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FSE - Firestone Energy Limited - Activities Update

Release Date: 01/03/2012 10:53
Code(s): FSE
Wrap Text

FSE - Firestone Energy Limited - Activities Update FIRESTONE ENERGY LIMITED (Incorporated in Australia) (Registration number ABN 058 436 794) Share code on the JSE Limited: FSE Share code on the ASX: FSE ISIN: AU000000FSE6 (SA company registration number 2008/023973/10) ("FSE" or "the Company") ACTIVITIES UPDATE In recent announcements the Board of Firestone Energy Limited (ASX/JSE: FSE) ("Firestone" or the "Company") has indicated that certain key developments were under negotiation and were expected to be announced in the short term. On 15 September 2011 Firestone announced that it had commenced negotiations with a multinational power company. On 31 October 2011, in the Quarterly Report for the quarter ending 30 September 2011 Firestone announced that it had agreed to renegotiate its Memorandum of Understanding (MoU) with Eskom to achieve increased tonnages and longer supply period. Also on 31 October 2011 Firestone advised in that Quarterly Report that the combined effect of the significant developments which it was negotiating was to delay the anticipated start date for delivery of coal from the Smitspan Project. At the time of those announcements the board had anticipated that by this time it would have been in a position to provide a definitive statement as to Firestone`s short-term and medium-term developments. As this is not possible the Company wishes to update Shareholders, in addition to the overview given in the Quarterly Report of 31 January 2012, with this interim activities report. Eskom MoU Negotiations with Eskom have progressed substantially in accordance with the Company`s expectations. While no final MoU has been executed, the board is comfortable with the way in which negotiations have been conducted. The context within which the MoU is being concluded is complex and involves issues which are significant to the development of the South African economy. The board remains confident that it will successfully conclude a MoU which will contain terms consistent with the guidance previously given. Cornerstone Investor Firestone`s negotiations with the major multinational power company are ongoing. These negotiations have progressed much more slowly than the board had initially anticipated due in part to the length of the due diligence process and the multinational decision making processes of the proposed investor. These negotiations are subject to extensive confidentiality provisions. However, the board can advise that negotiations have progressed, and that the board is confident that in the short term it will be able to outline the elements of the proposal from this multinational to jointly develop the Smitspan Project. These details will be the subject of a separate ASX announcement. Exploration and Development Firestone`s negotiations with Eskom and with the proposed Cornerstone Investor are predicated upon the development of a mine which has substantially different characteristics to those incorporated in the mine plan which had been previously reported to shareholders. Our previous development plan incorporated commencing production of coal at the rate of approximately 500,000 tons per annum from April 2012. Our production expectations which are derived from present negotiations exceed this level of production to such an extent as to make the mine plan upon which that earlier production figure was formulated, irrelevant to future operations as currently anticipated. In light of this Firestone has suspended further exploration and development expenditure until the parameters of these anticipated new arrangements are better known. Firestone has previously announced that it has a JORC resource of just under 1.9billion tons of coal in the Smitspan farm (as per the Venmyn Rand Report as detailed below). Firestone is confident from the definitive feasibility study previously conducted that this resource will be sufficient to meet the requirements which are likely to evolve from present negotiations. We do not see any marginal benefit can be gained from exploration and development expenditure until the negotiations referred to above are concluded. Production Based on current expectations and a review of the project plan, Firestone expects to commence production in 2014. Environmental Approvals and Water Use License The revised assumptions about potential rates of production have resulted in a reassessment of environmental approvals and water use licenses. Firestone is confident that its revised production assumptions can be accommodated and continues discussions with the various departments which are assessing its applications Transfer of Mining Right to Incorporated Joint-Venture The process of transferring the mining right to the intended incorporated joint- venture company involves a substantial reorganisation of the historical Firestone corporate structure. The assets and shareholdings of Firestone`s South African subsidiaries are being reorganised in order to accommodate the organisational structure which is set out in both Sekoko`s funding agreement with IDC and the initial Eskom MoU. This re-structuring of Lexshell 126 General Trading (Pty) Ltd (a wholly owned subsidiary of Firestone) is pre-requisite to the lodging of the application to transfer the mining right. KPMG have provided an opinion on the detailed steps which should be followed to achieve the restructuring objectives. It is anticipated that this restructuring will be completed during the second quarter of 2012. On the completion of the restructure of the joint-venture entity, the section 11 will be submitted to the Department of Mineral Resources. Yours sincerely, David Knox Chief Executive Officer www.firestoneenergy.com.au About Sekoko Resources Sekoko Resources (Pty) Ltd is a South African-based black-owned energy and minerals company developing the coal, magnetite iron ore and PGMs Projects in the Limpopo Province of South Africa. This includes a significant exploration program and development of the Waterberg Coal Joint Venture Project based on significant Coal Zone Resources. August 2010 Venmyn Rand Report Farm Zone Measured Indicated Inferred Total Tonnage GTIS Coal GTIS Coal GTIS Coal GTIS Coal "1" Tonnage Tonnage "2" (mill (mill (mill (mill (mill
tonnes) tonnes) tonnes) tonnes) tonnes) Smitspan 1,881.758 238.668 475.844 - 714.512 Hooikraal 358.444 - 7.282 155.491 162.773 Minnasvlakte 755.805 - 26.507 230.687 257.194 Massenburg 337.034 - 20.797 109.539 130.336 Vetleegte 570.265 1.224 204.499 17.893 223.616 Swanepoelpan 1,239.974 - 1.072 378.227 379.299 Duikerfontein 30.200 - - 13.949 13.949 Total 5,173.480 239.892 736.001 905.786 1,881.679 "1" Waterberg coal typically occurs interlaminated with shale which for the most part cannot be mined separately from the coal and thus the zone gross in-situ tonnage is the tonnage of coal and shale. "2" In the interest of balanced reporting it is the Company`s intention to also report the gross in-situ tonnage of coal rather than the tonnage of coal and shale. In order to identify the gross in-situ tonnage of coal in each zone, rather than the zone tonnage including the rock, each zone tonnage was discounted by the percent yield at a relative density of 1.9, in effect, removing the influence of the shale) to derive an estimate of the coal tonnage. Competent Persons Statement Information in this announcement that relates to exploration results, coal resources or reserves on the properties Smitspan 306LQ, Hooikraal 315LQ, Minnasvlakte 258LQ, Massenburg 305LQ, Swanepoelpan 262LQ and Duikerfontein 263LQ is based on information compiled by Ms Catherine Telfer who is employed by Venmyn Rand (Pty) Ltd and is a member of The Australasian Institute of Mining and Metallurgy and the Geological Society of South Africa. Ms Telfer has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves" (The JORC Code). Ms Telfer consents to the inclusion in the announcement (and as included in the attached report) of the matters based on her information in the form and context in which it appears. About Firestone Energy Firestone Energy Limited is an independent, Australian exploration and development company listed on the Australian Stock Exchange Ltd (ASX) and the Johannesburg Stock Exchange (JSE). Firestone Energy has entered into a Joint Venture with Sekoko Resources (Pty) Ltd through which Firestone Energy has acquired the right to 60% participation interests in the Waterberg Coal Project located in Lephalale area, Limpopo Province, South Africa. The first stage of the project is to develop the Smitspan mine which has a substantial measured thermal coal resource and to develop the Vetleegte mine which is a substantial metallurgical coal deposit. Firestone Energy is committed to becoming a profitable independent coal and energy producer at its projects in South Africa, thereby making a substantial contribution to the social and economic development of the Lephalale area and South Africa. Corporate Details ASX: FSE JSE: FSE Issued Capital: 3,114 million ordinary shares Major Shareholders: Sekoko Resources (Pty) Ltd Linc Energy Ltd BBY Nominees Pty Ltd Bell Potter Nominees Ltd Directors and Officers Non Executive Directors: Mr Tim Tebeila (Chairman) David Perkins (Deputy Chairman) Dr Pius Kasolo Ben Mphahlele Kobus Terblanche Company Secretary: Jerry Monzu Contact: Suite B9, 431 Roberts Road Subiaco, Western Australia 6008 Tel: +61 (08) 9287 4600 Web: www.firestoneenergy.com.au 01 March 2012 Pretoria Sponsor River Group Date: 01/03/2012 10:53:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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