Wrap Text
FSE - Firestone Energy Limited - Firestone adds 1 billion tonnes of coal to its
existing inventory in the Waterberg Coalfield of South Africa and lifting of
trading halt
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 ADDS 1 BILLION TONNES OF COAL TO ITS EXISTING INVENTORY IN THE
WATERBERG COALFIELD OF SOUTH AFRICA AND LIFTING OF TRADING HALT
The Directors of Firestone Energy Limited ("Firestone or the Company") are
pleased to announce that the Company has added to its ground holding in the
Waterberg Coalfield by signing a second Agreement with Sekoko Coal (Pty) Ltd
("Sekoko"). The transaction will deliver an interest in four additional farms,
Minnasvlakte 258 LQ, Massenberg 305 LQ, Smitspan 306LQ and Hooikraal 315 LQ
("the Properties") which have a JORC compliant estimated coal resource of 996
million tonnes.
The Properties lie between the Company`s Vetleegte and Olieboomsfontein farms
which are subject to the first Agreement between the Company and Sekoko entered
into in June 2008. Together the six farms comprise one of the largest land
holdings in the Waterberg coalfield and through this transaction will
substantially expand the Company`s coal inventory in the area. The key
highlights of this second transaction are:
Coal Resource Estimate Gross Tonnes In Situ1,2
Indicated Mt Inferred M Total Mt
Smitpsan 306LQ 484.2 134.4 618.6
Hooikraal 315LQ 19.3 67.5 86.8
Minnasvlakte 258LQ 42.3 193.8 236.1
Massenberg 305LQ 13.1 41.3 54.4
TOTAL 558.9 437.0 995.9
1 Waterberg coal typically occurs interlaminated with shale which for the most
part cannot be mined separately from the coal and thus in the past it has been
usual for Waterberg coal resources to be quoted inclusive of the shale fraction.
This has led to the reporting of large resource tonnages but of low raw coal
quality.
In the interest of balanced reporting it is the Company`s intention to only
report the gross in-situ tonnage of coal rather than the tonnage of coal and
shale. In order to estimate the tonnage of coal in each zone, rather than the
zone tonnage including the rock, each zone was discounted by the percent yield
at a relative density of 1.9g/cc (in effect removing the influence of the shale)
and the result multiplied by the relative density of the "washed coal" to derive
an estimate of the coal tonnage.
3 No geological losses applied.
Further highlights include:
* Part of the coal resource for the farm Smitspan may progress to a higher
resource category upon the receipt of further coal quality analyses over
the next 4-6 weeks.
* Potential to increase the estimated resource tonnages at Hooikraal,
Minnasvlakte and Massenberg by way of further drilling in areas where
reconnaissance drilling has intersected coal.
* Average in-situ "de-shaled" RAW coal qualities (below) appear suitable for
local power generation, whilst further beneficiation to produce a washed
product is expected to yield a combination of semi-soft coking coal, export
thermal coal and a domestic thermal coal.
CV (MJ/kg) Ash (%) Volatiles (%) Sulphur (%) Moisture (%)
Raw Coal Air Dried 20.38 32.56 25.71 0.88 2.44
* Recent drilling has outlined large areas of the farm Smitspan, and to a
lesser extent over Massenberg, where a mostly complete coal stratigraphy, that
is coal zones 1 to 11 (and importantly zones 6-11) which contain both a coking
coal and domestic steam coal component - lies beneath approximately 30m of
overburden. It is anticipated that these areas would be amenable to open cast
mining operations.
The transaction is conditional on, amongst other things, the completion of
due diligence and the obtaining of shareholder approval and all necessary
regulatory approvals.
Summary of the Waterberg Coalfield
The Properties are located in the Waterberg coalfield in the Limpopo
Province of South Africa (Figure 1). This coalfield is becoming increasingly
important as coal resources 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.
Exxaro Resources Ltd owns and operates the nearby Grootegeluk Colliery
which mines coal from an opencast operation. It produces semi-soft coking coal
and steam coal for the inland and export market, and has a 15Mtpa coal supply
agreement with Eskom`s nearby Matimba power station. Production will rise
significantly as Eskom brings on-stream the Medupi power station adjacent to
Matimba. Exxaro will begin supplying Medupi in 2011 and with a ramp-up to full
production by 2014 Medupi will require some 14.6Mtpa of coal.
Eskom is currently studying three potential sites in the Waterberg area for a
third power station expected to produce around 5,000MW.
Description of the Projects
The Properties comprise granted new order Prospecting Rights, for coal
only, over the farms Minnasvlakte 258 LQ, Massenberg 305 LQ, Smitspan 306LQ
and Hooikraal 315 LQ. The Prospecting Right, PR681/2007 expires on the 12th
October 2010 and is renewable once for a period not exceeding three (3)
years. An application for a Mining Right can be made at any time.
The farms lie due west of, and contiguous to, the Grootegeluk Colliery`s
mine lease boundary (Figure 2), and are 240km northwest of Pretoria and 70km
south of the border with Botswana. The area is accessed via the sealed R517
between Modimolle (formerly Nylstroom) and Lephalale (Ellisras). The rail line
from Richards Bay Coal Terminal (the largest South African coal export port)
via Thabazimbi terminates immediately north of the Grootegeluk Colliery.
The farms overlie shales, sandstones, mudstones and coal seams. The
stratigraphy is fault bounded in a generally east-west direction by the
Eenzaamheid, Zoetfontein and Daarby faults (Figure 3). Coal seams were
formed in the east-west orientated graben trough while subsequent faulting
divided the coalfield into shallow and deep areas, and preserved or destroyed
the coal seams.
In the Waterberg the coal seams of the Vryheid and Volksrust Formations are
grouped into eleven (11) coal bearing zones that can be correlated across the
coalfield, but not all zones occur over the whole coalfield.
Numbered from the base of the Vryheid Formation zones 1-4 lie within the Vryheid
Formation over a stratigraphic interval of +/-60m, the coal in these bottom
zones occurs as thicker and more distinct seams. These zones require little or
no beneficiation to produce a coal product that is suitable for steam raising
and metallurgical uses.
The coal seams in the upper seven zones, i.e. zones 5 to 11, lie in the
Volksrust Formation and consist of finely intercalated bands of coal and
mudstone with an increasing ratio of bright coal to dull coal. Over most
of the coalfield the better quality coal seams are present in zones 8 to 11
where the highest yields of coal product are achieved. Coal from these zones
must be beneficiated to produce a semi-soft coking coal and a middlings product
for local power generation (Eskom).
Coal Resource Estimate
The estimated coal resource has been prepared by Venmyn Rand (Pty) Ltd
("Venmyn"), and is compliant with the South African Code for Reporting of
Mineral Resources and Mineral Reserves ("SAMREC"), the South African National
Standard SANS10320:2004 ("SANS") and the Australasian Code for the Reporting of
Mineral Resources and Ore Reserves ("JORC Code") 2004 Edition.
The coal deposit has been assessed in terms of the thick interbedded seam
deposit type, as defined in the SANS Code as a thick succession of multiple,
thinly interbedded coal and non-coal layers. The coal deposits of the Waterberg
Coalfield are typical of this definition.
Sekoko`s database, consisting of some 75 diamond boreholes of which 31 have
associated coal quality data, together with a data package held by the Council
of Geoscience of some 32 historic boreholes none of which have coal quality
data, were used to provide the coal resource estimates.
A full sequence of the coal stratigraphy, that is coal zones 1 to 11,
occurs throughout the entirety of the farm Minnasvlakte but at depths to
the top of zone 11 greater than, for the most part, 70m from ground surface.
This situation continues south into the northern part of the farm Smitspan but
moving progressively south a number of generally east-west orientated arcuate
intra-basin faults uplifts the coal sequence such that the central portion of
Smitspan retains the full coal sequence but the top of zone 11 lies some 30m
beneath ground surface; for the most part this 30m is entirely weathered. In
the southern portion of Smitspan further east-west faults continue to uplift the
coal sequence resulting in an ever increasing loss, through erosion, of the
upper coal zones 9 to 11.
This situation continues south into the farm Massenberg where continued
uplift results in the (mostly) total loss of coal zones 4 to 11 over the farm,
whilst zones 1 to 3 are poorly developed. Thereafter zones 1 to 4 continue to
be poorly developed when moving south from Massenberg into Hooikraal where the
effect of the intra-basin faults precludes the preservation of zones 5 to 11.
The coal stratigraphy at Hooikraal is further complicated by a north-south fault
in the central west. Borehole data within these faulted domains have been
modelled by Sound Mining Solutions (Pty) Ltd under the direct guidance of
Venmyn. No coal quality parameters were used as constraining variables in
terms of grade cutting or capping and a minimum seam height of 0.5m has been
applied. From the borehole data the characteristics of the individual seam
intersections were used to correlate adjacent borehole data into the identified
zones specific to the Waterberg area and especially the coal zones of the
Grootegeluk Colliery.
The coal resource estimate for all zones was calculated exclusive of the
interbedded non-coal lithologies and no geological losses were applied (refer
table below).
All coal resources were categorised using the SAMREC and the SANS 10320:2004
scheme which utilises the distance between boreholes as the defining factor
between the classifications of measured, indicated and inferred resources.
Venmyn considers this methodology applicable to and compliant with the JORC 2004
Code. The coal resource estimate based on the data available and the assumptions
given above, as at 1 March 2009 is as follows:-
Venmyn Coal Resource Estimate Statement 1st March 2009 (Gross Tonnes In Situ)
Coal Zones Indicated (t) Inferred (t) Total (t)
Smitspan Zones 5 to 11 318,590,000 81,373,000 399,963,000
Zones 1 to 4 165,619,000 53,050,000 218,669,000
Hooikraal Zones 5 to 11 - - -
Zones 1 to 4 19,339,000 67,498,000 86,837,000
Minnasvlakte Zones 5 to 11 33,795,000 149,262,000 183,057,000
Zones 1 to 4 8,469,000 44,572,000 53,041,000
Massenberg Zones 5 to 11 1,016,000 4,271,000 5,287,000
Zones 1 to 4 12,106,000 37,093,000 49,199,000
TOTAL 558,934,000 437,119,000 996,053,000
The Company believes that additional drilling of all farms except perhaps
Smitspan will be required to better assess the quantity and quality of the coal,
although it is uncertain if further exploration will necessarily result in
either an improved resource classification or determination of a coal resource
estimate.
SUMMARY OF TRANSACTION
Firestone has signed a Joint Venture agreement with Sekoko Coal (Pty) Ltd
("Sekoko"), a wholly owned subsidiary of Sekoko Resources (Pty) Ltd, to
acquire an interest in and to farm into the Properties ("Joint Venture
Agreement").
Under the terms of the 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 50% interest in
the Properties in consideration for:
* a cash payment to Sekoko (or its nominee) of ZAR17.5 million (approximately
A$2.59 million),
* the issue to Sekoko (or its nominee) of new shares in Firestone in the
amount of ZAR265 million which amounts to approximately 785,600,000
Firestone shares; and
* the reimbursement of expenditure of an amount not more than ZAR12,636,848
(approximately A$1.87 million) which has been expended by Sekoko in the
exploration and development of the Properties.
Firestone must endeavour to complete a placement to raise ZAR17.5 million
(approximately A$2.59 million) to third parties on behalf Sekoko within 90 days
of satisfaction of the conditions.
Firestone can earn a further 10% interest (for a total of 60%) upon completion
within a two year period of a Bankable Feasibility Study ("BFS") level enabling
the establishment of a future commercial mining operation.
The transaction will be conditional on (amongst other things), Firestone
completing a capital raising at A$0.05 per share to raise not less than A$4
million, Firestone completing legal, financial and technical due diligence on
the Properties and approval of the Johannesburg Stock Exchange and South African
Reserve Bank.
Corporate Information
A notice of shareholder meeting to approve the transaction is currently being
drafted. It is anticipated that the shareholder meeting will be held late in
May 2009. It is intended that the acquisition will be funded through a
combination of debt and equity the detail of which will be included in the
notice of meeting.
About Firestone Energy (ASX: FSE)
Firestone Energy Limited is a Perth based exploration company listed on the
Australian Stock Exchange Ltd (ASX: FSE) and the Johannesburg Stock Exchange
(JSE:FSE). The Company sources and develops viable mineral projects with
particular focus at this time on coal prospects in the Waterberg Coal Field,
South Africa. The Company currently has a joint venture with Sekoko over the
farms Vetleegte 304LQ and Olieboomsfontein 220LQ which are located in the
Waterberg coalfield.
Recent Highlights
Shareholder approval was granted for the Waterberg Coal Joint Venture with
Sekoko on 18 September 2008 and the last outstanding conditions of South African
Reserve Bank approval and Johannesburg Stock Exchange dual listing have been
fulfilled. Sekoko is a Broad Based Black Economic Empowerment mining and energy
company based in Johannesburg, South Africa.
Lifting of trading halt
Shareholders are advised that the Company has requested the JSE to lift the
current trade halt as of commencement of business today as the ASX has lifted
the trade halt subsequent to this announcement on the ASX.
2 Information in this report that relates to exploration results, coal
resources or reserves 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.
Pretoria
1 April 2009
Corporate Details: ASX Code: FSE Directors
Mr Lee Boyd Mr Malcolm Smartt Mr Daryl Henthorn Mr Tim Tebeila Ms Amanda
Matthee
Company Secretary
Mr Simon Storm
Chief Executive Officer
Mr Garth Higgo
Registered Office
63 Hay Street Subiaco 6008 Western Australia
Telephone: +61 8 9381 2755 Facsimile: +61 8 9381 4799 Email:
enquiries@firestoneenergy.net
Sponor
River Group
Andrew Lianos
Telephone: +83 440 8365
Date: 01/04/2009 09:38:36 Supplied by www.sharenet.co.za
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