. While no final MoU has been executed, the board is
comfortable with the way in which negotiations have been conducted. The context
within which the MoU is being concluded is complex and involves issues which are
significant to the development of the South African economy. The board remains
confident that it will successfully conclude a MoU which will contain terms
consistent with the guidance previously given.
Cornerstone Investor
Firestone`s negotiations with the major multinational power company are ongoing.
These negotiations have progressed much more slowly than the board had initially
anticipated due in part to the length of the due diligence process and the
multinational decision making processes of the proposed investor. These
negotiations are subject to extensive confidentiality provisions. However, the
board can advise that negotiations have progressed, and that the board is
confident that in the short term it will be able to outline the elements of the
proposal from this multinational to jointly develop the Smitspan Project. These
details will be the subject of a separate ASX announcement.
Exploration and Development
Firestone`s negotiations with Eskom and with the proposed Cornerstone Investor
are predicated upon the development of a mine which has substantially different
characteristics to those incorporated in the mine plan which had been previously
reported to shareholders. Our previous development plan incorporated commencing
production of coal at the rate of approximately 500,000 tons per annum from
April 2012. Our production expectations which are derived from present
negotiations exceed this level of production to such an extent as to make the
mine plan upon which that earlier production figure was formulated, irrelevant
to future operations as currently anticipated. In light of this Firestone has
suspended further exploration and development expenditure until the parameters
of these anticipated new arrangements are better known.
Firestone has previously announced that it has a JORC resource of just under
1.9billion tons of coal in the Smitspan farm (as per the Venmyn Rand Report as
detailed below). Firestone is confident from the definitive feasibility study
previously conducted that this resource will be sufficient to meet the
requirements which are likely to evolve from present negotiations. We do not see
any marginal benefit can be gained from exploration and development expenditure
until the negotiations referred to above are concluded.
Production
Based on current expectations and a review of the project plan, Firestone
expects to commence production in 2014.
Environmental Approvals and Water Use License
The revised assumptions about potential rates of production have resulted in a
reassessment of environmental approvals and water use licenses. Firestone is
confident that its revised production assumptions can be accommodated and
continues discussions with the various departments which are assessing its
applications
Transfer of Mining Right to Incorporated Joint-Venture
The process of transferring the mining right to the intended incorporated joint-
venture company involves a substantial reorganisation of the historical
Firestone corporate structure. The assets and shareholdings of Firestone`s South
African subsidiaries are being reorganised in order to accommodate the
organisational structure which is set out in both Sekoko`s funding agreement
with IDC and the initial Eskom MoU. This re-structuring of Lexshell 126 General
Trading (Pty) Ltd (a wholly owned subsidiary of Firestone) is pre-requisite to
the lodging of the application to transfer the mining right. KPMG have provided
an opinion on the detailed steps which should be followed to achieve the
restructuring objectives. It is anticipated that this restructuring will be
completed during the second quarter of 2012. On the completion of the
restructure of the joint-venture entity, the section 11 will be submitted to the
Department of Mineral Resources.
Yours sincerely,
David Knox
Chief Executive Officer
www.firestoneenergy.com.au
About Sekoko Resources
Sekoko Resources (Pty) Ltd is a South African-based black-owned energy and
minerals company developing the coal, magnetite iron ore and PGMs Projects in
the Limpopo Province of South Africa. This includes a significant exploration
program and development of the Waterberg Coal Joint Venture Project based on
significant Coal Zone Resources.
August 2010 Venmyn Rand Report
Farm Zone Measured Indicated Inferred Total
Tonnage GTIS Coal GTIS Coal GTIS Coal GTIS Coal
"1" Tonnage Tonnage "2"
(mill (mill (mill (mill (mill
tonnes) tonnes) tonnes) tonnes) tonnes)
Smitspan 1,881.758 238.668 475.844 - 714.512
Hooikraal 358.444 - 7.282 155.491 162.773
Minnasvlakte 755.805 - 26.507 230.687 257.194
Massenburg 337.034 - 20.797 109.539 130.336
Vetleegte 570.265 1.224 204.499 17.893 223.616
Swanepoelpan 1,239.974 - 1.072 378.227 379.299
Duikerfontein 30.200 - - 13.949 13.949
Total 5,173.480 239.892 736.001 905.786 1,881.679
"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.
"2" In 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 identify 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 1.9, in effect,
removing the influence of the shale) to derive an estimate of the coal tonnage.
Competent Persons Statement
Information in this announcement that relates to exploration results, coal
resources or reserves on the properties Smitspan 306LQ, Hooikraal 315LQ,
Minnasvlakte 258LQ, Massenburg 305LQ, Swanepoelpan 262LQ and Duikerfontein 263LQ
is based on information compiled by Ms Catherine Telfer who is employed by
Venmyn Rand (Pty) Ltd and is a member of The Australasian Institute of Mining
and Metallurgy and the Geological Society of South Africa. 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" (The JORC Code). Ms Telfer consents to the inclusion in the
announcement (and as included in the attached report) of the matters based on
her information in the form and context in which it appears.
About Firestone Energy
Firestone Energy Limited is an independent, Australian exploration and
development company listed on the Australian Stock Exchange Ltd (ASX) and the
Johannesburg Stock Exchange (JSE). Firestone Energy has entered into a Joint
Venture with Sekoko Resources (Pty) Ltd through which Firestone Energy has
acquired the right to 60% participation interests in the Waterberg Coal Project
located in Lephalale area, Limpopo Province, South Africa.
The first stage of the project is to develop the Smitspan mine which has a
substantial measured thermal coal resource and to develop the Vetleegte mine
which is a substantial metallurgical coal deposit.
Firestone Energy is committed to becoming a profitable independent coal and
energy producer at its projects in South Africa, thereby making a substantial
contribution to the social and economic development of the Lephalale area and
South Africa.
Corporate Details
ASX: FSE
JSE: FSE
Issued Capital:
3,114 million ordinary shares
Major Shareholders:
Sekoko Resources (Pty) Ltd
Linc Energy Ltd
BBY Nominees Pty Ltd
Bell Potter Nominees Ltd
Directors and Officers
Non Executive Directors:
Mr Tim Tebeila (Chairman)
David Perkins (Deputy Chairman)
Dr Pius Kasolo
Ben Mphahlele
Kobus Terblanche
Company Secretary:
Jerry Monzu
Contact:
Suite B9, 431 Roberts Road
Subiaco, Western Australia 6008
Tel: +61 (08) 9287 4600
Web: www.firestoneenergy.com.au
01 March 2012
Pretoria
Sponsor
River Group
Date: 01/03/2012 10:53:01 Produced by the JSE SENS Department.
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