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FSE - Firestone Energy Limited - Annual Report
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")
ANNUAL REPORT
Annual Report 30 June 2011 For the year ended 30 June 2011
CORPORATE DIRECTORY
DIRECTORS SHARE REGISTRY
Mr. David Perkins Computershare Investor Services
Non Executive Chairman Level 2, Reserve Bank Building
45 St Georges Terrace
Dr. Pius Chilufya Kasolo PERTH W A, 6000
Non Executive Director Ph 08 9323 2000
Fax 08 9323 2033
Mr. Sizwe Nkosi
Executive Director
Mr. Colin McIntyre
Non Executive Director
COMPANY SECRETARY SOLICITORS TO THE COMPANY
Jerry Monzu Blake Dawson
Level 36, Grosvenor Place
225 George Street
Sydney NSW 2000
REGISTERED OFFICE AUDITORS
Suite B9, 431 Roberts Road BDO Audit (W A) Pty Ltd
SUBIACO, W A 6008 38 Station Street
SUBIACO W A 6008
Telephone: (08) 9287 4600
Facsimile: (08) 9287 4655
STOCK EXCHANGE LISTING ASX CODE
Securities of Firestone Energy Limited are dual "FSE"
listed on the Australian Securities Exchange and
the Johannesburg Securities Exchange. JSE CODE
"FSE
CONTENTS
Management Disclosure Report 3
Directors` Report 7
Auditor`s Independence Declaration 14
Corporate Governance Statement 15
Consolidated Statement of Comprehensive Income 21
Consolidated Balance Sheet 22
Consolidated Statement of Cash Flows 23
Consolidated Statement of Changes in Equity 24
Notes to the Financial Statements 25
Directors` Declaration 49
Independent Audit Report 50
ASX Additional Information 52
MANAGEMENT DISCLOSURE REPORT
OVERVIEW
The financial year ending the 30 June 2011 has been very productive for
Firestone Energy in its South African based Waterberg project.
The operational highlights of the year are:
- Two further properties were acquired through a transaction with its Joint
Venture partner, Sekoko Resources (Pty) Ltd; providing FSE the right to earn in
up to 60% in 8 properties,
- A Definitive Feasibility Study was completed and approved by the Board on 31
October 2010,
- Drilling results of the Southern Farms contain significant resource of shallow
open castable metallurgical coal,
- An off-take MOU with Eskom was signed in January 2011. More recently the
Company agreed with Eskom to renegotiate the MOU,
- FSE`s Joint Venture partner Sekoko Resources secured up to ZAR250million
(approx A$33million) in funding from the Industrial Development Corporation
(IDC),
- A Shareholders Agreement was signed paving the way to consolidate all three JV
agreements pending S11 transfer of the Mining Rights from Sekoko Coal (Pty) Ltd
to the JV Operating Company,
- The Company purchased surface rights of Smitspan and Hooikraal. It further
secured a 12 month exclusive purchase option on the Vetleegte and Massenberg
farms,
- The joint venture opened an office in Lephalale town, and
- The Company conducted a Share Purchase program which raised $1.8m in Australia
and New Zealand and $230,000 in South Africa.
The highlights post year-end are:
- The mining right was granted,
- The JV has entered into an exclusive arrangement with a major power company to
complete a due diligence which may result in the company becoming a cornerstone
investor, and
- The Company placed approximately $1.8 million of equity (ordinary shares) with
LINC Energy Ltd which together with on market purchases gives LINC a 9.6% equity
stake in Firestone.
CORPORATE DEVELOPMENTS
Joint Venture Agreement 3 - T3
Firestone signed an addendum to the second Joint Venture agreement which
entitled the Company to purchase a 60% interest in Swanepoelpan and
Duikerfontein. This would result in mineral rights for eight properties being
owned in joint venture with Sekoko Resources (Pty) Ltd.
The T3 transaction entailed:
- Issue of 200m fully paid ordinary shares to Sekoko Resources, and
- A payment of $2m to Sekoko Resources.
A deposit of $200,000 has been paid to Sekoko Coal in February 2010. The
remaining $1.8 million was payable on the earlier of 18 months from effective
date or 30 June 2011. The $1.8m has become due after year end and is being paid
to Sekoko on an agreed payment schedule and terms.
The general meeting held on the 4 January 2011 approved the Joint Venture
transaction.
Shareholders Agreement
Following the completion and approval of the Definitive Feasibility study, the
Boards of FSE and Sekoko Resources took a decision to progress the Waterberg
project from the exploration to the development phase. This culminated in
the incorporation of a company owned 60% by FSE and 40% by Sekoko Coal to
hold joint venture assets. A shareholder agreement detailing governance and
structure of the company was negotiated and signed in February 2011.
Surface Rights
The Company purchased the surface rights of Smitspan, the property where it is
intended the first mine will be opened. The Company also purchased the surface
rights of Hooikraal, the property where it is intended the load out station and
rail siding will be built. The Company further secured a 12 month exclusive
option with the owners of the properties Massenberg and Vetleegte; the options
expire in November 2011 and February 2012 respectively.
Funding
During the year the company continued to use the remainder of the $25m
convertible note facility which had been arranged and fully underwritten by BBY
Limited.
Firestone allocated the convertible note in the following manner:
- completion of the "DFS" for a large scale mining operation at the Company`s
Waterberg coal project in South Africa,
- meeting project commitments undertaken by Lexshell General Trading 126 Pty Ltd
and Sekoko Coal (Pty) Limited,
- production, laboratory analysis and submission of 2 x 3 tonne samples to Eskom
laboratories for testing and analysis,
- purchase of surface rights, and
- working capital requirements.
FSE conducted a Share Purchase Plan (SPP) programme, commencing in May 2011. The
SPP raised $1.8m from Shareholders in Australia and New Zealand and a further
$230,000 from shareholders in South Africa.
Post year end FSE completed a placement with Linc Energy Limited where
approximately 150m shares were issued to Linc at 1.2cents per share under the
Company`s existing 15% share issue capacity. This share issue raised $1.8m and
resulted (together with other on market purchases made by Linc) in Linc Energy
owning 9.6% of Firestone Energy. As part of the arrangement the Company has
agreed to grant to Linc Energy the Company`s Underground Coal Gasification, oil
and gas rights over the tenements that are subject of the JV between Firestone
and its partner, Sekoko Resources.
The Industrial Development Corporation of South Africa (IDC) entered into an
agreement with Sekoko to part fund the development of the Waterberg Project.
Cornerstone Investor
Post year end FSE and Joint Venture partner, Sekoko Resources, signed a non-
binding proposal with a global power company giving it an exclusive access to
complete a due diligence. The indicative terms of this proposal entail purchase
of an equity stake in the JV Company and the entering into an offtake agreement
with the joint venture.
REVIEW OF OPERATIONS
Exploration Undertaken
During the year the definitive feasibility study was completed and signed off by
the Board on the 31 October 2010. Following this there has been no further
exploration work.
Coal Resource Statement
Venmyn Rand (Pty) Ltd was commissioned by the Company to undertake Mineral
Resource estimates for eight farms constituting the Waterberg Coal Project.
- The resource has been estimated in accordance with the SAMREC and JORC codes
and the SANS 10320:2004 (South African National Standard) method of
classification of thick inter-bedded coal deposits, The total coal resource
estimate based on the data available at 1 August 2010 (Venmyn) is tabled below:
FARM ZONE MEASURED INDICATED
TONNAGE COAL
MT GTIS MT GTIS MT
SMITSPAN 1,881.758 238.667 475.844
HOOIKRAAL 358.444 - 7.282
MINNASVLAKTE 755.805 - 26.507
MASSENBERG 337.034 - 20.797
VETLEEGTE 570.265 1.224 204.499
SWANEPOELPAN 615.553 - 1.072
DUIKERFONTEIN 30.200 - -
TOTAL 5,173.480 239.891 736.001
FARM INFERRED TOTAL COAL
COAL
GTIS MT GTIS MT
SMITSPAN - 714.511
HOOIKRAAL 155.491 162.773
MINNASVLAKTE 230.687 257.194
MASSENBERG 109.539 130.336
VETLEEGTE 17.893 223.816
SWANEPOELPAN 378.227 379.299
DUIKERFONTEIN 13.949 13.949
TOTAL 905.786 1,882.463
Competent Person Statement
Information in this report that relates to exploration results and coal
resources on the properties Smitspan, Hooikraal, Minnasvlakte, Massenberg,
Vetleegte, Swanepoelpan and Duikerfontein are based on information compiled by
Mr Paul S Norman who is employed by Wardell Armstrong LLP and is a Fellow of the
Geological Society of London, a Fellow of the Institution of Materials, Minerals
and Mining, a Fellow of the Energy Institute, a Chartered Geologist and
Chartered Engineer. Mr Norman has sufficient experience which is relevant to the
style of mineralisation and type of deposit under consideration and to the
activity he is undertaking to qualify as a Competent Person as defined by the
South African Code of the Reporting of Exploration Results, Mineral Resources
and Mineral Reserves (The SAMREC Code) 2007 edit ion and the Australasian Code
for reporting of Exploration Results, Mineral Resources and Ore Reserves (The
JORC Code). Mr Norman consents to the inclusion in the report of the matters
based on his information in the form and context in which it appears.
The information in this report that relates to coal reserve estimation is based
on work completed by Mr Peter I Watkinson who is an employee of Parsons
Brinckerhoff and a Member of the Institute of Materials, Minerals and Mining, a
Member of the Minerals Engineering Society and a Chartered Engineer. Mr
Watkinson has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which
he is undertaking to qualify as a Competent Person as defined by the South
African Code of the Reporting of Exploration Results, Mineral Resources and
Mineral Reserves (The SAMREC Code) 2007 edition and the Australasian Code for
reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC
Code). Mr Watkinson consents to the inclusion in the report of the matters based
on his information in the form and context in which it appears.
Additional comment in this report that relates to coal resource estimation is
made by Mr James A Johnson who is an employee of Sekoko Resources and a Fellow
of the South African Institute of Mining and Metallurgy, and a Professional
Engineer. Mr Johnson has sufficient experience which is relevant to the style of
mineralisat ion and type of deposit under consideration and to the activity
which he is undertaking to qualify as a Competent Person as defined in the
Edition of the Australian Code for the Reporting of Exploration Results, Mineral
Resources and Ore Reserves (The JORC Code). Mr Johnson consents to the inclusion
in the report of the matters based on his information in the form and context in
which it appears.
Metallurgical Coal
The company received analyses and reports showing that the South Eastern
properties have shallow open castable Metallurgical Coal with appropriate
phosphorus qualities to be used as reductors in the steel and smelting . 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
JORC and SAMREC measured resource.
Detailed Feasibility Study (DFS) results
Firestone Energy Limited and its Joint Venture Partner Sekoko Resources,
approved the Definitive Feasibility Study "DFS" document completed by
independent consultants, Parsons Brinckerhoff (PB) on 31 October 2010. The
document indicated the viability (as previously indicated) of an open cast
operation for 21 years with capital and operating cost tolerances of +/- 10% for
the complete first phase mine life.
PB confirmed that the first stage open cast has saleable coal reserves of 120
million tonnes under the Smitspan farm, of which 51 million tonnes are proven
and 69million tonnes are in the probable category.
Development activities
The Company also addressed the following:
- lodging an application of mining right, water use licence (WUL) and
environmental impact assessment (EIA),
- necessary processes and procedures relating to EIA including public
participation meetings, specialists environmental studies, Social Labour Plan
and interaction with interested and affected parties,
- production, analysis and submission of Eskom samples for testing in their
laboratories,
- conceptual study of railsiding and conceptual designs including lodging
applications for the necessary authorisations; and
- detailed mine and support infrastructure designs and plans.
REGULATORY APPROVALS
Mining Right
The Mining Right was signed, executed and registered on the 8 August 2011 giving
the licensee 30 years licence to mine subject to obtaining other relevant
approvals. Currently a process is in underway to formally transfer the mining
right to the joint venture company in as required by or Shareholders Agreement.
EIA and WUL
Environmental Impact Assessment and Water Use Licence were submitted during the
year and their approval is currently pending approval of the Mining Right. Both
EIA and WUL are being reviewed by authorities and we expect approvals to be
issued in due course.
MARKETS & LOGISTICS
Eskom
The Joint Venture signed a Memorandum of Understanding with Eskom on
28 January 2011. The joint venture has agreed to renegotiate aspects of the MOU
and as of the date of release of this Annual Report the joint venture is
involved in negotiations with Eskom.
Rail
The preferred method of delivery from Waterberg by all interested parties and
stakeholders is rail. Rail Consulting Engineers (RCE) completed a conceptual
feasibility study for the rail siding and connection to the m ain Transnet
Freight Rail (TFR) network. RCE is currently finalising detailed designs
including bridge designs. Firestone envisages constructing a 7km rail spur line.
RCE is also a consultant to Eskom and TFR and they are currently working on a
separate feasibility study to increase the capacity of the rail line from
Waterberg.
Outlook
The development of the Waterberg Coal Project will continue with a view to
receiving the necessary regulatory approvals. Negotiations with potential
developers, financiers and off-take parties will be progressed as will the MOU
with Eskom.
Successful completion of the due diligence by the global power company may
result in FSE securing a cornerstone investor that has the potential to inject
cash and to provide significant off-take.
The growing interest in South African coal, South Africa`s shortage of power and
the level of activity within the energy and coal sector provides an encouraging
economic framework within which to advance this project.
DIRECTORS` REPORT
Your Directors submit the annual financial report of the consolidated entity for
the financial year ended 30 June 2011. In order to comply with the provisions of
the Corporations Act, the directors report as follows:
1 DIRECTORS
The names of Directors who held office during or since the end of the year and
until the date of this report are as detailed below. Directors were in office
for this entire period unless otherwise stated. The Board has no sub-
committees.
MR DAVID PERKINS
Non-Executive Chairman - Appointed as Non-Executive Director on 17 January 2011,
and Non-Executive Chairman from 31 January 2011
David Perkins has a Bachelor of Jurisprudence and Bachelor of Law degrees from
the University of New South Wales, a post graduate Diploma of Corporate
Administration and is a Fellow of both the Australian Institute of Company
Directors and Chartered Secretaries of Australia. He is also a m ember of the
Law Society of New South Wales.
Mr Perkins brings a broad and practical experience to Firestone`s business,
including Corporate Governance and regulation, as well as the financial and
operational goals of the Company.
Mr Perkins is the principal of Perkins Solicitors and is a Non-Executive
Director of Australian Stockbroking firm, BBY Limited. He was previously General
Counsel and Company Secretary for the JP Morgan Chase and Company (formerly the
Chase Manhattan Bank) for Australia, New Zealand and Oceania.
DR PIUS KASOLO
Non-Executive Director - Appointed 28 January 2011
Dr Pius Kasolo is a highly credentialed geologist and has extensive experience
in the evaluation and management of mining projects, the formulation of company
strategy, resource optimisation and business process analysis. Dr Kasolo sits on
several boards in South Africa and has published m any papers in his field of
geology. Dr Kasolo is not a Director of any other listed entities at present, or
in the past three years.
MR COLIN MCINTYRE
Non-Executive Director
Colin McIntyre is an experienced and credentialed mining engineer, mining
manager and company director, with 35 years experience in the mining industry,
including fourteen years with Western Mining Corporation.
Mr McIntyre previously held executive management positions with Western Mining
Corporation, National Mine Management Pty Ltd and Macmahon Contractors (WA). He
was previously non executive chairman of Tectonic Resources Ltd and Perilya Ltd
for 12 years and 2 years respectively.
He has had extensive operational experience in open pit and underground mining
spread amongst several commodities, in addition to listed company board
experience. Mr McIntyre does not currently hold any other Directorships in
listed entities, and he has not been a director of any listed entity in the last
three years.
MR SIZWE NKOSI
Executive Director - Appointed 3 November 2010
Sizwe is a registered South African Chartered Accountant and has a MBA degree
from the University of Cape Town`s Graduate School of Business.
For the past three years, Mr Nkosi has been involved with the operations of
Firestone Energy. His role at Firestone has been in marketing, logistics and
rail, downstream projects and financial modelling, including negotiating the
Joint Venture agreements between Sekoko Resources and Firestone Energy Limited.
Mr Nkosi has previously been, and will continue to be, a key person in the
negotiation of potential off-take agreements and cornerstone investors.
Sizwe brings a wealth of experience to the Board. Prior to joining Firestone,
his major prior experience was with South African merchant and investment bank,
Investec Bank Limited "Investec", with a role focused in mergers and
acquisitions. Prior to his position with Investec, Mr Nkosi was employed by
Foskor as a financial manager, and De Beers as the Senior Management Accountant.
Mr Nkosi does not currently hold any other Directorships in listed entities, and
he has not been a director of any listed entity in the last three years.
DIRECTORS` REPORT
MS AMANDA MATTHEE
Non-Executive Director - Resigned 30 November 2010
MR JOHN WALLINGTON
Non-Executive Director - Resigned 31 December 2010
MR TIM TEBEILA
Non-Executive Director - Resigned 7 January 2011
MR JOHN DREYER
Non-Executive Chairman - Resigned 31 January 2011
MR MATSIDISO PETER TSHISEVHE
Non-Executive Director - Appointed 28 January 2011 / Resigned 27 June 2011
COMPANY SECRETARY
MR JERRY MONZU
Mr Monzu has over 20 years experience in publicly listed multinational
corporations predominantly in the resources and mining sectors. He has
previously held senior management positions in companies such as Woodside Energy
and Normandy Mining.
Mr Monzu graduated with a Bachelor of Business (Accounting and Finance) from
Curtin University and is a qualified m ember of CPA Australia and Chartered
Secretaries Australia.
2 DIRECTORS` MEETINGS
The number of Directors held and the number of meetings attended by each of the
Directors of the Company during the year to 30 June 2011 are:
Meetings held during
Meetings attended time as Director
John Dreyer 5 6
David Perkins 10 10
John Wallington 4 4
Amanda Matthee 2 2
Timothy Tebeila 4 4
Colin McIntyre 12 15
Sizwe Nkosi 12 13
Pius Chilufya Kasolo 8 9
Matsidiso Peter Tshisevhe 4 9
There are no Board sub-committees therefore no sub-committee meetings were held
during the period.
3 PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The principal activities of the entities within the consolidated group during
the year were to continue to identify, evaluate and develop potential mineral
exploration and mining projects located in Africa.
Other than for the matters referred to in the Management Disclosure Report there
have been no significant changes in the state of affairs within the consolidated
entity.
4 OPERATING AND FINANCIAL REVIEW
An operating review of the consolidated entity for the financial year ended 30
June 2011 is set out in the Management Discussion Analysis.
DIRECTORS` REPORT
Shareholder returns 2011 2010
Net loss for the year (4,762,294) (3,436,308)
Basic EPS (loss) - cents (0.19)cps (0.16)cps
Share price as at 30 June 1.6cps 1.3cps
During the year, a total of 450,013,897 shares were issued, primarily due to the
T3 transaction, an addendum to the T2 Joint Venture agreement with Sekoko Coal
(Pty) Ltd. Further shares were issued relating to conversions on the convertible
notes issued pursuant to the A$25 million Convertible Note Facility arranged and
fully underwritten by BBY limited, and a SPP in June 2011 raising $1.8m. Refer
to note 12 for further details of shares issued throughout the year.
At 30 June 2011, Firestone Energy had the following unlisted shares under option
on issue:
Exercise Price
Number Under Option Expiry
30,000,000 30 Nov 2012 $0.05
110,000,000 30 May 2013 $0.06
96,904,767 30 June 2013 $0.06
25,875,000 30 June 2014 $0.06
42,382,500* 31 May 2014 $0.04
305,162,167
* These options were issued during the year in regards to the Share Purchase
Plan conducted in June 2011, whereby one free-attaching option was issued for
every 2 shares purchased. Free attaching options were not given to Directors or
Key Management Personnel that participated in the SPP.
5 DIVIDENDS
There have been no dividends declared or paid during the period.
6 REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for Directors and
executives of Firestone Energy Limited. The information provided in this
remuneration report has been audited as required by section 308(3C) of the
Corporations Act 2001.
The objective of Firestone`s broad remuneration policy is to ensure that the
remuneration package provided to Directors and executives of the Group properly
reflects the relevant person`s duties and responsibilities and that remuneration
is competitive in attracting, retaining and motivating people of the highest
quality.
Policy for determining remuneration
The Board is responsible for determining the remuneration policy for all
Directors and executives based upon the Firestone`s nature, scale and scope of
operating requirements and any other factors which the Board determines to be
appropriate in determining the Group`s remuneration policy.
Non-Executive Directors` fees are determined within an aggregate directors` fee
pool limit. The maximum currently stands at $250,000 per annum and was approved
by Firestone`s shareholders.
The Group does not currently have policies around Executive Director
remuneration. Mr Sizwe Nkosi is currently the only Executive Director of the
Group.
Short Term Cash Incentives
No short term cash incentives were provided to Directors or Key Management
Personnel during the year.
Other Payments
No other payments are due to Directors or Key Management Personnel.
Long Term Benefits
Directors or Key Management Personnel currently have no right to long term leave
payments.
Service contracts
The contract duration, period of notice and termination conditions for Key
Management Personnel as at 30 June 2011 are as follows:
Mr Jerry Monzu the Company Secretary is engaged through a Consultancy Agreement
with Monzu Corporate Consulting, with no fixed date of expiry. Termination by
the Company is with 3 months notice or payment in lieu thereof. Termination by
the consultant is with 3 months notice. Consulting fees are on an hourly rate of
$150 (GST exclusive).
There were no formal service agreements with Non-Executive Directors. On
appointment to the Board, all Non- Executive Directors enter into a service
agreement with Firestone, in the form of a letter of appointment. The letter
summarises the Board policies and terms which mirror those set out within the
Corporations Act 2001, including compensation, relevant to the office of
Director.
Post Employment Benefits
There are no members of Key Management Personnel that are entitled to post
employment benefits, with exceptions of superannuation where applicable.
Performance Related Benefits
The company provides incentive and performance based payments/benefits,
typically in the way of equity options.
There were no performance related benefits during the year. In considering
Firestone Energy`s performance and benefits for shareholder wealth, the Board
takes regard of the following indices in respect of the current and previous
four financial years.
Financial Performance of the Group
There is no relationship between Firestone`s current remuneration policy for Key
Management Personnel and the company`s performance or shareholder wealth.
However the Board takes note of the following indices in respect of the current
and previous four financial years.
2011 2010 2009
Net profit/(loss) (4,762,294) (3,436,308) (1,316,064)
Working capital (2,808,322) (938,914) (113,731)
$ Change in share price 0.002 (0.020) (0.016)
% Change in share price 0.00% (0.02)% (0.02)%
2008 2007
Net profit/(loss) (2,186,998) 13,511,145
Working capital 1,825,423 1,039,558
$ Change in share price (0.030) (0.600)
% Change in share price (0.03)% (0.60)%
Directors` and key management personnel remuneration
Details of the nature and amount of each element of remuneration of each Key
Management Personnel of Firestone Energy Limited are set out in the following
tables; each Key Management Personnel was in office for the full year unless
otherwise specified:
Short term Post Share
emloyee employment based
benefits benefits payments
Directors Salary/Fees Super
Specified Directors
Non-Executive
D. Perkins 10 2011 27,419 - -
2010 - - -
C. McIntyre 1 2011 45,872 4,128 -
2010 47,910 - -
S. Nkosi 7 2011 203,051 - -
2010 - - -
P.C. Kasolo 11 2011 20,834 - -
2010 - - -
M.P. Tshisevhe 12 2011 20,834 - -
2010 - - -
J. Dreyer 13 2011 46,674 825 -
2010 55,000 - -
A. Matthee 6 2011 103,571 - -
2010 248,978 - -
T. Tebeila 9 2011 25,000 - -
2010 50,000 - -
J. Wallington 8 2011 25,000 - -
2010 182,215 - -
Total Specified 2011 518,255 4,953 -
Directors 2010 584,103 - -
Executives
G. Higgo 2 2011 - - -
2010 133,481 12,013 -
S. Storm 3 2011 - - -
2010 59,550 - -
R. Dorrington 4 2011 - - -
2010 28,132 - -
J. Monzu 5 2011 128,987 - -
2010 23,102 - -
Total Executives 2011 128,987 - -
2010 244,265 12,013 -
Total Key Management 2011 647,242 4,953 -
Personnel 2010 828,368 12,013 -
Termination
payments
Directors Total
Specified Directors
Non-Executive
D. Perkins 10 2011 - 27,419
2010 - -
C. McIntyre 1 2011 - 50,000
2010 - 47,910
S. Nkosi 7 2011 - 203,051
2010 - -
P.C. Kasolo 11 2011 - 20,834
2010 - -
M.P. Tshisevhe 12 2011 - 20,834
2010 - -
J. Dreyer 13 2011 - 47,499
2010 - 55,000
A. Matthee6 2011 - 103,571
2010 - 248,978
T. Tebeila 9 2011 - 25,000
2010 - 50,000
J. Wallington 8 2011 - 25,000
2010 - 182,215
Total Specified 2011 - 523,208
Directors 2010 - 584,103
Executives
G. Higgo 2 2011 - -
2010 60,000 205,494
S. Storm 3 2011 - -
2010 - 59,550
R. Dorrington 4 2011 - -
2010 - 28,132
J. Monzu 5 2011 - 128,987
2010 - 23,102
Total Executives 2011 - 128,987
2010 60,000 316,278
Total Key Management 2011 - 652,195
Personnel 2010 60,000 900,381
1. Appointed - 17 July 2009
2. Resigned - 16 October 2009
3. Resigned - 1 December 2009
4. Appointed / Resigned - 1 December 2009 / 30 March 2010
5. Appointed -30 March 2010
6. Resigned - 30 September 2010
7. Appointed -3 November 2010
8. Resigned -31 December 2010
9. Resigned -7 January 2011
10. Appointed -17 January 2011
11. Appointed -28 January 2011
12. Appointed / Resigned -28 January 2011 / 27 June 2011
13. Resigned -31 January 2011
Share Based Remuneration
Under current Accounting Standards any share-based remuneration must be valued
in accordance with an appropriate option pricing model. Share options carry no
voting rights and each option is convertible into one ordinary share in the
company. No share based remuneration (such as options to acquire Firestone
shares) have been granted to Directors in the current year or last financial
year.
For equity holdings by Key Management Personnel at year end refer to note 16.
No options were exercised during the year as a result of share based payments.
This is the end of the audited Remuneration Report.
7 LIKELY DEVELOPMENTS
Disclosure of any information beyond that which is included in the Management
Disclosure Report in relation to further developments has not been included in
this Directors` Report because, in the opinion of the Directors, to do so would
be speculative and is therefore not in the best interests of the Group.
8 ENVIRONMENTAL REGULATION
The consolidated entity has done everything to the best of its knowledge to
comply with all applicable legislation and has no reason to believe that they
did not comply with any of the legislative requirements during the year ended 30
June 2011 and subsequent to year end.
9 DIRECTORS` INTERESTS
The following relevant interests in shares and options of Firestone were held by
the Directors as at the date of this report:
Director Ordinary shares Unlisted options
David Perkins 2,500,000 -
Pius Chilufya Kasolo - -
Sizwe Nkosi 150,000 -
Colin McIntyre 27,450,000 3,125,000
10 INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
Indemnification
The Company has agreed to indemnify the directors and officers of the Company
against all liabilities to another person (other than the Company or related
body corporate) that m ay arise from their position as directors of the Company
and its controlled entities, except where the liability arises out of conduct
involving a lack of good faith.
During the financial year the Company paid a premium in respect of a contract
insuring the directors and officers of the company and its controlled entities
against any liability incurred in the course of their duties to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
11 NON-AUDIT SERVICES
During the year the consolidated group paid $45,857 to a related entity of the
auditor for non-audit services provided as outlined in note 17 to the financial
statements. The Directors are satisfied that the provision of non- audit
services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The Directors are of the opinion that the services do not compromise the
auditor`s independence as all non-audit services have been reviewed to ensure
that they do not impact the integrity and objectivity of the auditor and none of
the services undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants issued by the
Accounting Professional & Ethical Standards Board.
12 PROCEEDINGS ON BEHALF OF THE COMPANY
No person has made an application to the court under Section 237 of the
Corporations Act 2001 for leave to bring court proceedings on behalf of the
Company, or to intervene in any court proceedings to which Firestone is a party,
for the purpose of taking responsibility on behalf of Firestone for all or part
of those proceedings.
13 AUDITOR`S INDEPENDENCE DECLARATION
The auditor`s independence declaration, under section 307C of the Corporations
Act 2001, is included on the next page and forms part of this directors` report.
14 SUBSEQUENT EVENTS
On 3 August 2011 the Company announced that a mining right had been granted with
respect to its joint venture project in South Africa and that the S11 transfer
application to transfer the mining right from Sekoko Coal to the Operating JV
had been submitted.
In September 2011, Firestone Energy Limited completed a placement of
approximately 150 million shares at $0.012 per share to ASX listed global energy
company Linc Energy Limited (ASX: LNC), raising approximately $1.8m. Following
the placement (and including other on market purchases) Linc Energy will hold
approximately 9.6% of the Company. The placement was made under the Company`s
existing 15% capacity.
On 15 September the Company announced that the JV had entered into an exclusive
arrangement with a major power company to complete a due diligence which may
result in the company becoming a cornerstone investor.
On 21 September 2011 the company announced that it had appointed Mr David Knox
as its chief executive officer.
That is, with exception to the above, there have been no other matters or
circumstances that have arisen since 30 June 2011 that have significantly
affected, or m ay significantly affect:
(i) The consolidated entity`s operations in future financial years, or
(ii) The results of those operations in future financial years, or
(i) The consolidated entity`s state of affairs in future financial years.
David Perkins
Chairman
Perth
Western Australia
29 September 2011
Firestone Energy Limited
The Directors
PO Box 8284
SUBIACO WA 6008
Dear Sirs,
DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF
FIRESTONE ENERGY LIMITED
As lead auditor of Firestone Energy Limited for the year ended 30 June 2011, I
declare that, to the best of my knowledge and belief, there have been no
contraventions of:
- the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
- any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Firestone Energy Limited and the entities it
controlled during the period.
Brad McVeigh
Director
BDO Audit (WA) Pty Ltd
Perth, Western Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association
of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and
BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent
member firms. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial
services licensees) in each State or Territory other than Tasmania.
CORPORATE GOVERNANCE STATEMENT
Firestone has made it a priority to adopt system s of control and accountability
as the basis for the administration of corporate governance. Some of these
policies and procedures are summarised in this statement. To the extent that
they are applicable, and given its circumstances, Firestone adopts the Eight
Essential Corporate Governance Principles and Best Practice Recommendations
(`Recommendations`) published by the Corporate Governance Council of the ASX.
Where Firestone`s corporate governance practices follow a recommendation, the
Board has made appropriate statements reporting on the adoption of the
recommendation. Where, after due consideration, Firestone`s corporate governance
practices depart from a recommendation, the Board has offered full disclosure
and reasoning for the adoption of its own practice, in compliance with the "if
not, why not" regime.
As Firestone`s activities develop in size, nature and scope, the size of the
Board and the implementation of additional corporate governance structures will
be given further consideration.
DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES
Compliance with the ASX Principles and Recommendations
The table below is provided to facilitate your understanding of Firestone`s
compliance with the ASX Corporate Governance Principles and Recommendations.
Recommendation ASX Principles and Further
Recommendations information
1.1 X Refer (a) below
1.2 X Refer (a) below
1.3 X Refer (a) below
2.1 X Refer (b) below
2.2 X Refer (b) below
2.3 Yen Refer (b) below
2.4 X Refer (c) below
2.5 X Refer (d) below
2.6 X Refer (e) below
3.1 X Refer (f) below
3.2 X Refer (f) below
3.3 X Refer (f) below
3.4 X Refer (f) below
3.5 X Refer (f) below
4.1 X Refer (c) below
4.2 n/a n/a
Recommendation ASX Principles and Further
Recommendations information
4.3 n/a n/a
4.4 n/a n/a
Refer (g)
5.1 X
below
5.2 n/a n/a
Refer (h)
6.1 X
below
6.2 n/a n/a
Refer (i)
7.1 X
below
7.2 n/a n/a
Refer (j)
7.3 Yen
below
7.4 n/a n/a
Refer (k)
8.1 X
below
Refer (k)
8.2 X
below
Refer (k)
8.3 X
below
8.4 n/a n/a
(a) Principle 1 - Lay solid foundations for management and oversight
Recommendation 1.1: Companies should establish the functions reserved to the
board and those delegated to senior executives and disclose those functions.
Notification of departure from Recommendation
Firestone has not form ally disclosed the functions reserved to the Board and
those delegated to senior executives.
Explanation for departure from Recommendation
The Board recognises the importance of distinguishing between the respective
roles and responsibilities of the Board and management. The Board has
established an informal framework for Firestone`s management and the roles and
responsibilities of the Board and management. Due to the small size of the Board
and of Firestone, the Board do not think that it is necessary to formally
document the roles of Board and management as it believes that these roles are
being carried out in practice and are clearly understood by all members of the
Board and management.
The appointments of Non-Executive Directors are formalised in accordance with
the regulatory requirements and Firestone`s constitution.
Recommendation 1.2: Companies should disclose the process for evaluating the
performance of senior executives.
Notification of departure from Recommendation
Firestone has not established formal processes for evaluating the performance of
senior executives.
Explanation for departure from Recommendation
The Board is responsible for the strategic direction of Firestone, establishing
goals for senior executives and monitoring the achievement of these goals,
monitoring the overall corporate governance of Firestone and ensuring that
shareholder value is increased. Due to the size of Firestone and the stage of
the company`s development, the Board does not consider it is necessary to
establish formal processes for evaluating the performance of senior executives.
(b) Principle 2 - Structure of the Board to add value
Recommendation 2.1: A majority of the board should be independent directors.
Recommendation 2.2: The chair should be an independent director.
Notification of departure from Recommendations
The Firestone Board does not currently have a majority of independent directors
and the Chairman is not considered independent.
Explanation for departure from Recommendations
The Board`s com position changed during the year. Consistent with the size of
Firestone and its activities, the Board currently comprises four (4) Directors.
The Board considers that Mr Colin McIntyre meets the criteria set in Principle
2.1 by the Corporate Governance Council to be considered to be an independent
Director.
Mr McIntyre has no material business or contractual relationship with Firestone,
other than as a Director, and no conflicts of interest which could interfere
with the exercise of independent judgement. Accordingly, he is considered to be
independent.
The Board`s policy is that the majority of Directors shall be independent, Non-
Executive Directors. Due to the size of Firestone and the stage of Firestone`s
development, the Board does not consider it can justify the appointment of m ore
independent Non-Executive Directors, and therefore, the composition of the Board
does not currently conform to the best practice recommendations of the ASX
Corporate Governance Council.
Recommendation 2.3: The roles of chair and chief executive officer should not be
exercised by the same individual.
The Chairman, Mr David Perkins, is a Non-Executive Director.
(c) Principle 2 - Structure of the Board to add value& Principle 4 - Safeguard
integrity in financial reporting
Recommendation 2.4: The board should establish a nomination committee.
Recommendation 4.1: The board should establish an audit committee.
Recommendation 4.2: The audit committee should be structured so that it:
- consists only of non-executive directors
- consists of a majority of independent directors
- is chaired by an independent chair, who is not chair of the board
- has at least three members.
Recommendation 4.3: The audit committee should have a form al charter.
Notification of departure from Recommendations
The Board has not established nomination and audit committees.
Explanation for departure from Recommendations
The Board considers that Firestone is not currently of a size, or its affairs of
such complexity, that the formation of separate or special committees is
justified at this time. The Board as a whole is able to address the governance
aspects of the full scope of Firestone`s activities and ensure that it adheres
to appropriate ethical standards.
In particular, the Board as a whole considers those matters that would usually
be the responsibility of an audit committee and a nomination committee. The
Board considers that, at this stage, no efficiencies or other benefits would be
gained by establishing a separate audit committee or a separate nomination
committee.
(d) Principle 2 - Structure of the Board to add value
Recommendation 2.5: Companies should disclose the process for evaluating the
performance of the board, its committees and individual directors.
Notification of departure from Recommendation
Firestone does not have in place a formal process for evaluation of the Board,
its committees, individual Directors and key executives.
Explanation for departure from Recommendations
Evaluation of the Board is carried out on a continuing and informal basis.
Firestone will put a formal process in place as and when the level of operations
of Firestone justifies this.
(e) Principle 2 - Structure of the Board to add value
Recommendation 2.6: Companies should provide the information indicated in the
Guide to Reporting on Principle 2.
Skills, Experience, Expertise and term of office of each Director
A profile of each Director containing their skills, experience, expertise and
term of office is set out in the Directors` Report.
Identification of Independent Directors
The independent Directors during the financial year ended 30 June 2011 are
disclosed in (b) above.
The Board has considered the relationships listed in Box 2.1 of the ASX
Corporate Governance Principles and Recommendations when making determinations
regarding the independence of Directors.
Board access to independent professional advice
To assist Directors with independent judgement, it is the Board`s policy that if
a Director considers it necessary to obtain independent professional advice to
properly discharge the responsibility of their office as a Director then,
provided the Director first obtains approval for incurring such expense from the
Chair, Firestone will pay the reasonable expenses associated with obtaining such
advice.
Selection of Directors
The Board considers the balance of independent Directors on the Board as well as
the skills and qualifications of potential candidates that will best enhance the
Board`s effectiveness.
Recommendations of candidates for new Directors are made by the Directors for
consideration by the Board as a whole. If it is necessary to appoint a new
Director to fill a vacancy on the Board or to complement the existing Board, a
wide potential base of possible candidates is considered. If a candidate is
recommended by a director, the Board assesses that proposed new director against
a range of criteria including background, experience, professional skills,
personal qualities, the potential for the candidate`s skills to augment the
existing Board and the candidate`s availability to commit to the Board`s
activities. If these criteria are met and the Board appoints the candidate as a
director, that director must retire at the next following General Meeting of
Shareholders and will be eligible for election by shareholders at that General
Meeting.
Nomination Matters
The full Board sits in its capacity as a Nomination Committee. The functions
that would normally be carried out by the nominations committee are currently
performed by the full Board
Performance Evaluation
Performance evaluations for the Board and individual Directors did occur on an
informal basis during the financial year ended 30 June 2011.
Reappointment of Directors
Each Director other than the Managing Director (if appointed) must retire from
office no later than the longer of the third annual general meeting of the
company or 3 years following that Director`s last election or appointment. At
each annual general meeting a minimum of one Director or a third of the total
number of Directors must resign. A Director who retires at an annual general
meeting is eligible for re-election at that meeting. Reappointment of Directors
is not automatic.
(f) Principle 3 - Promote ethical and responsible decision making
Recommendation 3.1: Companies should establish a code of conduct and disclose
the code or a summary of the code as to:
- the practices necessary to maintain confidence in the company`s integrity
- the practices necessary to take into account their legal obligations and the
reasonable expectations of their stakeholders
- the responsibility and accountability of individuals for reporting and
investigating reports of unethical practices.
Notification of departure from Recommendation
Firestone has not established a formal code of conduct.
Explanation for departure from Recommendation
The Board considers that its business practices, as determined by the Board and
key executives, are the equivalent of a code of conduct.
Recommendation 3.2: Companies should establish a policy concerning diversity and
disclose the policy or a summary of that policy. The policy should include
requirements for the board to establish measurable objectives for achieving
gender diversity for the board to assess annually both the objectives and
progress in achieving them.
Recommendation 3.3: Companies should disclose in each annual report the
measurable objectives for achieving gender diversity set by the board in
accordance with the diversity policy and progress towards achieving them.
Recommendation 3.4: Companies should disclose in each annual report the
proportion of women employees in the whole organisation, women in senior
executive positions and women on the board.
Notification of departure from Recommendations
Firestone does not currently have a diversity policy in place and is therefore
not in compliance with Recommendation 3.2 of the ASX Corporate Governance
Principles and Recommendations during the financial year (and also
Recommendations 3.3 and 3.4).
Explanation for departure from Recommendations
The Board does not consider it appropriate to have such a policy at this stage
of Firestone`s development. The Board will continue to review the development of
Firestone and will adopt a diversity policy at an appropriate time.
(g) Principle 5 - Make timely and balanced disclosure
Recommendation 5.1: Companies should establish written policies designed to
ensure compliance with ASX Listing Rule disclosure requirements and to ensure
accountability at a senior executive level for that compliance and disclose
those policies or a summary of those policies.
Notification of departure from Recommendations
Firestone has not established written policies and procedures designed to ensure
compliance with ASX Listing Rule disclosure requirements and accountability for
compliance.
Explanation for departure from Recommendations
The Directors have a long history of involvement with public listed companies
and through the support of professional staff, are kept familiar with the
disclosure requirements of the ASX listing rules.
Firestone has in place informal procedures that it believes are sufficient for
ensuring compliance with ASX Listing Rule disclosure requirements and
accountability for compliance. The Board has nominated the Chief Executive
Officer and the Company Secretary as being responsible for all matters relating
to disclosure.
(h) Principle 6 - Respect the rights of shareholders
Recommendation 6.1: Companies should design a communications policy for
promoting effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a summary of that
policy.
Notification of departure from Recommendations
Firestone has not established a formal Shareholder communication strategy.
Explanation for departure from Recommendations
While Firestone has not established a formal Shareholder communication strategy,
it actively communicates with its Shareholders in order to identify their
expectations and actively promotes Shareholder involvement in Firestone.
Firestone achieves this by posting on its website copies of all information
lodged with the ASX.
Shareholders with internet access are encouraged to provide their email
addresses in order to receive electronic copies of information distributed by
Firestone. Alternatively, hard copies of information distributed by Firestone
are available on request.
(i) Principle 7 - Recognise and manage risk
Recommendation 7.1: Companies should establish policies for the oversight and
management of material business risks and disclose a summary of those policies.
Recommendation 7.2: The board should require management to design and implement
the risk management and internal control system to manage the company`s material
business risks and report to it on whether those risks are being managed
effectively. The board should disclose that management has reported to it as to
the effectiveness of the company`s management of its material business risks.
Notification of departure from Recommendations
Firestone has an informal risk oversight and management policy and internal
compliance and control system.
Explanation for departure from Recommendations
The Board does not currently have formal procedures in place but is aware of the
various risks that affect Firestone and its particular business. As Firestone
develops, the Board will develop appropriate procedures to deal with risk
oversight and management and internal compliance, taking into account the size
of Firestone and the stage of development of its projects.
(j) Principle 7 - Recognise and manage risk
Recommendation 7.3: The board should disclose whether it has received assurance
from the chief executive officer (or equivalent) and the chief financial officer
(or equivalent) that the declaration provided in accordance with section 295A of
the Corporations Act is founded on a sound system of risk management and
internal control and that the system is operating effectively in all material
respects in relation to financial reporting risks.
The Chairman, Mr David Perkins, and the Chief Financial Officer, Mr Sizwe Nkosi,
have provided a declaration to the Board in accordance with section 295A of the
Corporations Act and have assured the Board that such declaration is founded on
a sound system of risk management and internal control and that the system is
operating effectively in all material respects in relation to financial
reporting risks.
(k) Principle 8 - Remunerate fairly and responsibly
Recommendation 8.1: The board should establish a remuneration committee.
Recommendation 8.2: The remuneration committee should be structured so that it:
- consists of a majority of independent directors
- is chaired by an independent chair
- has at least three members.
Recommendation 8.3: Companies should clearly distinguish the structure of non-
executive directors` remuneration from that of executive directors and senior
executives.
Notification of departure from Recommendations
Firestone does not have a formal remuneration policy and has not established a
separate remuneration committee.
Explanation for departure from Recommendations
The current remuneration of the Directors is disclosed in the Directors` Report.
Non-executive Directors receive a fixed fee for their services.
Subject to shareholder approval, the issue of options or shares to non-executive
Directors m ay be an appropriate method of providing sufficient incentive and
reward while maintaining cash reserves.
Due to Firestone`s early stage of development and small size, it does not
consider that a separate remuneration committee would add any efficiency to the
process of determining the levels of remuneration for the Directors and key
executives. The Board believes it is more appropriate to set aside time at
specified Board meetings each year to specifically address matters that would
ordinarily fall to a remuneration committee. In addition, all matters of
remuneration will continue to be in accordance with regulatory requirements,
especially in respect of related party transactions, and none of the Directors
will participate in any deliberations regarding their own remuneration or
related issues.
(l) Securities trading policy
Firestone adopted a Share Trading policy in December 2010. The policy summarises
the law relating to insider trading and sets out Firestone`s policy on
Directors, officers, employees and consultants of the Group dealing in
securities of Firestone.
The policy is provided to all Directors and employees of the Group and
compliance with it is reviewed on an ongoing basis in accordance with
Firestone`s risk management systems.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011
Consolidated
Note 2011 2010
$ $
Revenue 2(a) 57,894 62,386
Other Income 20,877 28,863
Profit/(loss) on disposal of PP&E (3,521) -
Administration expenses (407,364) (542,641)
Compliance and regulatory expenses (278,057) (237,201)
Directors` fees (253,679) (252,911)
Foreign exchange gain / (loss) 3,631 144,762
Employee and consultant expenses (173,618) (420,075)
Finance expenses 2(b) (2,738,581) (1,281,555)
Legal and professional fees (740,755) (642,791)
Occupancy costs (73,600) (76,242)
Travel and accommodation (175,521) (218,903)
Loss before income tax expense from
continuing operations (4,762,294) (3,436,308)
Income tax expense 3 - -
Loss for the year (4,762,294) (3,436,308)
Other comprehensive income for the year
Movement in foreign currency translation
reserve (2,330,804) 433,349
Total comprehensive income for the year
attributable to the owners of the Company (7,093,098) (3,002,959)
Basic and diluted loss per share (cents) 4 (0.19) (0.16)
For JSE requirements, the Headline Earnings per Share ("HEPS") has been
calculated to be the equivalent of the basic and diluted loss per share as
displayed above.
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2011
Consolidated
Note 2011 2010
$ $
CURRENT ASSETS
Cash and cash equivalents 6(a) 1,892,188 2,130,542
Trade and other receivables 7 62,110 420,031
Total Current Assets 1,954,298 2,550,573
NON-CURRENT ASSETS
Receivables 7 108,618 147,119
Interest in joint venture asset 8 85,197,758 75,849,117
Property, plant & equipment 9 5,374,513 3,635,535
Total Non-Current Assets 90,680,889 79,631,771
TOTAL ASSETS 92,635,187 82,182,344
CURRENT LIABILITIES
Trade and other payables 10 3,432,033 1,958,093
Borrowings 11 1,330,587 1,531,394
Total Current Liabilities 4,762,620 3,489,487
NON-CURRENT LIABILITIES
Borrowings 11 20,372,463 14,530,114
20,372,463 14,530,114
TOTAL LIABILITIES 25,135,083 18,019,601
NET ASSETS 67,500,104 64,162,743
EQUITY
Issued capital 12 73,135,309 62,704,850
Reserves 13 3,879,461 6,210,265
Accumulated losses (9,514,666) (4,752,372)
TOTAL EQUITY 67,500,104 64,162,743
The above consolidated statement balance sheet should be read in conjunction
with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2011
Consolidated
2011 2010
$ $
Note
Cash Flows from Operating Activities
Payments to suppliers and employees (1,673,682) (4,129,775)
Interest received 57,894 62,386
Interest Paid (1,912,841) (338,122)
Security deposits 34,758 -
Net cash used in operating activities 6(b) (3,493,871) (4,405,511)
Cash Flows from Investing Activities
Payments to acquire plant and equipment (5,443) (109,709)
Proceeds on sale of plant and equipment 3,900 -
Purchase of surface rights (2,826,243) -
Project expenditure - JV`s (4,034,730) (11,993,976)
Net cash used in investing activities (6,862,516) (12,103,685)
Cash Flows from Financing Activities
Proceeds from issue of shares, net of
issue costs 1,630,459 -
Proceeds from borrowings 8,577,500 16,869,167
Loans repaid - (100,000)
Net cash provided by financing activities 10,207,959 16,769,167
Net (decrease)/ increase in cash held (148,428) 259,971
Cash at the beginning of the financial
year 2,130,542 1,870,754
Effect of exchange rate changes on the
balance of cash held in foreign currencies (89,926) (183)
Cash at the end of the financial year 6(a) 1,892,188 2,130,542
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2011
Share
based
Issued Accumulated payment
Capital Losses reserve
$ $ $
Balance at 1 July 2009 14,781,022 (1,316,064) 4,081,645
Total comprehensive income for the
2010 year
Loss for the year - (3,436,308) -
Other comprehensive income
Foreign currency translation - - -
Total other comprehensive income - - -
Total comprehensive income for the year - (3,436,308) -
Transactions with owners in their
capacity as owners:
Issue of shares, net of transaction
costs 47,923,828 - -
Balance at 30 June 2010 62,704,850 (4,752,372) 4,081,645
Total comprehensive income for the
2011 year
Loss for the year - (4,762,294) -
Other comprehensive income
Foreign currency translation - - -
Total other comprehensive income - - -
Total comprehensive income for the year - (4,762,294) -
Transactions with owners in their
capacity as owners:
Issue of shares, net of transaction
costs 7,030,459 - -
Conversion of convertible notes 1 3,400,000 - -
Balance at 30 June 2011 73,135,309 (9,514,666) 4,081,645
Foreign
Currency
Translation
Reserve Total
$ $
Balance at 1 July 2009 1,695,271 19,241,874
Total comprehensive income for the
2010 year
Loss for the year - (3,436,308)
Other comprehensive income
Foreign currency translation 433,349 433,349
Total other comprehensive income 433,349 433,349
Total comprehensive income for the year 433,349 (3,002,959)
Transactions with owners in their
capacity as owners:
Issue of shares, net of transaction costs - 47,923,828
Balance at 30 June 2010 2,128,620 64,162,743
Total comprehensive income for the
2011 year
Loss for the year - (4,762,294)
Other comprehensive income
Foreign currency translation (2,330,804) (2,330,804)
Total other comprehensive income (2,330,804) (2,330,804)
Total comprehensive income for the year (2,330,804) (7,093,098)
Transactions with owners in their
capacity as owners:
Issue of shares, net of transaction costs - 7,030,459
Conversion of convertible notes 1 - 3,400,000
Balance at 30 June 2011 (202,184) 67,500,104
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.
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance
The financial statements of Firestone Energy Limited for the year ended 30 June
2011 were authorised for issue in accordance with a resolution of the Directors
on 29 September 2011 and covers the consolidated entity consisting of Firestone
Energy Limited and its subsidiaries as required by the Corporations Act 2001.
The financial statements are presented in the company`s functional currency,
Australian dollars.
Firestone Energy Limited is a company limited by shares incorporated in
Australia whose shares are publicly traded on the Australian Securities Exchange
and the Johannesburg Stock Exchange.
(b) Basis of Preparation
The financial statements are general purpose financial statements which have
been prepared in accordance with Australian Accounting Standards (including
Australian Interpretations) issued by the Australian Accounting Standards Board
and the Corporations Act 2001.
The financial statements also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board. The
financial statements have also been prepared on a historical cost basis. The
accounting policies have been consistently applied, unless otherwise stated.
Accounting Standards and Interpretations that have recently been issued or am
ended but are not yet effective have not been adopted by the consolidated entity
for the annual reporting period ended 30 June 2011. These are outlined in the
table below:
Reference Title Summary Application
date of
standard
AASB 9 Financial Am ends the requirements for Periods
(issued Instruments classification and measurement beginning
December of financial assets. on or
2009 and The following requirements have after 1
am ended generally been carried forward January
December unchanged from AASB 139 2013
2010) Financial Instruments:
Recognition and Measurement
into AASB 9. These include the
requirements relating to:
- Classification and
measurement of financial
liabilities; and
- Derecognition requirements
for financial assets and
liabilities.
However, AASB 9 requires that
gains or losses on financial
liabilities measured at fair value
are recognised in profit or loss,
except that the effects of
changes in the liability`s credit
risk are recognised in other
comprehensive income.
AASB 10 Consolidated Introduces a single `control Annual
(issued Financial model` for all entities, including reporting
August Statements special purpose entities (SPEs), periods
2011) whereby all of the following commencing
conditions must be present: on
- Power over investee (whether or after 1
or not power used in practice) January
- Exposure, or rights, to 2013
variable returns from investee
- Ability to use power over
investee to affect the entity`s
returns from investee.
Reference Title Impact on Application
consolidated date for
financial report Group
AASB 9 Financial Due to the recent 1 July
(issued Instruments release of these 2013
December amendments and
2009 and that adoption is only
am ended mandatory for the
December 31 December 2013
2010) year end, the entity
has not yet made
an assessment of
the impact of these
amendments.
The entity does not
have any financial
liabilities measured
at fair value through
profit or loss. There
will therefore be no
impact on the
financial statements
when these
amendments to
AASB 9 are first
adopted.
AASB 10 Consolidated When this standard 1 July 2013
(issued Financial is first adopted for
August Statements the year ended 30
2011) June 2014, there
will be no impact on
transactions and
balances
recognised in the
financial statements
because the entity
does not have any
special purpose
entities.
Reference Title Summary Application
date of
standard
AASB 11 Joint Joint arrangements will be Annual
(issued Arrangements classified as either `joint reporting
August operations` (where parties with periods
2011) joint control have rights to commencing
assets and obligations for on
liabilities) or `joint ventures` or after 1
(where parties with joint control January
have rights to the net assets of 2013
the arrangement).
Joint arrangements structured
as a separate vehicle will
generally be treated as joint
ventures and accounted for
using the equity method
(proportionate consolidation no
longer allowed).
However, where terms of the
contractual arrangement, or
other facts and circumstances
indicate that the parties have
rights to assets and obligations
for liabilities of the arrangement,
rather than rights to net assets,
the arrangement will be treated
as a joint operation and joint
venture parties will account for
the assets, liabilities, revenues
and expenses in accordance
with the contract.
AASB 13 Fair Value Currently, fair value Annual
(issued Measurement measurement requirements are reporting
September included in several Accounting periods
2011) Standards. AASB 13 establishes commencing
a single framework for on
measuring fair value of financial or after 1
and non-financial item s January
recognised at fair value in the 2013
balance sheet or disclosed in
the notes in the financial
statements.
Additional disclosures required
for items measured at fair value
in the balance sheet, as well as
item s merely disclosed at fair
value in the notes to the
financial statements. Extensive
additional disclosure
requirements for item s
measured at fair value that are
`level 3` valuations in the fair
value hierarchy that are not
financial instruments, e.g. land
and buildings, investment
properties etc.
Reference Title Impact on Application
consolidated date for
financial report Group
AASB 11 Joint When this standard 1 July 2013
(issued Arrangements is first adopted for
August the year ended 30
2011) June 2014, there
will be no impact on
transactions and
balances
recognised in the
financial statements
because the entity`s
current joint venture
is unincorporated
and accounted for
as stated in note
1(g). When the joint
venture is
incorporated, it will
be accounted for
using the equity
method.
AASB 13 Fair Value Due to the recent 1 July 2013
(issued Measurement release of this
September standard, the entity
2011) has yet to conduct a
detailed analysis of
the differences
between the current
fair valuation
methodologies used
and those required
by AASB 13.
However, when this
standard is adopted
for the first time for
the year ended 30
June 2014, there
will be no impact on
the financial
statements because
the revised fair
value measurement
requirements apply
prospectively from 1
July 2013.
When this standard
is adopted for the
first time on 1 July
2013, additional
disclosures will be
required about fair
values.
Reference Title Summary Application
date of
standard
AASB 2011- Amendments Amendments to align the Annual
9 (issued to Australian presentation of item s of other periods
September Accounting comprehensive income (OCI) commencing
2011) Standards - with US GAAP. on
Presentation Various name changes of or after 1
of Items of statements in AASB 101 as July 2012
Other follows:
- 1 statement of
Comprehensive
Income
comprehensive income - to
be referred to as `statement
of profit or loss and other
comprehensive income`
- 2 statements - to be
referred to as `statement of
profit or loss` and `statement
of comprehensive income`.
OCI item s must be grouped
together into two sections: those
that could subsequently be
reclassified into profit or loss
and those that cannot.
AASB 1054 Australian Moves additional Australian Annual
(issued May Additional specific disclosure requirements reporting
2011) Disclosures for for-profit entities from various periods
Australian Accounting Standards commencing
into this Standard as a result of on
the Trans-Tasman Convergence or after 1
Project. Removes the July 2011
requirement to disclose each
class of capital commitment and
expenditure commitment
contracted for at the end of the
reporting period (other than
commitments for the supply of
inventories).
AASB 12 Disclosure of Combines existing disclosures Annual
(issued Interests in from AASB 127 Consolidated reporting
August Other Entities and Separate Financial periods
2011) Statements, AASB 128 commencing
Investments in Associates and on
AASB 131 Interests in Joint or after 1
Ventures. Introduces new January
disclosure requirements for 2013
interests in associates and joint
arrangements, as well as new
requirements for unconsolidated
structured entities.
Reference Title Impact on Application
consolidated date for
financial report Group
AASB 2011- Amendments When this standard 1 July 2012
9 (issued to Australian is first adopted for
September Accounting the year ended 30
2011) Standards - June 2013, there
Presentation will be no impact on
of Items of amounts recognised
Other for transactions and
Comprehensive balances for 30
Income June 2013 (and
comparatives).
However, the
statement of
comprehensive
income will include
name changes and
include subtotals for
item s of OCI that
can subsequently
be reclassified to
profit or loss in
future (e.g. foreign
currency translation
reserves) and those
that cannot
subsequently be
reclassified (e.g.
fixed asset
revaluation
surpluses).
AASB 1054 Australian When this Standard 1 July 2011
(issued May Additional is adopted for the
2011) Disclosures first time for the
year ended 30 June
2012, the financial
statements will no
longer include
disclosures about
capital and other
expenditure
commitments as
these are no longer
required by AASB
1054.
AASB 12 Disclosure of As this is a
(issued Interests in disclosure standard
August Other Entities only, there will be
2011) no impact on
amounts recognised
in the financial
statements.
However, additional
disclosures will be
required for
interests in
associates and joint
arrangements, as
well as for
unconsolidated
structured entities.
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 loss after tax for the year ended 30 June 2011 of
$4,762,294 (2010: $3,436,308) and experienced net cash outflows from operating
activities of $3,493,871 (2010: $4,405,511).
The Directors believe that there are sufficient funds to meet the Consolidated
Entity`s working capital requirements. However, as the convertible note facility
with BBY has been drawn down by $24.7m of the $25m limit, and there is a working
capital deficit of $2,808,322, 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, and/or entering into negotiations with third
parties regarding farm out of assets.
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of
Firestone Energy Ltd (the Company) and its subsidiaries (the Group) as at
30 June each year.
Subsidiaries are all those entities (including special purpose entities) over
which the Group has the power to govern the financial and operating policies so
as to obtain benefits from their activities. The existence and effect of
potential voting rights that are currently exercisable or convertible are
considered when assessing whether a group controls another entity.
The financial statements of the subsidiaries are prepared for the same reporting
period as the Company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances ,
income and expenses and profit and losses resulting from intra-group
transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group. Investments in subsidiaries are
accounted for at cost in the individual financial statements of Firestone Energy
Ltd.
(d) Critical accounting judgements and significant estimates
The application of accounting policies requires the use of judgements, estimates
and assumptions about carrying values of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions are recognised in the period in which the estimate is revised if it
affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
Recoverability of interest in joint venture
The Group considers the interest in the joint venture asset is recoverable based
on future coal sales from a developed coal mine, and has not been impaired on
the basis that the underlying asset will be successfully commercialised.
(e) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the balance sheet.
(f) Income Tax
The charge for current income tax expenses is based on the profit for the year
adjusted for any non-assessable or disallowed items. It is calculated using tax
rates that have been enacted or are substantively enacted by the balance date.
Deferred tax is accounted for using the liability method in respect of temporary
differences arising between the tax base of assets and liabilities and their
carrying amounts in the financial statements. No deferred income tax will be
recognised from the initial recognition of an asset or liability, excluding a
business combination, where this is no effect on accounting or taxable profit or
loss.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or liability is settled. Deferred tax is
credited in the statement of comprehensive income except where it relates to
item s that may be credited directly to equity, in which case the deferred tax
is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that
future tax profits will be available against which deductible temporary
differences can be utilised.
The amount of benefits brought to account or which may be realised in the future
is based on the assumption that no adverse change will occur in income taxation
legislation and the anticipation that the Company will derive sufficient future
assessable income to enable the benefit to be realised and com ply with the
conditions or deductibility imposed by the law.
(g) Jointly controlled operations and assets
The interest of the Group in unincorporated joint ventures are jointly brought
to account by recognising in its financial statements the assets it controls,
the liabilities that it incurs, the expenses it incurs and its share of income
that it earns from the sale of goods or services by the joint venture.
(h) Investment in joint venture
Investment in an incorporated joint venture entity is accounted for using the
equity method of accounting in the consolidated financial statements.
Under the equity method, the investment in the joint venture is carried in the
consolidated balance sheet at cost plus post-acquisition changes in the Group`s
share of net assets of the joint venture.
After application of the equity method, the Group determines whether it is
necessary to recognise any additional impairment loss with respect to the
Group`s net investment in the joint venture.
The Group`s share of the joint venture post-acquisition profits or losses is
recognised in the statement of comprehensive income. The cumulative post-
acquisition movements are adjusted against the carrying amount of the
investment. When the Group`s share of losses in the joint venture equals or
exceeds its interest in the joint venture, including any unsecured long-term
receivables and loans, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the joint venture.
The reporting dates of the joint venture and the Group are identical and the
joint venture`s accounting policies conform to those used by the Group for like
transactions and events in similar circumstances.
(i) Mineral Exploration and Evaluation and Development Expenditure
The Group has adopted the policy of capitalising the costs of purchasing its
mining tenements and all exploration and evaluation expenditure in relation to
its mineral tenements as incurred.
All projects are subject to detailed review on an annual basis and accumulated
costs written off to the extent that they will not be recoverable in the future.
(j) Property, Plant and Equipment
Plant and equipment are measured on the cost basis less depreciation and
impairment losses.
The carrying amount of plant and equipment is reviewed annually by Directors to
ensure it is not in excess of the recoverable amount from these assets. The
recoverable amount is assessed on the basis of the expected net cash flows that
will be received from the assets employment and subsequent disposal. The
expected net cash flows have been discounted to their present values in
determining recoverable amounts.
The cost of fixed assets constructed within the Group will include the cost of
materials, direct labour, borrowing costs and an appropriate proportion of fixed
and variable overheads.
Subsequent costs are included in the asset`s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to
profit or loss during the financial period in which they are incurred.
Surface rights refer to ownership of the land that the entity intends to mine,
and is separate from a license to tenure over the land. These assets will be
classified as property and carried at cost. The property will be amortised over
a life of mine basis, with amortisation commencing upon production of saleable
coal.
Depreciation
The depreciation amount of all fixed assets including building and capitalised
lease assets is depreciated on a straight line basis over their useful lives to
the Group commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of
the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset Depreciation Rate
Motor vehicles 5 years
Office Furniture & Equipment 4 years
Software 3 years
Leasehold Improvements 3 years
The assets` residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset`s carrying amount is written down immediately to its recoverable amount
if the asset`s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by com paring proceeds with the
carrying amount. These gains and losses are included in profit or loss.
(k) Impairment of Assets
At each reporting date, the Group reviews the carrying values of tangible assets
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset`s fair value less costs to sell and
value in use, is compared to the asset`s carrying value. Any excess of the
asset`s carrying value over its recoverable amount is expensed to the profit or
loss.
Where it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
(l) Financial Instruments
At present, the Group does not undertake any hedging or deal in derivative
instruments.
Recognition
Financial instruments are initially measured at cost on trade date, which
includes transaction costs, when the related contractual rights or obligations
exist. Subsequent to initial recognition these instruments are measured as set
out below.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are stated at
amortised cost using the effective interest rate method. They are included in
current assets, except for those maturities greater than 12 months after the
balance sheet date which are classified as non- current assets. Loans and
receivables are included in trade and other receivables (note 7). They are
measured initially at fair value and subsequently at amortised cost.
Financial Liabilities
Non-derivative financial liabilities are recognised initially at fair value and
subsequently at amortised cost, comprising original debt less principal payments
and amortisation.
Impairment
At each reporting date, the Group assesses whether there is objective evidence
that a financial instrument has been impaired. If there is evidence of
impairment for any of the Group`s financial assets carried at amortised cost,
the loss is measured as the difference between the assets carrying amount and
the present value of estimated future cash flows, excluding future credit losses
that have not been incurred. The cash flows are discounted at the asset`s
original effective interest rate. Any impairment losses are taken to the
statement of comprehensive income.
Compound financial instruments - Borrowings
Compound financial instruments issued by the Group comprise convertible notes
that can be converted to share capital at the option of the holder.
The liability component of a compound financial instrument is recognised
initially at the fair value of a similar liability that does not have an equity
conversion option. The equity component is recognised initially at the
difference between the fair value of the com pound financial instrument as a
whole and the fair value of the liability component. Any directly attributable
transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound
financial instrument is measured at amortised cost using the effective interest
method. The equity component of a compound financial instrument is not re-
measured subsequent to initial recognition.
Interest, dividends, losses and gains relating to the financial liability are
recognised in profit or loss. Distributions to the equity holders are recognised
against equity, net of any tax benefit.
(m) Revenue Recognition
Revenue from the sale of goods and disposal of other assets is recognised when
the Group has passed control of the goods or other assets to the buyer.
Interest revenue is recognised when it is due, on the accruals basis.
(n) Borrowing Costs
Borrowing costs are recognised as an expense when incurred except those that
relate to the acquisition, construction or production of qualifying assets where
the borrowing cost is added to the cost of those assets until such time as the
assets are substantially ready for their intended use or sale. Assets
capitalised within IFRS 6 have not been considered to be qualifying assets.
Transaction costs relating to compound financial instruments are offset against
the debt/equity on the balance sheet, and amortised over the life of the
convertible notes.
(o) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the company, excluding any loss of servicing equity other than
ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued
during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account the after income tax effect of
interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential ordinary
shares.
(p) Leases
Lease payments for operating leases, where substantially all the risks and
benefits remain with the lessor, are charged as expenses on a straight line
basis over the lease term.
(q) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are
derecognised.
(r) Share-based payment transactions
Equity settled transactions:
The Group provides benefits to employees (including senior executives) or
consultants of the Group in the form of share-based payments, whereby employees
or consultants render services in exchange for shares or rights over shares in
the Company (equity-settled transactions).
The cost of these equity-settled transactions with employees or consultants is
measured by reference to the fair value of the equity instruments at the date at
which they are granted. The fair value is determined by an internal valuation
using an appropriate option pricing model for options or market price for
ordinary shares or the fair value of the services received.
In valuing equity-settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares of Firestone
Energy Limited (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award (the vesting period).
The dilutive effect, if any, of outstanding options is reflected as additional
share dilution in the computation of earnings per share. Refer to note 12 for a
listing of all ordinary shares under option at year-end.
(s) Employee leave benefits
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees`
services up to the reporting date. They are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities for non-accumulating sick
leave are recognised when the leave is taken and are measured at the rates paid
or payable.
Employee benefits payable later than one year have been measured at the present
value of the estimated future cash outflows to be made for those benefits.
(t) Provisions
Provisions are recognised when the group has a legal or constructive obligation,
as a result of past events, for which it is probable that an outflow of economic
benefits will results and that outflow can be reliably measured.
Provisions are measured at the present value of management`s best estimate of
the expenditure required to settle the present obligation at the balance sheet
date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the
liability. The increase in the provision due to the passage of time is
recognized as interest expense.
(u) Foreign currency translation
Both the functional and presentation currency of Firestone Energy Limited is
Australian dollars. Each entity in the Group determines its own functional
currency and item s included in the financial statements of each entity are
measured using that functional currency.
Transactions:
Transactions in foreign currencies are initially recorded in the functional
currency by applying the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance date.
All exchange differences in the consolidated financial report are taken to
profit or loss with the exception of differences on foreign currency borrowings
that provide a hedge against a net investment in a foreign entity. These are
taken directly to equity until the disposal of the net investment, at which time
they are recognised in profit or loss.
Non-monetary item s that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of the initial
transaction.
Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
Foreign Subsidiaries Translation:
The functional currency of the foreign operations, Checkered Flag Investments 2
(Pty) Ltd, Lexshell 126 General Trading (Pty) Ltd and Utafutaji Trading 75 (Pty)
Ltd is South African Rand (ZAR). As at the reporting date the assets and
liabilities of these subsidiaries are translated into the presentation currency
of Firestone Energy Limited at the rate of exchange ruling at the balance date
and their income statements are translated at the weighted average exchange rate
for the year.
Equity accounts are translated at their historical exchange rates. The exchange
differences arising on the translation are taken directly to a separate
component of equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised in statement
of comprehensive income.
(v) Issued capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options for the acquisition of a
business are not included in the cost of the acquisition as part of the purchase
consideration.
(w) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to
conform to changes in presentation for the current financial year.
(y) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group
prior to the end of the financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition.
(z) Goods and services Tax (GST) and Value Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of associated
GST/VAT, unless the GST/VAT incurred is not recoverable from the taxation
authority. In this case it is recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST/VAT
receivable or payable. The net amount of GST/VAT recoverable from, or payable
to, the taxation authority is included with other receivables or payables in the
balance sheet.
Cash flows are presented on a gross basis. The GST/VAT components of cash flows
arising from investing or financing activities which are recoverable from, or
payable to the taxation authority, are presented as operating cash flows.
2. REVENUE & EXPENSES
2011 2010
(a) Revenue $ $
Interest received 57,894 62,386
57,894 62,386
(b) Finance Expenses
Interest expense 2,073,732 901,441
Amortisation of transaction costs 664,849 380,114
2,738,581 1,281,555
Included within the statement of comprehensive income
is also the following:
Superannuation expenses 4,953 12,013
Depreciation 36,589 27,142
Office rent 62,479 46,494
3. INCOME TAX EXPENSE
(a) Income tax recognised in profit
No income tax is payable by the parent or consolidated entities as they recorded
losses for income tax purposes for the year.
(b) Numerical reconciliation between income tax expense and the loss before
income tax.
The prima facie income tax benefit on pre-tax
accounting loss from operations reconciles to the
income tax expense in 2011 2010
the financial statements as follows: $ $
Accounting loss before tax (4,762,294) (3,436,308)
Income tax benefit at 30% (2010:30%) 1,428,688 1,030,892
Non-deductible expenses:
Foreign tax rate adjustment 10,719 20,617
Foreign exchange (gain)/loss (1,075) (43,581)
Share based payment - -
Other non deductible expenses 893,804 428,970
Unrecognised tax losses 525,240 624,886
Income tax benefit attributable to loss from
ordinary activities before tax - -
(c) Unrecognised deferred tax balances
Tax losses attributable to members of the
Company - revenue 11,886,617 9,505,658
Potential tax benefit at 30% 3,523,486 2,851,697
Deferred tax liability not recognised
Deferred expenditure on African projects - -
Deferred tax asset not recognised
Amounts recognised in profit & loss
-employee provisions - 1,432
-other - 4,770
Net unrecognised deferred tax asset at 30% 3,523,486 2,857,899
4. LOSS PER SHARE
2011 2010
Cents Cents
Basic loss per share (cents per share) (0.19) (0.16)
The loss and weighted average number of
ordinary shares used in the calculation of
basic loss per share is as follows:
Loss for the year (4,762,294) (3,436,308)
Weighted average number of shares outstanding
during the year used in calculations of
basic loss per share 2,481,222,510 2,084,646,605
Diluted loss per share
There is no dilution of shares due to options
as the potential ordinary shares are not
dilutive and are therefore not included in
the calculation of diluted loss per share.
5. SEGMENT INFORMAT ION
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 (who
are the chief operating decision makers) with making decisions regarding the
Group and its ongoing exploration activities, while also taking into
consideration the results of exploration work that has been performed to date.
As the company is in the exploration phase it has no major customers.
Segment information provided to the Board:
2011 2010
$ $
Revenue from external sources - -
Reportable segment loss (873,834) (150,172)
Reported segment assets 90,519,024 79,371,322
Reported segment assets are the equivalent of the
interest in joint venture (note 8) plus surface
right properties included in note 9.
A reconciliation of reportable segment loss to
operating loss before income tax is provided as follows:
Total loss for reportable segment (873,834) (150,172)
Interest revenue and other income 54,955 236,011
Administration expenses (166,500) (539,527)
Finance costs (2,597,202) (1,239,642)
Compliance and regulatory expenses (278,057) (237,201)
Directors` fees (253,679) (252,911)
Employee and consultant expenses (147,912) (348,534)
Legal and professional fees (329,299) (642,791)
Occupancy costs (73,600) (76,242)
Travel and accommodation (97,166) (185,299)
Loss before income tax from continuing operations (4,762,294) (3,436,308)
6. (a) CASH AND CASH EQUIVALENTS
2011 2010
$ $
Cash at bank 1,892,188 2,130,542
1,892,188 2,130,542
Cash at bank earns interest at floating rates based on daily bank deposit rates.
The Groups exposure to interest rate risk is discussed in
note 14. The maximum exposure to credit risk at the end of the reporting period
is the carrying amount of cash and cash equivalents noted above.
Reconciliation to Statement of Cash Flows For the purposes of the cash flow
statement, cash and cash equivalents comprise the following at 30 June:
Cash and cash equivalents 1,892,188 2,130,542
6. (b) RECONCILIATION TO ST ATEMENT OF CASH FLOWS
Reconciliation of loss after income tax to net
cash flows from operating activities: 2011 2010
$ $
Loss after income tax (4,762,294) (3,436,308)
Non cash flows in operating loss:
Depreciation 36,590 26,833
Amortisation of borrowing costs 664,849 380,114
Foreign exchange loss (3,631) (1,146)
Share based payments expense - 85,000
Changes in operating assets and liabilities: (4,064,486) (2,945,507)
(Increase)/decrease in trade debtors - -
(Increase)/decrease in other receivables 396,422 (389,984)
Increase/(decrease) in other provisions - (5,381)
Increase/(decrease) in trade and other Payables 174,193 (1,064,639)
Net cash outflow from operating activities (3,493,871) (4,405,511)
For the purposes of the statements of cash flows, cash and cash equivalents
comprise cash on hand, at bank and investments in money market instruments, net
of outstanding bank overdrafts.
6. (c) NON CASH INVESTING AND FINANCING ACTIVITIES
2011 2010
$ $
Shares issued to redeem convertible note to
ordinary shares 3,400,000 3,225,000
Shares issued in payment for T3 properties as per
agreement - (see note 8) 5,400,000 43,408,828
Consultancy costs paid via equity - 1,290,000
7. TRADE AND OTHER RECEIVABLES
2011 2010
$ $
Current
GST recoverable 47,067 328,356
Security bond - 8,000
Prepayments 15,043 83,162
Other receivables - 513
Non-Current 62,110 420,031
Security bond - 26,758
Environmental rehabilitation bond 108,618 120,361
108,618 147,119
8. INTEREST IN JOINT VENTURE
2011 2010
$ $
Interest in capitalised exploration and evaluation
expenditure 85,197,758 75,849,117
2011 2010
$ $
Opening balance 75,849,117 19,645,502
Additional costs 9,603,304 13,229,726
Acquisition of properties via equity 5,400,000 43,408,828
Foreign currency movements (5,654,663) (434,939)
Closing balance 85,197,758 75,849,117
Previously, the Company had entered into a Joint Venture Agreement (T1) with
Sekoko Coal (Pty) Ltd for a coal project in the Waterberg locality in South
Africa comprising the Olieboom sfontein and Vetleegte properties. During the
year, an amendment was made to the Joint Venture agreement, to allow Checkered
Flag (a wholly owned subsidiary) to earn up to an interest of 60% in the T1
Joint Venture, in which it had a full participation at 30 June 2011 (2010: 30%
participation of a possible 55%).
In addition to T1, Lexshell Trading (a wholly owned subsidiary) entered into two
further Joint Venture agreements, T2 and T3. In September 2009 and February
2011, Firestone Energy Ltd issued 868,176,563 (T2) and 200,000,000 (T3) shares,
in consideration for Lexshell Trading entering into the T2 and T3 transactions.
These transactions have been included in the financial statements at amounts of
$43,408,828 and $5,400,000 respectively.
The issue of shares was consideration for entering into a second Joint Venture
Agreement (T2) with Sekoko Coal (Pty) Ltd for a coal project in the Waterberg
locality in South Africa, comprising the Smitspan, Hooikraal, Massenberg and
Minnasvlakte properties. An addendum was later made to include additional
properties Duikerfontein and Swanepoelpan (T3). At 30 June Firestone Energy had
completed its performance and was entitled to a 60% in the project.
The Joint Venture is unincorporated at 30 June 2011 and is accounted for in
accordance with note 1(g).
9. PROPERTY, PLANT AND EQUIPMENT
2011 2010
$ $
Office furniture and equipment:
Cost 100,408 122,779
Accumulated depreciation (54,908) (35,396)
45,500 87,383
Motor Vehicles:
Cost 11,067 28,830
Accumulated depreciation (3,320) (2,883)
7,747 25,947
Property - Surface rights:
Cost 5,321,266 3,522,205
Total Property, plant and equipment 5,374,513 3,635,535
Movements in the carrying amounts of each class of
property, plant & equipment are set out below:
2011 2010
Office furniture and equipment $ $
Balance at the beginning of year 87,383 30,454
Additions 5,443 81,188
Depreciation expense (32,438) (24,259)
Foreign exchange adjustment (9,270) -
Disposals (5,618) -
Carrying amount at the end of the year 45,500 87,383
Motor Vehicles
Balance at the beginning of year 25,947 -
Additions - 28,830
Depreciation expense (4,152) (2,883)
Foreign exchange adjustment (1,762) -
Disposals (12,286) -
Carrying amount at the end of the year 7,747 25,947
2011 2010
$ $
Property - Surface rights
Balance at the beginning of year 3,522,205 -
Acquisition of Smitspan farm - 3,522,205
Acquisition of Hooikraal farm 2,107,000 -
Foreign exchange adjustment (307,939) -
Carrying amount at the end of the year 5,321,266 3,522,205
10. TRADE AND OT HER PAYABLES
2011 2010
Current $ $
Trade payables 973,437 1,323,782
Employee entitlements 89,964 4,772
Accruals* 2,207,387 620,853
Other 161,245 8,686
3,432,033 1,958,093
*An accrual of $1,418,340 is included in this amount, relating to the T3 Joint
Venture transaction with related party Sekoko Coal (Pty) Ltd. The total payable
is $1,800,000 as released to the market in February 2010. A further $700,000
payment was made post balance date, with a remaining balance of $718,340 owing
at the date of this report.
Trade payables are non-interest bearing and are normally settled on 30-day
terms, information about the Group`s exposure to foreign exchange risk is
provided in note 14.
11. BORROWINGS
2011 2010
Current $ $
Loans carried at amortised cost
Unsecured loans 1,330,587 1,531,394
These loans relate to amounts payable to third
parties for the acquisition of surface rights as
disclosed in note 9. The loan on Smitspan attracts
interest at the South African prime interest rate
less 2percent (7% at 30 June 2011) of which a balance
of $424,928 (2010: $1,531,394) was payable at year-end.
The Hooikraal loan incurs interest at the
South African prim e interest rate (9% at 30 June
2011) of which an amount of $905,659 (2010: nil)
was payable at year-end. Both these loans are
dominated in South African Rand.
The South African prim interest rate at 30 June
2010 was 10%.
Non-Current
Loans carried at amortised cost
Convertible note (Face Value)* 24,700,000 15,923,080
Conversions (3,400,000) -
Transaction Costs (Convertible notes) (927,537) (1,392,966)
20,372,463 14,530,114
*The total draw down facility is $25 million with a maturity date of 3 years
from the date of issuing each note. The notes can be converted at any time
before the maturity date and bears interest at a fixed rate of 10% per annum.
The effective interest rate on the liability will also be 10%. The notes
commence maturing in October 2012. For convertible notes issued prior to 13 July
2010 the conversion price will be $0.04, all notes issued subsequent to that
date will have a conversion price set to the higher of $0.02 or the 7.5%
discount to the 5day VWAP.
Details of the group`s exposure to risks arising from current and non-current
borrowings are set out in note 14.
12. ISSUED CAPITAL
2011 2010
$ $
2,781,314,361 (2010: 2,331,300,464)
fully paid ordinary shares 73,135,309 62,704,850
(i) Movement in ordinary share capital: Notes No of Shares $ Value
1 July 2009 - Opening Balance 1,354,951,295 14,781,022
16 Sep 2009 - Conversion of Convertible
loan at 4 cents 67,000,000 2,680,000
16 Sep 2009 - Conversion of Convertible
note at 3.6 cents 15,172,606 545,000
30 Sep 2009 - Issued to Sekoko - T2 868,176,563 43,408,828
30 Sep 2009 - Issued to River Group for
services rendered 25,000,000 1,250,000
30 Sep 2009 - Issued to Argonaut for
services rendered 1,000,000 40,000
Balance at 30 June 2010 2,331,300,464 62,704,850
4 Oct 10 - Note conversion 30,000,000 600,000
8 Nov 10 - Note conversion 39,411,766 800,000
2 Feb 11 - Note conversion 26,315,790 600,000
4 Feb 11 - Issued to Sekoko - T3 200,000,000 5,400,000
27 Apr 11 - Note conversion 35,000,000 700,000
24 May 11 - Note conversion 34,146,341 700,000
22 Jun 11 - Share Purchase Program 85,140,000 1,702,800
Less share issue costs - (72,341)
Balance at 30 June 2011 2,781,314,361 73,135,309
Unlisted Options
Unissued ordinary shares of the Company under option as at 30 June 2011 are as
follows:
Number Under Option Expiry Exercise Price
30,000,000 30 Nov 2012 $0.05
110,000,000 30 May 2013 $0.06
96,904,767 30 June 2013 $0.06
25,875,000 30 June 2014 $0.06
42,382,500 31 May 2014 $0.04
305,162,267
No option holder has any right under the options to participate in any other
share issue of the Company.
13 RESERVES
2011 2010
$ $
Reserves 3,879,461 6,210,265
Reserves comprise the following:
Share based payment reserve
2011 2010
Options - number No. No.
At start of period 262,779,767 262,779,767
Issued as free attaching - SPP 42,382,500 -
Exercised during the period - -
Balance at 30 June 305,162,267 262,779,767
2011 2010
Options - value $ $
At start of period 4,081,645 4,081,645
Balance at 30 June 4,081,645 4,081,645
Foreign Currency Translation Reserve
At start of period 2,128,620 1,695,271
Currency translation differences (2,330,804) 433,349
Balance at 30 June (202,184) 2,128,620
Nature and purpose of reserves
Share based payments reserve
This reserve is used to record the value of equity benefits provided to
employees and Directors or consultants as part of their remuneration or services
to the entity.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences
arising from the translation balances of foreign subsidiaries.
14 FINANCIAL RISK MANAGEMENT
(i) Capital Risk Management
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern while maximising the return to stakeholders
through the optimisation of the debt and equity balance.
The Group`s overall strategy remains unchanged from the previous year.
The capital structure of the Group consists of borrowings, cash and cash
equivalents and equity attributable to equity holders of the parent, comprising
issued capital, reserves and accumulated losses.
None of the Group`s entities are subject to externally imposed capital
requirements.
Gearing levels are reviewed by the Board on a regular basis after factoring in
the cost of capital and the risks associated with each class of capital.
The company`s objectives when managing capital are to safeguard their ability to
continue as a going concern, so that they can continue to provide returns to
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
(ii) Financial risk management objectives
The Group`s activities may expose it to a variety of financial risks in the
future: market risk (including currency risk and interest rate risk), credit
risk and liquidity risk. The Group`s overall risk management program does focus
on the unpredictable nature of the financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group.
Risk management is carried out under an approved framework covering a risk
management policy and internal compliance and control by management. The Board
identifies, evaluates and approves measures to address financial risks.
(iii) Market risk
Cash flow interest rate risk
The Group`s m ain interest rate risk arises from cash deposits to be used as
investments, prior to being spent on exploration and evaluation activities.
Deposits at variable rates expose the Group to cash flow interest rate risk.
During 2011 and 2010, the Group`s deposits at variable rates were denominated in
Australian Dollars and South African Rand.
As at the reporting date, the consolidated entity had the following variable
rate deposits on hand:
2011 2010
Weighted Weighted
average interest average interest
rate Balance rate Balance
% $ % $
Deposits - cash 4.64% 1,892,188 2.5% 2,130,542
Summarised Sensitivity Analysis - Interest Rate Risk and Foreign Currency Risk
The effect of possible interest rate movements used to determine the impact upon
profit and loss and equity have been determined based upon management`s
assessment of current and future market conditions.
As a result of increasing investment overseas, large transactions are
denominated in South African Rand, and the Group`s balance sheet can be affected
significantly by movements in the ZAR/AUD exchange rates. The Group seeks to
mitigate some of the effect of its foreign currency exposure by holding South
African Rand.
The Group also has transactional currency exposures. Such exposure arises from
sales or purchases by an operating entity in currencies other than the
functional currency.
The Group does not have a policy to enter into forward contracts and does not
negotiate hedge derivatives to exactly match the term s of the hedged item.
At 30 June, the Group had the following exposure to Australian short term
interest rates and South African prime overdraft rates, along with ZAR foreign
currency financial instruments expressed in AUD equivalents that are not
designated as cash flow hedges:
2011 2010
$ $
Subject to Foreign Currency Risk:
Financial assets
Cash and cash equivalents 2,532 921,969
Trade and Other Receivables 108,618 129,593
Financial liabilities 111,150 1,051,562
Trade and other payables 583,094 1,549,312
Subject to Interest Rate Risk:
Financial assets
Cash and cash equivalents 1,892,188 2,130,542
Financial liabilities
Trade and other payables 1,330,587 1,531,394
The following sensitivity is based on the foreign currency risk and interest
rate risk exposures in existence at the reporting date.
Based on historical information, and market trends, management`s assessment of
the possible change in foreign exchange rates are between the ranges of 10%
either way. As for interest rates, management has determined a range of 100
basis points decrease or increase as appropriate.
Based on these factors, at 30 June the effects on post tax loss and equity would
be as follows;
Future possible changes in interest rates and foreign 2011 2010
exchange rates based on management`s estimates: $ $
Interest Rates + 100bp (2010: 100bp) 5,616 5,994
Interest Rates - 100bp (2010: 50bp) (5,616) (2,997)
AUD/ZAR+10% (85,360) (49,775)
AUD/ZAR - 10% 85,360 49,775
(iv) Credit risk
The Group has no significant concentrations of credit risk. Cash transactions
are limited to high credit quality financial institutions. The company has a
concentration in the receivable from its subsidiaries.
Credit risk arises from cash and cash equivalents, deposits with banks and
financial institutions, as well as credit exposures on outstanding receivables
and committed transactions. In relation to other credit risk areas management
assesses the credit quality of the customer, taking into account its financial
position, past experience and other factors.
(v) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the
availability of funding through an adequate amount of committed credit
facilities. The Consolidated entity manages liquidity risk by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. The Group will aim at maintaining flexibility
in funding by accessing appropriate committed credit lines available from
different counterparties where appropriate and possible. Surplus funds when
available are generally only invested in high credit quality financial
institutions in highly liquid markets.
Maturity analysis of financial assets and liabilities based on management`s
expectations:
6-12
Year ended 30 June 2011 <6 months months 1-5 years
Financial assets
Trade & other receivables 1 47,067 - 108,618
47,067 - 108,618
Financial liabilities
Trade & other payables (3,432,033) - -
Borrowings 2 (1,065,000) (2,395,587) (22,902,000)
Net maturity (4,449,966) (2,395,587) (22,793,382)
6-12
Year ended 30 June 2010 <6 months months 1-5 years
Financial assets
Trade & other receivables 1 513 - 147,119
513 - 147,119
Financial liabilities
Trade & other payables (3,489,487) - -
Borrowings 2 - (1,081,808) (18,803,080)
Net maturity (3,488,974) (1,081,808) (18,655,961)
Contractual Carrying
Year ended 30 June 2011 >5 years cash flows Amount
Financial assets
Trade & other receivables 1 - 155,685 155,685
- 155,685 155,685
Financial liabilities
Trade & other payables - (3,432,033) (3,432,033)
Borrowings 2 - (26,362,587) (21,703,050)
Net maturity - (29,638,935) (24,979,398)
Contractual Carrying
Year ended 30 June 2010 >5 years cash flows Amount
Financial assets
Trade & other receivables 1 147,632 147,632
- 147,632 147,632
Financial liabilities
Trade & other payables - (3,489,487) (3,489,487)
Borrowings 2 - (19,884,888) (15,923,080)
Net maturity - (23,226,743) (19,264,935)
1 No impairment is required on long term receivables, as these are long term
deposits.
2 The note holder has the option to convert the face value of the liability to
equity at any time until maturity.
15 COMMITMENTS
2011 2010
(i) Operating Lease Commitments $ $
Non-cancellable operating leases contracted for but not
capitalised in the financial statements. Payable - Minimum
lease payments:
- not later than 12 months - 71,429
- between 12 months and 5 years - 62,501
- 133,930
The company no longer has contractual commitments
regarding rent for its head office.
(ii) Expenditure commitments contracted for: 2011 2010
$ $
Exploration
- not later than 12 months - 2,374,352
- between 12 months and 5 years - -
- 2,374,352
In the previous year, the commitments related to the purchase of the Hooikraal
farm. This amount was partly paid in the current period, with the remainder
included as a liability in the balance sheet. Refer to note 9 for further
details.
Further to the above, a production royalty, equivalent to ZAR0.50 (A$0.07) per
tonne of coal sold is payable during the term of the mining operations to a
maximum aggregated amount of ZAR25 million (A$3.45million).
16 RELATED PARTY TRANSACTIONS
(a) Key management personnel remuneration
2011 2010
$ $
Short-term employee benefits 647,242 828,368
Termination benefits - 60,000
Post-employment benefits 4,953 12,013
652,195 900,381
(b) Key management personnel equity holdings
(i) Option holdings - Unlisted
The numbers of options over ordinary shares in the Company held during the
financial year by each Director and executive of Firestone Energy Limited,
including their personally related parties, are set out below:
Balance at
2011 the start of Granted as Options
the year remuneration Exercised
Directors
J Dreyer 1 - - -
D Perkins - - -
S Nkosi 2 - - -
A Matthee 1 110,000,000 - -
PC Kasolo 2 - - -
MP Tshisevhe 2&1 - - -
C McIntyre 3,125,000 - -
T Tebeila 1 110,000,000 - -
J Wallington 1 - - -
Executives
J Monzu - - -
223,125,000 - -
Balance at the Vested and
2011 Net change end of the exercisable
other period at 30 June
Directors
J Dreyer 1 - - -
D Perkins - - -
S Nkosi 2 - - -
A Matthee 1 (110,000,000) - -
PC Kasolo 2 - - -
MP Tshisevhe 2&1 - - -
C McIntyre - 3,125,000 3,125,000
T Tebeila 1 (110,000,000) - -
J Wallington 1 - - -
Executives
J Monzu - - -
(220,000,000) 3,125,000 3,125,000
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
Balance at
2010 the start of Granted as Options
the year remuneration Exercised
Directors
J Dreyer - - -
A Matthee 110,000,000 - -
C McIntyre - - -
T Tebeila 110,000,000 - -
J Wallington - - -
Executives
G Higgo 1 250,000 - -
S Storm 1 - - -
R Dorrington 1 - - -
J Monzu 2 - - -
220,250,000 - -
Balance at Vested and
2010 Net change the end of the exercisable
other period at 30 June
Directors
J Dreyer - - -
A Matthee - 110,000,000* 110,000,000
C McIntyre 3,125,000 3,125,000 3,125,000
T Tebeila - 110,000,000* 110,000,000
J Wallington - - -
Executives
G Higgo 1 (250,000) - -
S Storm 1 - - -
R Dorrington 1 - - -
J Monzu 2 - - -
2,875,000 223,125,000 223,125,000
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
* Balance includes amounts nominally held through directorship of a related
entity, Sekoko Coal, whereby Sekoko Coal had 997,937,832 shares and 110,000,000
options held in Firestone Energy Ltd at 30 June 2010.
(ii) Share holdings
The numbers of shares in the Company held during the financial year by each
Director and executive of Firestone Energy Limited, including their personally
related parties, are set out below:
Balance at
2011 the start of Granted as On exercise
the period* remuneration of options
Directors
J Dreyer 1 - - -
D Perkins - - -
S Nkosi 2 - - -
A Matthee 1 1,018,237,832 - -
PC Kasolo 2 - - -
MP Tshisevhe 2&1 - - -
C McIntyre 27,075,000 - -
T Tebeila 1 997,937,832 - -
J Wallington 1 - - -
Executives
J Monzu 150,000 - -
2,043,400,664 - -
Balance at
2011 Net change the end of the
other period
Directors
J Dreyer 1 - -
D Perkins 2,500,000 2,500,000
S Nkosi 2 150,000 150,000
A Matthee 1 (1,018,237,832) -
PC Kasolo 2 - -
MP Tshisevhe 2&1 - -
C McIntyre 375,000 27,450,000
T Tebeila 1 (997,937,832) -
J Wallington 1 - -
Executives
J Monzu - 150,000
(2,013,150,664) 30,250,000
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
Balance at the On
2010 start of the Granted as exercise of
period remuneration options
Directors
J Dreyer - - -
A Matthee 165,000,000 - -
C McIntyre - - -
T Tebeila 165,000,000 - -
J Wallington - - -
Executives
G Higgo 1 500,000 - -
S Storm 1 - - -
R Dorrington 1 - - -
J Monzu 2 - - -
330,500,000 - -
Balance at the
2010 Net change end of the
other period
Directors
J Dreyer - -
A Matthee 853,237,832 1,018,237,832*
C McIntyre 27,075,000 27,075,000
T Tebeila 832,937,832 997,937,832*
J Wallington - -
Executives
G Higgo 1 (500,000) -
S Storm 1 - -
R Dorrington 1 - -
J Monzu 2 150,000 150,000
1,712,900,664 2,043,400,664
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
* Balance includes amounts nominally held through directorship of a related
entity, Sekoko Coal, whereby Sekoko Coal had 997,937,832 shares and 110,000,000
options held in Firestone Energy Ltd at 30 June 2010.
All equity transactions with key management personnel other than those arising
from the issue or exercise of compensation options have been entered into under
terms and conditions no more favourable than those the Group would have adopted
if dealing at arm`s length.
(c) Loans to Key Management Personnel
No loans have been provided to key management personnel during the year.
(d) Investments in Controlled Entities
Subsidiaries of Firestone Energy Limited
are set out below:
Place of Equity holding
Incorporation
2011 2010
% %
Parent Entity:
Firestone Energy Limited Australia n/a n/a
Controlled Entities:
Checkered Flag Investments 2 (Pty) Ltd South Africa 100 100
Lexshell 126 General Trading (Pty) Ltd South Africa 100 100
Lexshell 126 General Trading (Pty) Ltd holds a 100% interest in Utafutaji
Trading 75 (Pty) Ltd, acquired at a cost of $15.
An impairment assessment is undertaken each financial year by examining the
financial position of the related party and the market in which the related
party operates to determine whether there is objective evidence that a related
party receivable is impaired. When such objective evidence exists, the Group
recognises an allowance for the impairment loss.
(e) Other transactions and balances with Key Management Personnel
Sekoko Coal (Pty) Ltd is a related party to the group, through its joint venture
agreement with Lexshell (a wholly owned subsidiary) and by the fact it has
significant influence over Firestone Energy Ltd.
As disclosed in note 8, an amount of 200,000,000 (2010: 868,176,563) fully paid
shares were issued to Sekoko Coal (Pty) Ltd during the period as part
consideration for the second and third joint venture transactions with Sekoko
Coal (Pty) Ltd, T2 and T3, through its wholly owned subsidiary Lexshell 126
General Trading (Pty) Ltd.
Non-executive Chairman David Perkins is also a director of related party BBY
Limited, the recipient of the convertible note facility. For further details on
the convertible note facility, refer to note 11.
The Company, through Checkered Flag Investments 2 (Pty) Ltd and Lexshell 126
General Trading (Pty) Ltd, has management control of all JV planning and
expenditure.
During the year the following payments have been made to Sekoko Resources Pty
Ltd:
2011 2010
Expenditure $ $
Management Fees 173,970 299,850
Reimbursement of expenditure incurred on behalf of
joint venture with Checkered Flag and Sekoko 83,290 230,976
Reimbursement of expenditure incurred in relation
to planned joint venture with Lexshell and Sekoko 2,529,669 3,798,055
Amounts owed to related parties
Due to Sekoko 1,474,816* 8,686
These fees were charged based on normal commercial terms and conditions.
*Includes accrual relating to T3 transaction amounting to $1,418,340.
17 AUDITORS` REMUNERATION
2011 2010
$ $
Amounts paid or payable to BDO Audit (WA) Pty Ltd:
Audit or review of the financial reports of the Group 42,263 42,615
Other services by BDO Corporate Tax (WA) Pty
Ltd and BDO Corporate Finance (WA) Pty Ltd 45,857 7,975
Audit and other services provided by BDO South Africa 27,000 25,000
115,120 75,590
18 EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 3 August 2011 the Company announced that a mining right had been granted with
respect to its joint venture project in South Africa and that the S11 transfer
application to transfer the mining right from Sekoko Coal to the Operating JV
had been submitted.
In September 2011, Firestone Energy Limited completed a placement of
approximately 150 million shares at $0.012 per share to ASX listed global energy
company Linc Energy Limited (ASX: LNC), raising approximately $1.8m. Following
the placement (and including other on market purchases) Linc Energy will hold
approximately 9.6% of the Company. The placement was made under the Company`s
existing 15% capacity.
On 15 September the Company announced that the JV had entered into an exclusive
arrangement with a major power company to complete a due diligence which may
result in the company becoming a cornerstone investor.
On 21 September 2011 the company announced that it had appointed Mr David Knox
as its chief executive officer.
With exception to the above, there have been no other matters or circumstances
that have arisen since 30 June 2011 that have significantly affected, or may
significantly affect:
(i) The consolidated entity`s operations in future financial years, or
(ii) The results of those operations in future financial years, or
(ii) The consolidated entity`s state of affairs in future financial years.
19 CONTINGENT LIABILITIES
The consolidated entity had no contingent liabilities at 30 June 2011.
20 PARENT ENTITY INFORMATION
(a) Summary Financial Information
BALANCE SHEET
2011 2010
$ $
Assets
Current assets 1,951,302 21,804,772
Non-current assets 88,846,270 56,330,500
Total assets 90,797,572 78,135,272
Liabilities
Current Liabilities 1,048,693 770,741
Non-current liabilities 20,372,463 14,530,114
Total Liabilities 21,421,156 15,300,855
Equity
Issued Capital 73,135,309 62,704,850
Reserves 4,081,645 4,081,645
Accumulated Losses (7,840,538) (3,952,078)
Total equity 69,376,416 62,834,417
Loss for the year (3,888,460) (2,636,014)
Total Comprehensive Loss (3,888,460) (2,636,014)
(b) Contingent liabilities of the parent entity
Firestone Energy Limited had no contingent liabilities as at 30 June 2011.
(c) Commitments for the parent entity
Firestone Energy Limited had no commitments as at 30 June 2011.
DECLARAT ION BY DIRECTORS
The Directors of the company declare that:
1. The financial statements, comprising the statement of comprehensive
income, balance sheet, statement of cash flows, statement of changes in
equity, and accompanying notes, are in accordance with the Corporations Act
2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the consolidated entity`s financial position as
at 30 June 2011 and of its performance for the year ended on that date.
2. The Company has included in the notes to the financial statements an explicit
and unreserved statement of compliance with International Financial Reporting
Standards.
3. 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.
4. The remuneration disclosures included in pages 9 to 12 of the Directors`
report (as part of the audited Remuneration Report), for the year ended 30 June
2011, comply with section 300A of the Corporations Act 2001.
5. The Directors have been given the declarations by the chief executive officer
and the chief financial officer required by section 295A.
This declaration is made in accordance with a resolution of the Directors.
David Perkins
Chairman
Perth
Western Australia
29 September 2011
INDEPENDENT AUDITOR`S REPORT
TO THE MEMBERS OF FIRESTONE ENERGY LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Firestone Energy Limited,
which comprises the consolidated balance sheet as at 30 June 2011, the
consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then
ended, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors` declaration of the consolidated
entity comprising the company and the entities it controlled at the year`s end
or from time to time during the financial year.
Directors` Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the
financial report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud
or error. In Note 1(b), the directors also state, in accordance with Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
Auditor`s Responsibility
Our responsibility is to express an opinion on the financial report based on our
audit. We conducted our audit in accordance with Australian Auditing Standards.
Those standards require that we comply with relevant ethical requirements
relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial report. The procedures selected depend
on the auditor`s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the
entity`s preparation of the financial report that gives a true and fair view in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entity`s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the
financial report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of
the Corporations Act 2001. We confirm that the independence declaration required
by the Corporations Act 2001, which has been given to the directors of Firestone
Energy Limited, would be in the same terms if given to the directors as at the
time of this auditor`s report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association
of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and
BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent
member firms. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial
services licensees) in each State or Territory other than Tasmania.
Opinion
In our opinion:
(a) the financial report of Firestone Energy Limited is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity`s financial position
as at 30 June 2011 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations
Regulations 2001; and
(b) the financial report also complies with International Financial Reporting
Standards as disclosed in Note 1(b).
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1(b) in the year-end
financial report which indicates that Firestone Energy Limited has an available
cash balance at reporting date of $1,892,188 (2010: $2,130,542) and working
capital of ($2,808,322) (2010: ($938,914)). Firestone Energy Limited is in the
process of developing a mine and requires significant funding to develop the
asset. These conditions, along with other matters as set forth in Note 1,
indicate the existence of a material uncertainty which may cast significant
doubt about the consolidated entity`s ability to continue as a going concern and
therefore, the consolidated entity may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not
qualified in respect of this matter.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors` report for
the year ended 30 June 2011. The directors of the company are responsible for
the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance
with Australian Auditing Standards.
Auditor`s Opinion
In our opinion, the Remuneration Report of Firestone Energy Limited for the year
ended 30 June 2011, complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Brad McVeigh
Director
Perth, Western Australia
Dated this 29th day of September 2011
ASX ADDIT IONAL INFORMATION
Shareholder Information
Additional information as required by the Australian Securities Exchange Limited
Listing Rules and not disclosed elsewhere in this report is set out below. This
information is current as at 27 September 2011.
Distribution of equity security holders
Ranges Number of Number of Shares % of issued
Holders Capital
1 - 1,000 2,375 1,033,481 0.03
1,001 - 5,000 1,446 3,229,338 0.11
5,001 - 10,000 344 2,615,930 0.09
10,001 - 100,000 1,656 82,762,819 2.80
100,001 - and over 1,369 2,869,034,216 96.97
Total 7,190 2,958,675,784 100.00
There are 4,646 holders of shares holding less than a marketable parcel.
Twenty largest holders of quoted shares
Number Shareholders Number of % of
Shares held issued
Capital
1 SEKOKO RESOURCES PTY LTD 852,315,091 28.81
2 LINC ENERGY LIMITED 283,336,423 9.58
3 BBY NOMINEES PTY LTD 200,000,000 6.76
4 BELL POTTER NOMINEES LTD 76,500,000 2.59
5 SUNGU SUNGU RESOURCES 62,000,000 2.10
6 BIOTRACE TRADING 316 (PTY) LTD 60,896,890 2.06
7 UZALILE INVESTMENTS PTY LTD 55,000,000 1.86
8 JP MORGAN NOMINEES AUSTRALIA LIMITED
48,573,946 1.64
9 COLBERN FIDUCIARY NOMINEES PTY LTD 45,000,000 1.52
10 MILLCORP SECURITIES PTY LTD 40,000,000 1.35
11 MRS AMANDA MATTHEE 32,183,437 1.09
12 HAO YUN LIMITED 30,941,696 1.05
13 SEPHOR INVESTMENTS LIMITED 27,000,000 0.91
14 SANPOINT PTY LTD 25,000,000 0.84
15 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY
LIMITED 22,868,786 0.77
16 MR WAYNE GREGORY LOXTON & MRS DONNA
JOY LOXTON 20,000,000 0.68
17 FMR INVESTMENTS PTY LIMITED 18,001,750 0.61
18 CITICORP NOMINEES PTY LIMITED 17,513,475 0.59
19 SGJ INVESTMENTS PTY LTD 17,000,000 0.57
20 CARRICK HOLDINGS LIMITED 16,281,817 0.55
Total 1,950,413,311 65.92
Quoted and unquoted equity securities
Equity Security Quoted Unquoted
Ordinary Shares 2,958,675,784 -
Options 42,385,500 262,779,767
Substantial shareholders
Substantial shareholders who have notified the Company in accordance with
section 671B of the Corporations Act 2001 are:-
Shareholder Number of
shares
Sekoko Resources Pty Ltd 852,315,091
Linc Energy Limited 283,336,423
Unlisted Option holdings at 27 September 2011 Number of Number of
Holders Options
Options expiring 30 Nov 2012 exercisable at 5 cents
(FSEAK) 3 30,000,000
Holdings of more than 20%
The Boyd Super Fund Pty Ltd 10,000,000
Lantech Developments Pty Ltd 10,000,000
Mr Malcolm Keith Smartt + Ms Janice Leonie
Smartt 10,000,000
Options expiring 30 Jun 2013 exercisable at 6 cents
(FSEAO) 9 96,904,767
Holdings of more than 20%
Hsbc Custody Nominees - 20,000,000
Sephor Investments Limited - 20,000,000
Options expiring 30 May 2013 exercisable at 6 cents
(FSEAM ) 1 110,000,000
Holdings of more than 20%
Sekoko Coal Pty Ltd - 88,000,000
Options expiring 30 Jun 2014 exercisable at 6 cents
(FSEAI) 11 25,875,000
Holdings of more than 20%
Nil - -
Voting rights
Ordinary shares carry one vote per share. There are no voting rights attached to
the options in the Company.
ASX ADDITIONAL INFORMATION
Stock Exchange
The Company is dual listed on the Australian Securities Exchange and the
Johannesburg Securities Exchange and has been allocated the code "FSE". The
"Home Exchange" is Perth.
Other information
Firestone Energy Limited, is incorporated and domiciled in Australia, and is a
publicly listed company limited by shares.
On-market buy-back
There is no current on-market buy-back.
Firestone`s interests in mining tenements
Country / Location Tenement Interest
South Africa - Waterberg region Smitspan (306LQ) 60%
South Africa - Waterberg region Hooikraal (315LQ) 60%
South Africa - Waterberg region Minnasvlakte (2584LQ) 60%
South Africa - Waterberg region Vetleegte (304LQ) 60%
South Africa - Waterberg region Swanepoelpan (262LQ) 60%
South Africa - Waterberg region Duikerfontein (263LQ) 60%
South Africa - Waterberg region Olieboomfontein (220LQ) 60%
South Africa - Waterberg region Massenburg (305LQ) 60%
Johannesburg
30 September 2011
Sponsor
River Group
Date: 30/09/2011 09:22:37 Supplied by www.sharenet.co.za
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