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FSE - Firestone Energy Limited - Quarterly activities report for the period to
30 June 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")
QUARTERLY ACTIVITIES REPORT FOR THE PERIOD TO 30 June 2011
The Board of Firestone Energy Limited (ASX/JSE: FSE) ("Firestone" or the
"Company") is pleased to provide shareholders with its Quarterly Activities
Report for the 3 month period ended 30 June 2011.
Highlights
* Further 3 tonne coal sample submitted to Eskom for testing;
* Major banks and financial institutions in South Africa indicate interest in
providing project finance;
* Substantially completed process for selection of mining contractor;
* Water Use Licence: Addressed questions from application submitted in
January 2011, no major issues identified;
* Rail: Detailed studies on rail transport options continued;
* Cornerstone Investor activity ongoing.
Post Quarter Events
* Eskom MOU Board approval is being extended by 90 days;
* Appointed Public Investment Corporation to lead a limited period exclusive
mandate to raise project finance;
* Letter of intent (LOI) received for coal export to the Sainty Group in
China.
OVERVIEW
Whilst the mining right approval has taken longer than anticipated, the Company
remains on course to start production in 2012. Communication with the
Department of Mineral Resources indicates the application is proceeding
smoothly, if somewhat delayed.
The award of mining rights is expected to pave the way for other regulatory
approvals including water and environmental assessment impact approvals.
While Eskom remains the main off-taker of the coal, we have made significant
inroads into the local high value market and export markets.
During the quarter the majority of management time was dedicated to addressing
issues arising from submitted Environmental Impact Assessment, Water Use Licence
and the Application for a Mining Right. Notwithstanding the delay in the issue
of the Mining Right milestone and the effect of that delay on the other
regulatory approvals, the Board remain satisfied with the progress made given
the complexity of the processes involved.
WATERBERG COAL PROJECT
Project Update
The Waterberg Coal Project is now well advanced with all major actions required
of the Company in order to receive approval for its application of a mining
license completed. Management has been addressing various issues raised by
respective regulators, none of these issues have been significant, primarily
issues have been in the nature of explanations by management of the content of
submitted documents. As previously advised, infrastructure, rail and processing
contractors have been appointed and continue to be engaged in anticipation of
the issue of the mining right.
The board completed its processes for the short listing of mining contractors
and has compiled a short list of suitably qualified companies. Completion of
this process by the appointment of the selected contractor is expected in the
near term, following the finalisation of regulatory approvals.
Smitspan remains the Company`s flagship project, the primary object of which
will be to service the Eskom off-take agreement and other Eskom requirements.
The flexibility of the 120mt saleable coal mine plan allows flexibility
depending on the requirements of the off-taker. The Company has also
experienced strong inquiry for its higher-quality metallurgical coal deposit.
Regulatory Approvals
The Company has been informed that it`s Application for a Mining Right was
reviewed by The Licensing Committee of the Department of Mineral Regulation on
25 July 2011. Firestone is yet to be formally notified of the outcome of the
committee meeting. Once approved at committee level the mining right approval
is anticipated to be formally executed in August 2011.
With respect to the Environmental Impact Assessment (EIA) no comments were
received within the time prescribed for a response from the Department of
Environment. Firestone interprets this to be a positive sign that our EIA does
not have major issues. The Company anticipates receiving the Record of
Decisions shortly following the formal execution of the mining right.
Similarly it is anticipated the Company`s application for Water Use Licence will
be approved and a license issued following execution of the mining right.
MARKETING
Initially it was anticipated that the Eskom MOU would be approved by the Eskom
Board in July 2011 in order to convert it from a MOU to a fully fledged off-take
agreement. Eskom have advised of a 90 day extension to this period as a result
of an internal reorganization.
The Company is continuing to negotiate with Eskom to extend its relationship and
to increase the tonnage of coal to be supplied from the Smitspan Mine.
The Company has received a Letter of intent from the Sainty Group of China to
purchase initially 600,000 tonnes of coal from the 2nd half of 2012 and ramping
up to 2.4m tonnes of coal in 2014. The Company and Sainty Group have agreed to
a 90 day period within which to confirm the Letter of Intent in a binding
agreement.
Logistics
The detailed designs of the rail sidings are at an advanced stage and are
expected to be completed within the next two months.
Environmental studies on the rail siding have been completed and are being
submitted to the Department of Environmental Affairs. This follows the draft
EIA which was submitted earlier this year.
Firestone`s negotiations with Transnet Freight Rail (TFR) for access to its
tracks and rolling stock are ongoing. TFR has publicly signalled a significant
upgrade of its infrastructure capacity servicing the Waterberg region and
Firestone interpret this as a positive indicator for our ability to transport
coal from the Waterberg Project to Eskom, for export via Richards Bay Coal
Terminal and/or the local market.
CORPORATE
Mr Peter Tshisevhe, the Sekoko nominated Director, resigned from the Board of
Firestone on 27 June 2011.
IDC
The Industrial Development Corporation of South Africa (IDC) received Federal
Investment Review Board (FIRB) approval for its ownership of shares in Firestone
Energy Limited in June 2011. Sekoko received its first cash draw down from the
IDC at the beginning of July 2011.
Funding
During the quarter Firestone conducted a Share Purchase Plan (SPP) capital
raising with the SPP offer being made in Australia, New Zealand and South
Africa. In total the SPP raised approximately A$1.9million.
Firestone has awarded the Public Investment Corporation of South Africa (PIC) an
exclusive mandate to raise project finance of A$29million (R200million). PIC
manages assets totalling approximately R910billion (approx A$130billion), making
it one of the largest investment managers on the African continent. It is
wholly owned by the South African Government and was established in April 2005
in accordance with the Public Investment Corporation Act of 2004.
Jindal Power and Steel MOU
An agreement between Firestone, Sekoko Coal and Jindal was reached in June 2011
that the Non-Binding MOU signed in January 2011 be cancelled.
As at 30 June 2011 the Company had a positive cash balance of A$1.9million.
Yours sincerely
Firestone Energy Limited
David Perkins
Chairman
www.firestoneenergy.com.au
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:
2,793 million ordinary shares
Major Shareholders:
Sekoko Resources (Pty) Ltd
BBY Nominees Ltd
Colbern Fiduciary Nominees Ltd
Bell Potter Nominees Ltd
Directors and Officers
Non Executive Directors:
David Perkins (Chairman)
Dr Pius Kasolo
Colin McIntyre
Executive Directors:
Sizwe Nkosi
Company Secretary:
Jerry Monzu
Contact:
Suite B9, 431 Roberts Road
Subiaco, Western Australia 6008
Tel: +61 (0)8 9287 4600
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. Sekoko is targeting to commence operations in
2012, thus forming the basis for developing a global coal business.
Pretoria
29 July 2011
Sponsor
River Group
Date: 29/07/2011 12:07:40 Supplied by www.sharenet.co.za
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