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FSE - Firestone Energy Limited - Half-Year Financial Report 31 December 2010
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
Half-Year Financial Report
31 December 2010
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Half-Year Ended 31 December 2010
December December
2010 2009
$ $
Continuing operations
Interest revenue 36,030 29,189)
Other income 3,545 -
Occupancy costs (55,962) (19,371)
Legal fees (497,465) (114,232)
Administration costs (241,825) (766,825)
Directors` fees (130,000) (125,002)
Employee & Consultant costs (39,822) (169,662)
ASX and share registry costs (135,270) (194,532)
Finance cost 2 (1,303,402) (311,694)
Foreign exchange gain/(loss) 478 139,983
Loss before income tax (2,363,693) (1,532,146)
Income tax expense - -
Loss from continuing operations (2,363,693) (1,532,146)
Loss for the half-year attributable to the
members (2,363,693) (1,532,146)
of Firestone Energy Limited
Other comprehensive income for the half-year
Foreign currency translation reserve (2,124,377) 17,941
Total comprehensive income for the half-year
attributable to the members of Firestone
Energy Limited (4,488,070) (1,514,205)
Loss per share
Loss per share on loss from continuing operations
attributable to the ordinary equity holders
of the company
Basic loss per share (cents per share) (0.10) (0.08)
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2010
Note December June
2010 2010
$ $
Current assets
Cash and cash equivalents 4 1,607,050 2,130,542
Trade and other receivables 242,435 420,031
Prepayments 5,098 -
Total current assets 1,854,583 2,550,573
Non-current assets
Property, plant and equipment 83,733 113,330
Interest in joint venture 10 81,754,574 79,371,322
Receivables 116,687 147,119
Total non-current assets 81,954,994 79,631,771
Total assets 83,809,577 82,182,344
Current liabilities
Trade and other payables 4,717,717 3,489,487
Total current liabilities 4,717,717 3,489,487
Non- current liabilities
Borrowings 3 18,017,187 14,530,114
Total non-current liabilities 18,017,187 14,530,114
Total liabilities 22,734,904 18,019,601
Net assets 61,074,673 64,162,743
Equity
Issued capital 7 64,104,850 62,704,850
Reserves 4,085,888 6,210,265
Accumulated losses (7,116,065) (4,752,372)
Total Equity 61,074,673 64,162,743
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Half-Year Ended 31 December 2010
Issued Accumulated Foreign currency
capital losses translation
reserve
$ $ $
Balance at 1 July 2010 62,704,850 (4,752,372) 2,128,620
Comprehensive income for
the half-year
Loss for the half-year - (2,363,693) -
Foreign currency translation reserve - - (2,124,377)
Total comprehensive income
for the half-year - (2,363,693) (2,124,377)
Transactions with owners in
their capacity as owners:
Share-based payments - - -
Issue of shares, net of
transaction costs - - -
Conversion of convertible
notes 1 1,400,000 - -
Total transactions with owners 1,400,000 - -
Balance at 31 December 2010 64,104,850 (7,116,065) 4,243
Share-based Total
payment
reserve
$ $
Balance at 1 July 2010 4,081,645 64,162,743
Comprehensive income for
the half-year
Loss for the half-year - (2,363,693)
Foreign currency translation reserve - (2,124,378)
Total comprehensive income for the half-year - (4,488,071)
Transactions with owners in
their capacity as owners:
Share-based payments - -
Issue of shares, net of transaction costs - -
Conversion of convertible
notes 1 - 1,400,000
Total transactions with owners - 1,400,000
Balance at 31 December 2010 4,081,645 61,074,673
1 The issued capital is primarily a reduction in debt.
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
For the Half-Year Ended 31 December 2010
Issued Accumulated Foreign
capital losses currency
translation
reserve
$ $ $
Balance at 1 July 2009 14,781,022 (1,316,064) 1,695,271
Comprehensive income for the half-year
Loss for the half-year - (1,532,146) -
Foreign currency translation reserve - - 17,941
Total comprehensive income
for the half-year - (1,532,146) 17,941
Transactions with owners in
their capacity as owners:
Issue of shares, net of
transaction costs 47,923,828 - -
Total transactions with owners 47,923,828 - -
Balance at 31 December 2009 62,704,850 (2,848,210) 1,713,212
Share-based Total
payment
reserve
$ $
Balance at 1 July 2009 4,081,645 19,241,874
Comprehensive income for the half-year
Loss for the half-year - (1,532,146)
Foreign currency translation reserve - 17,941
Total comprehensive income for the half-year - (1,514,205)
Transactions with owners in their capacity as owners:
Issue of shares, net of transaction costs - 47,923,828
Total transactions with owners - 47,923,828
Balance at 31 December 2009 4,081,645 65,651,497
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Half-Year Ended 31 December 2010
Note December December
2010 2009
$ $
Cash flows from operating activities
Payments to suppliers and employees (883,917) (2,658,155)
Interest Paid (69,233) (222,488)
Interest Received 36,030 29,189)
Net cash used in operating activities (917,120) (2,851,454)
Cash flows from investing activities
Project expenditure - JV`s (1,909,339) (6,362,409)
Acquisition of surface rights - JV`s (2,232,441) (1,177,410)
Payments to acquire fixed assets - (9,335)
Sale of office plant and equipment 3,545 -
Net cash used in investing activities (4,138,235) (7,549,154)
Cash flows from financing activities
Proceeds from issue of shares - -
Proceeds from the issue of convertible notes 4,676,920 11,680,000
Transaction cost (116,920) (1,600,000)
Net cash from financing activities 4,560,000 10,080,000
Net decrease in cash and cash equivalents (495,355) (320,608)
Cash and cash equivalents at 1 July 2,130,542 1,870,754
Effect of exchange rate differences on
the balance of cash held in foreign currencies (28,137) -
Cash and cash equivalents at 31 December 4 1,607,050 1,550,146
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For The Period Ended 31 December 2010
1 Basis of preparation of half-year financial report
These general purpose financial statements for the half-year reporting period
ended 31 December 2010 have been prepared in accordance with Accounting Standard
AASB 134 Interim Financial Reporting and the Corporations Act 2001.
These half-year financial statements do not include all the notes of the type
normally included in annual financial statements. Accordingly, these financial
statements are to be read in conjunction with the annual financial statements
for the year ended 30 June 2010 and any public announcements made by Firestone
Energy Ltd during the half-year reporting period in accordance with the
continuous disclosure requirements of the Corporations Act 2001.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.
Impact of standards issued but not yet applied by the entity
There have been no new accounting standards, or amendments to, that would have
any impact on the group.
Going Concern
The financial report has been prepared on the going concern basis, which
contemplates the continuity of normal business activity and the realisation of
assets and the settlement of liabilities in the normal course of business.
The Group has incurred a comprehensive loss after tax for the half-year ended 31
December 2010 of $2,363,693 (2009 half-year: $1,532,146) and experienced net
cash outflows from operating activities of $917,120 (2009 half-year:
$2,851,454).
The Directors believe that there are sufficient funds to meet the Group`s
working capital requirements. However, as the convertible note facility with BBY
has been drawn down by $20.6m of the $25m limit, and the group intends to
commence mine construction in the second half of 2011, the Directors recognise
that the ability of the Group to continue as a going concern and to pay its
debts as and when they fall due is dependent on the ability to secure further
working capital by the issue of additional equities, debt, or entering into
negotiations with third parties regarding farm out of assets.
December December
2010 2009
$ $
2. Expenses
Interest Expense 976,329 222,488
Amortisation of transaction costs 327,073 89,206
Total finance costs: 1,303,402 311,694
December June
2010 2010
$ $
3. Borrowings
Loans carried at amortised cost
Convertible Notes (Face Value) 19,200,000 15,923,080
Transaction Costs - Carrying Amount (1,182,813) (1,392,966)
18,017,187 14,530,114
These transaction costs are being amortised over the life of each note as part
of the effective interest rate. The facility has been drawn down by an amount of
$20.6million, with $1.4million already converted to equity. Firestone Energy has
drawn down $4,676,920 during the 6 months ended 31 December 2010 (December 2009:
$7,489,206)
The total draw-down facility is $25 million with a maturity date of 3 years from
the date of issue. The notes can be converted at any time before the maturity
date and bears interest at a rate of 10% per annum.
4. Cash and Cash Equivalents
Cash at bank 1,607,050 2,130,542
5. Dividends
No dividend has been paid during or is recommended for the financial period
ended 31 December 2010.
6. Commitments and Contingencies
There have been no significant changes to commitments since 30 June 2010, with
the exceptions to the approval of the T3 transaction with Sekoko Coal Pty
Limited which was approved by the shareholders of Company on 4 January 2011.
Under the agreement, Firestone have further obligations to pay a cash payment of
$1.8m by 31 July 2011 and issue 200m fully paid ordinary shares to Sekoko Coal.
The shares have been issued on 4 February 2011. At 31 December 2010 this amount
is a contingent liability, and has become a commitment post balance date.
31 December 2010
Shares $
7. Issued Capital
Reconciliation of movement in issued capital
attributable to equity holders of the Company.
(a) Movements in Ordinary Shares
At 1 July 2010 - Opening Balance 2,331,300,464 62,704,850
4 Oct - Note conversion 30,000,000 600,000
8 Nov - Note conversion 39,411,766 800,000
Ordinary shares at 31 December 2010 2,400,712,230 64,104,850
(b) Movements in Options
At 1 July 2010 - Opening Balance 262,779,767 4,081,645
Options at 31 December 2010 262,779,767 4,081,645
The unlisted options on issue as at 31 December are as follows:
Number Expiry date Exercise price
under option of option
30,000,000 30-Nov-12 $0.05
110,000,000 31-May-13 $0.06
96,904,767 30-Jun-13 $0.06
25,875,000 30-Jun-14 $0.06
No option holder has any right under the options to participate in any other
share issue of the Company.
31 December 2009
Shares $
Reconciliation of movement in issued capital
attributable to equity holders of the Company.
(a) Movements in Ordinary Shares
At 1 July 2009 - Opening Balance 1,354,951,295 14,781,022
16 Sep - Loan converted 15,172,606 545,000
16 Sep - Loan converted 67,000,000 2,680,000
30 Sep - Issued 868,176,563 43,408,828
30 Sep - Issued 25,000,000 1,250,000
30 Sep - Issued 1,000,000 40,000
Ordinary shares at 31 December 2009 2,331,300,464 62,704,850
(b) Movements in Options
At 1 July 2009 - Opening Balance 262,779,767 4,081,645
Options at 31 December 2009 262,779,767 4,081,645
9. Events occurring after Balance Date
- On 4 January 2011 a general meeting was held to successfully approve the T3
Joint Venture agreement with Sekoko Coal Pty Limited, to acquire additional
properties "Swanepoelpan" and "Duikerfontein". In consideration for the
acquisition, Firestone Energy must:
- Pay $100,000 to Sekoko Coal on the execution date of the agreement (Paid);
- Pay $100,000 to Sekoko Coal on or before 1 July 2010 (Paid);
- Pay $1,800,000 to Sekoko Coal before 31 July 2011; and
- Issue 200m fully paid ordinary shares in Firestone to Sekoko Coal once all the
conditions have been met (Issued 4 February 2011).
The Joint Venture will give Firestone the right to earn a 60% interest in the
above mentioned properties.
- Furthermore, as reported to the ASX, the Company`s Joint Venture with Sekoko
Coal Pty Limited has signed a legally binding Off-take MOU with the State owned
power utility, Eskom Limited on 28 January 2011 which could potentially generate
over $1bn in revenues over 21 years.
The agreement specifies the supply of contract coal product from the Waterberg
Coal Project to the nearby Eskom owned Coal power station, Matimba, within the
same Limpopo region of South Africa.
The first contract supply schedule is as follows;
1 April 2012 - 31 March 2015: 525,000 tonnes p.a.
1 April 2015 - 31 March 2018: 1,000,000 tonnes p.a.
Negotiations are continuing, in good faith, for the objective of entering into a
longer term contract from 2018 to 2032.
- On the 28th of February, The group signed a shareholder`s agreement with
Sekoko Resources.
This agreement proves that FSE has completed its earn-in to the full
participation right of 60% of the 8 properties in the Waterberg project (T1 and
T2) and paves the way for lodging application for transfer of the mineral rights
from Sekoko Coal to the incorporated JV company name.
10. Interest in Joint Venture
As at 31 December 2010, the Company had entered into two Joint Venture
Agreements with Sekoko Coal (Pty) Ltd for a coal project in the Waterberg
locality in South Africa.
At the half-year, both Checkered Flag and Lexshell (wholly owned subsidiaries)
have a participation interest of 54% in the projects relating to the jointly
controlled operation (T1 and T2). The Company has the rights to earn up to an
interest of 60% in each Joint Venture agreement.
Half-year Year ended
ended Dec June 2010
2010 $
$
Opening balance 79,371,322 19,645,502
Acquisition costs - 48,548,836
Project costs 2,232,541 4,157,437
Surface rights 2,275,088 6,586,198
Foreign exchange movements (2,124,377) 433,349
Closing balance 81,754,574 79,371,322
The above amounts include both Joint Venture agreements, T1 and T2.
11. Segment Information
Management has determined that the consolidated group has one reportable
segment, being coal exploration in South Africa. As the company is focused on
mineral exploration, the Board monitors the consolidated group based on actual
versus budgeted exploration expenditure incurred by area of interest.
This internal reporting framework is the most relevant to assist the Board with
making decisions regarding the consolidated group and its ongoing exploration
activities, while also taking into consideration the results of exploration work
that has been performed to date.
Segment information provided to the Board:
December December
2010 2009
$ $
Revenue from external sources - -
Reportable segment loss (510,864) (258,384)
Reportable segment assets 81,754,574 71,269,680
A reconciliation of reportable segment loss to operating loss before income tax
is provided as follows:
December December
2010 2009
$ $
Total loss for reportable segment (510,864) (258,384)
Unallocated:
Interest revenue 36,030 29,189)
Other income 3,545 -
Occupancy costs (55,962) (19,371)
Legal fees (140,746) (114,232)
Administration costs (241,826) (508,441)
Directors` fees (130,000) (125,002)
Employee and Consultant costs (77,336) (169,662)
ASX and share registry costs (135,270) (194,532)
Finance cost (1,111,742) (311,694)
Foreign exchange gain/(loss) 478 139,983)
Loss before income tax from continuing operations (2,363,693) (1,532,146)
12. Related Party Transactions
During the period, there has been a significant change with non-executive
directors. Newly appointed directors shall be remunerated consistently with the
past directors, as disclosed in the 30 June 2010 financial statements. There are
no other material changes to related parties since 30 June.
DIRECTORS` DECLARATION
The Directors of the Company declare that:
1. The consolidated financial statements and notes are in accordance with the
Corporations Act 2001 and:
a. comply with Accounting Standard AASB 134: Interim Financial Reporting and the
Corporations Regulations 2001; and
b. give a true and fair view of the consolidated entity`s financial position as
at 31 December 2010 and of its performance for the half-year then ended on that
date.
2. In the Directors` opinion there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of
Directors.
David Perkins
Director
DIRECTORS` REPORT
The Directors present their report together with the consolidated financial
statements for the half-year ended 31 December 2010.
Directors
The names of the Directors of Firestone Energy Limited throughout the reporting
period and at the date of this report are:
Mr John Dreyer (Resigned 31 January 2011)
Chairman
Mr David Perkins (Appointed 31 January 2011. Previously appointed as Non-
Executive Director on 17 January 2011)
Chairman
Ms Amanda Matthee (Resigned 30 September 2010)
Non-Executive Director
Mr John Wallington (Resigned 31 December 2010)
Non-Executive Director
Mr Timothy Tebeila (Resigned 7 January 2011)
Non-Executive Director
Mr Colin McIntyre
Non-Executive Director
Mr Sizwe Nkosi (Appointed 3 November 2010)
Non Executive Director
Dr Pius Chilufya Kasolo (Appointed 28 January 2010)
Non-Executive Director
Mr Matsidiso Peter Tshisevhe (Appointed 28 January 2010)
Non-Executive Director
Note: Directors were in power for the entire period unless otherwise stated.
Results of Operations
The net loss from continuing operations for the six months to 31 December 2010
amounted to $2,363,693 (Half-year ended 31 December 2009: Net Loss $1,532,146).
Review of Operations
During the half-year ended 31 December 2010, Firestone Energy Ltd has made
significant progress on turning its Waterberg Coal Project into a producing coal
mine. The Definitive feasibility study was completed, and approved by the board
in October 2010. It showed that the Smitspan property has 51mt in proven
reserves and 69mt in probable reserves. All properties show a Gross tons in situ
of 1.9bn ton and 5.1bn tons of coal zones in compliance with JORC and SAMREC
codes.
The Definitive Feasibility study confirms the viability of a robust open cast
operation for 21 years with capital and operating cost tolerances of +/- 10% for
the complete first phase of the mine life. More importantly, only 8% of the
total resource is modelled to be mined and treated in the first 21 years as per
the current DFS.
Application to convert the prospecting right to a Mining Right on seven of the 8
properties was lodged in July 2010. With this an environmental management
programme report was completed and submitted, three public consultation meetings
were held and revealed no major showstoppers; and social and labour plan (SLP)
was completed and submitted. The mining right on seven properties is expected to
be approved within the first half of 2011.
The directors believe that Firestone Energy is on target to begin mine
construction in the second half of 2011, and are continuing to seek a corner-
stone investor for the project.
Sekoko Resources (Pty) Ltd, FSE`s major shareholder and 40% partner in the
project raised R250m to fund its contribution for the construction of the mine.
Firestone has secured office space in the Lephalale town in the vicinity of
Waterberg Coalfield. The group has also purchased two surface rights, Smitspan
and Hooikraal, using a twelve month payment plan.
The company is working on detailed designs and environmental impact assessments
of a rail spur as a mode of delivery.
Post Balance Date Events
1. On 4 January 2011 a general meeting was held to successfully approve the T3
Joint Venture agreement with Sekoko Coal Pty Limited, to acquire additional
properties "Swanepoelpan" and "Duikerfontein". In consideration for the
acquisition, Firestone Energy must:
- Pay $100,000 to Sekoko Coal on the execution date of the agreement (Paid);
- Pay $100,000 to Sekoko Coal on or before 1 July 2010 (Paid);
- Pay $1,800,000 to Sekoko Coal before 31 July 2011; and
- Issue 200m fully paid ordinary shares in Firestone to Sekoko Coal once all the
conditions have been met (Issued 4 February 2011).
The Joint Venture will give Firestone the right to earn a 60% interest in the
above mentioned properties.
2. Furthermore, as reported to the ASX, the Company`s Joint Venture with Sekoko
Coal Pty Limited has signed a legally binding Off-take MOU with the State owned
power utility, Eskom Limited on 28 January 2011 which could potentially generate
over $1bn in revenues over 21 years.
The agreement specifies the supply of contract coal product from the Waterberg
Coal Project to the nearby Eskom owned Coal power station, Matimba, within the
same Limpopo region of South Africa.
The first contract supply schedule is as follows:
1 April 2012 - 31 March 2015: 525,000 tonnes p.a.
1 April 2015 - 31 March 2018: 1,000,000 tonnes p.a.
Negotiations are continuing, in good faith, for the objective of entering into a
longer term contract from 2018 to 2032.
3. On the 28th of February, The group signed a shareholder`s agreement with
Sekoko Resources. This agreement proves that FSE has completed its earn-in to
the full participation right of 60% of the 8 properties in the Waterberg project
(T1 and T2) and paves the way for lodging application for transfer of the
mineral rights from Sekoko Coal to the incorporated JV company name.
Auditor`s Independence Declaration
A copy of the auditor`s independence declaration as required under Section 307C
of the Corporations Act is set out on page 15 and forms part of this report.
This report is made in accordance with a resolution of directors.
Dated at Perth this 11th day of March 2011.
Signed in accordance with a resolution of the Directors.
David Perkins
Director
CORPORATE DIRECTORY
DIRECTORS
David Perkins
Non-Executive Chairman
Pius Chilufya Kasolo
Non-Executive Director
Sizwe Nkosi
Non-Executive Director
Colin McIntyre
Non-Executive Director
Matsidiso Peter Tshisevhe
Non-Executive Director
COMPANY SECRETARY
Jerry Monzu
REGISTERED OFFICE
Suite B9, 431 Roberts Road
SUBIACO, WA 6008
Telephone: (08) 9287 4600
Facsimile: (08) 9287 4655
SOLICITORS TO THE COMPANY
Blake Dawson
Level 36, Grosvenor Place
225 George Street
SYDNEY NSW 2000
SHARE REGISTRY
Computershare Investor Services
Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH WA, 6000
Ph 08 9323 2000
Fax 08 9323 2033
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6008
ASX CODE
"FSE"
JSE CODE
"FSE"
Johannesburg
11 March 2011
Sponsor and Corporate advisor
River Group
Dated at Perth this 11th day of March 2011
Date: 11/03/2011 14:28:00 Supplied by www.sharenet.co.za
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