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FIRESTONE ENERGY LIMITED - POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING

Release Date: 05/09/2012 08:28
Code(s): FSE     PDF:  
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POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING

                               

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")



POSTING OF CIRCULAR< NOTICE OF GENERAL MEETING and EXPLANATORY MEMORANDUM


                                 The Independent Expert has concluded the:

         •     Advantages of the Share Transfer described in these meeting materials outweigh the
                            disadvantages for the non-associated Shareholders; and

     •       Convertible Note issue described in these meeting materials is fair and reasonable to the
                                          non-associated Shareholders.

The Directors who are independent of the Transactions unanimously recommend shareholders vote
                                 in favour of the Resolutions.




                                       General Meeting to be held at
                                   BDO Chartered Accountants, Hay Room
                                             38 Station Street
                                        Subiaco, Western Australia

                                                    on

                                              5 October 2012
                                            11:00am Perth Time


                        This is an important document and requires your attention.

You should read this document in its entirety. You may wish to consult your financial adviser about
 its contents. If you are in doubt as to how to vote, you should seek advice from your accountant,
                        solicitor or other professional adviser prior to voting.


             Corporate Adviser                  Legal Adviser                    JSE Sponsor
               BBY Limited                    Kelly & Co. Lawyers                River Group




  253711AGC/1226029.5
                                                     1


                                      IMPORTANT NOTICES

Decision on how to vote
Shareholders should read this Notice of General Meeting and Explanatory Statement and the accompanying
booklet containing the Independent Expert's Report (Document) in its entirety before deciding how to vote.
If Shareholders are in doubt as to how they should vote, they should seek advice from their accountant,
solicitor, tax advisor, investment adviser or other professional adviser prior to voting.

If you have any questions, please feel free to contact the information line on 1800 643 977 (within
Australia) or +61 2 8256 3363 (outside Australia) Monday to Friday between 9.00am and 5.00pm
(Sydney Time).
ASX & ASIC
A draft of this Document was provided to ASX for review on 8 August 2012 in accordance with Listing Rule
15.1.7 and with ASIC on 21 August 2012 in accordance with the Corporations Act and ASIC Regulatory
Guide 74. ASX, ASIC and their respective employees and officers do not take any responsibility for this
Document.

Date

This Document is dated 31 August 2012.

Glossary
Capitalised expressions used in this Document are defined in the Glossary set out at the end of this
Document.

JOHANNESBURG STOCK EXCHANGE AND SOUTH AFRICAN APPROVALS AND
EXCHANGE CONTROL REGULATIONS
FSE has a secondary listing on the JSE Limited in South Africa (JSE). The JSE and other regulatory bodies
have noted the content of this document.

Pursuant to the relevant South African laws, this Document will be given to the South African Reserve
Bank (SARB) for its consideration of this Document.

SOUTH AFRICAN EXCHANGE CONTROL REGULATIONS
On listing on the JSE, FSE obtained South African Reserve Bank (“SARB”) approval for the secondary
listing of its ordinary shares on the JSE.
The SARB approval specifically provided the following:
*   the approval of the inward listing of FSE on the JSE;
*   confirmation that FSE meets the criteria of an “African Company" as defined in Section W 7.9.2 of the
    “Exchange Control Rulings” of SARB and is therefore treated as such; and
*   FSE’s South African shareholders will be treated according to the provisions of Section H.(A) of the
    Exchange Control Rulings following the secondary listing of FSE on the JSE.
Upon the listing of FSE’s shares on the JSE the “Exchange Control Regulations” of SARB provided for in
Section W of the Exchange Control Rulings will apply to the acquisition of FSE’s shares by South African
residents.
The following is a summary of the Exchange Control Regulations insofar as they have application to
Shareholders in relation to the holding of FSE shares. This summary description is intended as a guide only
and is therefore not comprehensive. If you are in any doubt you should consult an appropriate professional
advisor immediately.
                                                       2


South African corporates, trusts, partnerships and private individuals

South African corporates, trusts, partnerships and private individuals may invest in inward listed instruments
without restriction. Consequently, an acquisition of FSE shares by a South African corporate, trust,
partnership or private individual will not affect such person’s offshore investment allowance, and such a
person need not take any additional administrative actions and can instruct its broker to accept, buy and sell
inward listed common shares on its behalf in FSE as it would with any other listed security on the JSE.
South African institutional investors
South African retirement funds, long-term insurers, collective investment scheme management companies
and investment managers who have registered with the SARB as institutional investors for Exchange Control
purposes are entitled to a foreign portfolio investment allowance. South African institutional investors are
allowed to invest in inward listed shares without affecting their permissible foreign portfolio investment
allowance.
Member brokers of the JSE
In terms of Section W.7.9.5 of the SARB Exchange Control Rulings, a special dispensation was provided to
local brokers to facilitate the trading in shares of inward listed companies. South African brokers are now
allowed, as a book building exercise, to purchase FSE shares offshore and to transfer them to FSE’s South
African share register. This special dispensation is confined to shares of inward listed companies and brokers
may warehouse such shares for a maximum period of 30 days only.

Exchange Control provisions applicable to South African residents in respect of acquisition
issues and rights issues by African companies that are listed on the JSE

Foreign companies are, upon application, allowed to use their shares as acquisition currency. South African
institutional investors, authorised dealers, corporates, trusts, partnerships and private individuals may accept
such shares without restriction.

South African institutional investors, authorised dealers, corporates, trusts, partnerships and private
individuals may exercise their rights in terms of a rights offer without restriction.

Movement of FSE shares between registers
FSE shares are fully fungible and may be transferred between registers. South Africans may only acquire FSE
shares, via the JSE, that are already on the South African branch register maintained by FSE’s transfer
secretaries. Member brokers of the JSE may acquire shares on foreign exchanges and transfer FSE shares to
the South African register as set out above. Non-residents are not subject to Exchange Control Regulations
and may freely transfer FSE shares between branch registers.




253711AGC/1226029.5
                                                 3




Dear Shareholder,


On behalf of the Board of Directors of Firestone Limited (“Company” or “FSE”), I am delighted
to enclose the Notice of Meeting, which relates to and provides an explanation of a number of
resolutions being put to shareholders at a General Meeting of shareholders to be held on 5 October
2012.
The key resolutions relate to:
    i) the refinancing of the Company through a new A$40.7 million secured convertible note
       facility provided by Ariona Company SA (“Ariona”); and

    ii) the acquisition of 800 million FSE shares by Ariona from Sekoko Resources (Pty) Ltd and/or
        its subsidiary Sekoko Coal (Proprietary) Limited, FSE’s major shareholder and partner for the
        Waterberg Coal Joint Venture Project.
The new A$40.7 million convertible note facility is a crucial achievement for the Company as it will
enable the repayment of the existing convertible note facility and ensures that the Company is fully
funded through to completion of the Bankable Feasibility Study (“BSF”) for the Company’s flagship
Waterberg Coal Joint Venture Project. The refinancing requires your support and will adequately
capitalise the Company to allow the development of the Company’s core assets for the future benefit
of all FSE shareholders.
In addition to these transactions, Ariona has provided an undertaking to procure financing of up to
US$400 million for the development of the Waterberg Coal Joint Venture Project.
The introduction of Ariona as a major shareholder and funding partner to FSE has significant
benefits to the Company. Ariona is a special purpose vehicle representing a consortium of
international institutional and private investors focusing on global resource and mining projects. In
addition to being a substantial funding partner, Ariona’s consortium brings a wealth of knowledge,
experience and expertise in the resource and mining sector which will be invaluable to FSE as the
Company develops its core assets. Ariona will appoint up to three Directors to the Board of FSE,
which will further guide FSE to development.
The Notice of Meeting is an important document and requires your urgent attention. It provides
the details of the new convertible note facility, an explanation of each resolution being put to
shareholders, and an Independent Expert Report that was commissioned by the Board in relation to
the resolutions being put to shareholders. The Independent Expert Report concludes that the new
convertible note facility is fair and reasonable to shareholders of FSE.
The Directors who are independent of the Resolutions unanimously recommend you vote in
favour of each of the resolutions.
About the New Convertible Note Facility
A summary of the key terms of the new convertible note facility are outlined below:


Amount                   A$40.7 million
Term                     4 years
Interest Rate            8.0% pa
                                                     4

Interest Payments       Payable half yearly. For the first 24 months interest to be paid in cash or
                        capitalised at the election of FSE and after the first 24 months interest to
                        be paid in cash or capitalised as agreed by the Company and Ariona.
Conversion Price        A$0.025 per share
Conversion Terms        Convert into ordinary shares at the election of the noteholder.


The terms of the new convertible note facility are favourable compared to the existing convertible
notes which attract an interest rate of 10.0% per annum.


Use of Funds
The funds raised through the refinancing will be applied in approximately the manner set out below.
Use                                                       A$’000
Redeem existing convertible notes at face value           21,300
Pay outstanding     interest   on   the   existing        845
convertible notes
Working Capital                                           16,655
Expenses of the transaction (estimate)                    1,900
Total                                                     40,700


It is imperative that the refinancing through the new convertible note facility takes place, to enable
the Company to redeem the existing convertible notes that were issued since 2009. These existing
convertible notes start maturing on 9 October 2012, with the first maturity being in the amount of
approximately A$8 million.
More Information
Shareholders seeking further information can contact David Knox, the Company’s Chief Executive
Officer. You may wish to consult your financial adviser about the contents of the Notice of
Meeting.
The Board looks forward to receiving your favourable support in relation to all of the resolutions set
out in the Notice of Meeting that, among other things will recapitalise FSE and enable the Company
to advance the development of the Waterberg Coal Joint Venture Project.


Yours sincerely,




Tim Tebeila
Chairman
                                                         5



                                 NOTICE OF GENERAL MEETING
                                               OF
                                  FIRESTONE ENERGY LIMITED
                                        ABN 71 058 436 794


Notice is hereby given that a general meeting of shareholders of Firestone Energy Limited (FSE) will
be held at BDO Chartered Accountants, Hay Room, 38 Station Street Subiaco, Western Australia on
5 October 2012 at 11:00am Perth Time.



SPECIAL BUSINESS

1.    APPROVAL OF TRANSFER OF SHARES AND ACQUISITION OF RELEVANT
      INTEREST

      To consider and if thought fit pass the following resolution as an ordinary resolution:

     "That, for the purposes of item 7 of section 611 of the Corporations Act and for all other purposes, approval is
     given to:

      (a)     the purchase from Sekoko Resources (Proprietary) Limited and/or Sekoko Coal (Proprietary) Limited
              of 800,000,000 fully paid ordinary shares in the capital of FSE (Consideration Shares ) by
              Ariona Company SA; and

      (b)     the acquisition of a relevant interest, up to a maximum voting power of 25.7% in FSE, by Ariona
              Company SA and its associates,

      on the terms and conditions described in the Explanatory Statement accompanying this Notice of General
      Meeting.”

2.    APPROVAL OF ISSUE OF NEW CONVERTIBLE NOTES AND ISSUE OF
      SHARES ON CONVERSION OF NEW CONVERTIBLE NOTES

      To consider and if thought fit pass the following resolution as an ordinary resolution:

     “That,

      1.       for the purposes of section 208 of the Corporations Act and ASX Listing Rule 7.1 and for all other
               purposes, approval is given to:

              the issue to Ariona Company SA of A$40,700,000 of secured convertible notes with a conversion price
              of A$0.025 per share, a term of 4 years, and a coupon payment of 8.0% per annum (NCNs );

              and

      2.       for the purposes of item 7 of section 611 of the Corporations Act, and for all other purposes, approval
               is given to:

      (a)     the issue to Ariona Company SA of a minimum of 1,628,000,000 and a maximum of
              2,228,030,414 fully paid ordinary shares in the capital of FSE on conversion of the NCNs and
              capitalised interest on them (Conversion Shares ); and
                                                        6

     (b)    the acquisition by Ariona Company SA and its associates of a relevant interest, up to a maximum
            voting power of 56.7% in FSE, upon conversion by Ariona Company SA of the NCNs and
            capitalised interest on them,

     on the terms and conditions described in the Explanatory Statement accompanying this Notice of General
     Meeting.”

3.   APPROVAL OF ISSUE OF UNLISTED INCENTIVE OPTIONS

     To consider and if thought fit pass the following resolution as an ordinary resolution:

     That pursuant to ASX Listing Rule 7.1 and subject to and conditional on Resolution 2 above being passed,
     approval be given for the issue of 300 million options over the unissued share capital of FSE with an exercise
     price of A$0.025 per share and an expiry date of 2 years from the date of issue of the options and otherwise on
     the terms and conditions described in the Explanatory Statement accompanying this Notice of General
     Meeting.”


4.   SUBSEQUENT APPROVAL OF SHARE ISSUE

     To consider and if thought fit pass the following resolution as an ordinary resolution:

     “That pursuant to ASX Listing Rule 7.4, and for all other purposes, Shareholders ratify the issue and
     allotment of 155,202,857 fully paid ordinary shares in the capital of FSE on 22 February 2012, by way of
     the issue of shares to BBY Nominees Pty Ltd on the terms and conditions as outlined in the Explanatory
     Statement accompanying this Notice of General Meeting.”

5.   SUBSEQUENT APPROVAL OF CONVERTIBLE NOTE ISSUE

     To consider and if thought fit pass the following resolution as an ordinary resolution:

     “That pursuant to ASX Listing Rule 7.4, and for all other purposes, Shareholders ratify the issue of 3 (three)
     fully paid A$100,000 Convertible Notes on 19 October 2011, which are convertible into 15,000,000
     ordinary shares in the capital of FSE on the terms and conditions as outlined in the Explanatory Statement
     accompanying this Notice of General Meeting.”

BY ORDER OF THE BOARD




Mr Jerry Monzu
Company Secretary
31 August 2012


______________________________________________________________________________
                                                            7

NOTES
Voting Exclusion Statement

FSE will disregard any votes cast on the Resolutions by the following persons:

 Resolution       Person(s) excluded from voting

 1                The Company will disregard any votes cast in favour of Resolution 1 by Sekoko Resources
                  (Proprietary) Limited and Ariona Company SA and any associates of those persons.
 2                The Company will disregard any votes cast in favour of Resolution 2 by:
                  • Ariona Company SA;
                  • BBY Nominees Pty Limited and Jaguar Funds Management Pty Ltd;
                  • BBY Limited;
                  • as well as any other person who may participate in the issue and any person who might obtain a
                      benefit, except a benefit solely in the capacity of a holder of ordinary securities),
                  and any of their associates.

 3                The Company will disregard any votes cast in favour of Resolution 3 by BBY Nominees Pty Limited,
                  Jaguar Funds Management Pty Ltd and BBY Limited as well as any other person who may participate
                  in the issue, and any person who might obtain a benefit, except a benefit solely in the capacity of a
                  holder of ordinary securities, and any associates of those persons.

 4                The Company will disregard any votes cast in favour of Resolution 4 by BBY Nominees Pty Limited
                  and its associates.

 5                The Company will disregard any votes cast in favour of Resolution 5 by BBY Nominees Pty Limited
                  and its nominated subscribers for the Convertible Notes the subject of the Resolution and their
                  associates.


However, FSE need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy
form; or

(b) it is cast by the Chairperson of the meeting as a proxy for a person who is entitled to vote, in accordance with the
directions on the proxy form to vote as the proxy decides.

Undirected Proxies

Where permitted, the Chairperson of the meeting, in respect of each item of business, intends to vote undirected proxies
in favour of each Resolution.

Entitlement to Attend and Vote

The Board has determined that, for the purposes of the meeting (including voting at the meeting), Shareholders are those
persons who are the registered holders of ordinary shares at 5.00pm Perth Time on 3 October 2012.

Holders of existing convertible notes in FSE are entitled to attend the meeting but are not entitled to vote in their
capacity as noteholders.

Voting by Proxy

A Shareholder who is entitled to attend and cast a vote at the meeting may appoint a proxy. A proxy need not be a
Shareholder. A person can appoint an individual or a body corporate as a proxy. If a body corporate is appointed as a
proxy, it must ensure that it appoints a corporate representative in accordance with section 250D of the Corporations
Act to exercise its powers as proxy at the meeting.

A Shareholder who is entitled to cast 2 or more votes may appoint up to 2 proxies and may specify the proportion or
number of votes each proxy is appointed to exercise. The following addresses are specified for the purposes of receipt of
proxy appointments and any authorities under which proxy appointments are signed (or certified copies of those
authorities):
                                                             8

Share Registry contact details:

Post:              Computershare Investor Services Pty Limited, GPO Box 242, Melbourne VIC 3001 Australia
Facsimile:         +61 3 9473 2555.
For Intermediary Online subscribers only (custodians) please visit www.intermediaryonline.com to submit your voting
intentions.

The Chairman of the meeting will be Mr David Perkins.

To be effective, a proxy appointment and (if the proxy appointment is signed by the Shareholder’s attorney) the authority
under which the appointment is signed (or a certified copy of the authority) must be received by FSE at least 48 hours
before the meeting.

For more information concerning the appointment of proxies and the addresses to which proxy forms may be sent,
please refer to the proxy form.

Voting by Attorney

A Shareholder may appoint an attorney to vote on his/her behalf. For an appointment to be effective for the meeting,
the instrument effecting the appointment (or a certified copy of it) must be received by FSE at its registered office, or the
addresses listed above for the receipt of proxy appointments, at least 48 hours before the meeting.

Corporate Representatives

A body corporate which is a Shareholder, or which has been appointed as a proxy, may appoint an individual to act as its
representative at the meeting. The appointment must comply with the requirements of section 250D of the Corporations
Act. The representative should bring to the meeting evidence of his or her appointment, including any authority under
which it is signed, unless it has previously been given to FSE.

Independent Expert’s Report

FSE commissioned BDO, an Independent Expert, to prepare a report on the proposed Transactions and that report
forms part of this Notice of Meeting and is set out in Annexure D to this Notice of Meeting (see separate booklet
accompanying this document).

The Independent Expert Report concludes the:

    *   Advantages of the Share Transfer described in these meeting materials outweigh the disadvantages for the non-
         associated Shareholders; and

    *    Convertible Note issue described in these meeting materials is fair and reasonable to the non-associated
         Shareholders.

South African Shareholders
Forms of proxy must be received by the South African transfer secretaries, Computershare Investor Services (Pty) Ltd, at
Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 10h00 on 1
October 2012
Dematerialised shareholders, other than own name registration, must NOT complete the proxy form and must provide
their CSPD or broker their voting instructions in terms of the custody agreement entered into between such shareholders
and their CSDP or broker,
Hand deliveries to:                                              Mail deliveries to:

Computershare Investor Services (Pty) Ltd                        Computershare Investor Services (Pty) Ltd
Ground Floor                                                     PO Box 61051
70 Marshall Street                                               Marshalltown
Johannesburg                                                     2107
2001
                                EXPLANATORY STATEMENT


INTRODUCTION

The purpose of this Explanatory Statement is to provide Shareholders with information they require
in order to make an informed decision on each Resolution detailed in the Notice of General Meeting

If you are in doubt as to how to vote, you should seek advice from your accountant, solicitor, tax
advisor or other professional adviser prior to voting. It is important that you read this Explanatory
Statement in its entirety for a detailed explanation of each Resolution.

The Directors who are independent of the Resolutions described in these meeting materials
unanimously recommend shareholders vote in favour of the Resolutions.

BACKGROUND

FSE announced to the ASX on 7 May 2012 that FSE had agreed to the terms of a A$30.7 million
funding facility to be provided by Ariona Company SA, a special purpose vehicle representing a
consortium of international institutional and private investors focusing on global resource
opportunities.

On 25 July 2012, the Company announced that it had entered into a formal Investment Agreement
with Ariona to provide funding to the Company of A$40.7 million, increasing the initial A$30.7
million facility by a further A$10 million.

Further information about Ariona is set out in section 9.3 of the Explanatory Statement to
Resolution 1.

The facility will be offered via the issue of New Convertible Notes (NCN) which is the subject of
Resolution 2.

Funds raised are expected to be applied as follows:

 Use of Funds                                                                               A$’000

 Redeem Existing Convertible Notes (ECNs) at face value                                     21,300

 Pay outstanding interest on the ECNs                                                          845

 Working Capital                                                                            16,655

 Expenses of the transaction (estimate)                                                      1,900

 Total                                                                                      40,700


FSE has agreed, subject to shareholder approval, to issue 300 million Incentive Options exercisable
at A$0.025 per Share over a 2 year period to the ECN Holders as an incentive for the early
redemption of the ECNs. Further details regarding the Incentive Options are set out in the
Explanatory Statement to Resolution 3.

In addition, as announced to the ASX on 7 May 2012 and on 29 June 2012, FSE has been informed
that Ariona has agreed to acquire from Sekoko Resources (Proprietary) Limited and/or Sekoko Coal
(Proprietary) Limited (Sekoko) a:
                                                  2

   •   significant shareholding in FSE; and

   •   10% interest in the Waterberg Coal Project (which FSE indirectly holds a 60% interest in)
       either directly from Sekoko or, depending on South African regulatory approvals, through
       acquiring a 25% shareholding in Sekoko Coal (Proprietary) Limited that holds a 40% interest
       in the Waterberg Coal Project, and to provide or procure the long term funding requirements
       for the development the Waterberg Coal Project.

Shareholder approval is being sought for the transfer of 800,000,000 Shares by Sekoko to Ariona.
Further information is set out in the Explanatory Statement to Resolution 1.

FSE commissioned BDO, an Independent Expert, to prepare a report on the proposed Transactions
and that report forms part of this Notice of Meeting and is set out in the separate booklet
accompanying this document and marked Annexure D.

SUMMARY OF TRANSACTIONS

If Shareholders approve Resolutions 1, 2 and 3:

1. Ariona will acquire at least 622,000,000 and up to 800,000,000 Shares, comprising approximately
   a maximum 25.7% of the current issued Shares in FSE. As a result of the acquisition of those
   shares, Ariona’s voting power in FSE will be a maximum of 25.7%.

2. Two new directors nominated by Ariona (Mr David Hillier and Mr Kevin Kartun) will be
   appointed to the Board of FSE. Ariona has a right to nominate a third director to the Board of
   FSE at any time. Further details of the new directors are set out in section 7.2 of Resolution 1 of
   this Explanatory Statement.

3. 300 million Incentive Options will be issued to the ECN holders.

4. Ariona may receive up to a maximum of 2,228,030,414 Shares comprising 1,628,000,000 Shares
   on conversion of the NCNs and up to a further 600,030,414 Shares if interest on the NCNs is
   capitalised and it elects to receive all that interest in Shares.

5. On completion of the Share Acquisition and subject to the passing of Resolution 2 and assuming
   that Ariona subsequently converts all of the NCNs and capitalised interest into Shares and there
   is no adjustment to the conversion price of the NCNs under the terms of the issue of the NCNs,
   the maximum voting power of Ariona will be 56.7%.

6. The advantages of the Transactions are that:

    * FSE will be recapitalised with sufficient funding to redeem the ECNs and provide adequate
      funding for the completion of the Bankable Feasibility Study for the Waterberg Coal Project.

    * They introduce a new funding partner (in Ariona) into FSE and the Waterberg Coal Project,
      which has the support of international institutional and private investors focusing on global
      resource opportunities. The financial backing of Ariona will support FSE in proceeding
      with the development of the Waterberg Coal Project.

    * Ariona, through its two new nominated directors, brings strong experience in global mining
      projects which will be beneficial to FSE in the development of the Waterberg Coal Projects.

    * Ariona is making a substantial investment of over A$69 million into FSE and the Waterberg
      Coal Project. This substantial commitment to the Project will assist in providing FSE with
                                                3

        the funding, technical expertise and commercial acumen to advance the Project through the
        development phase and eventual production.

    * The NCNs provide FSE with a better form of funding than the ECNs by:

               (i)   having an 8.0% coupon per annum versus the current 10.0% coupon per
                     annum payable on the ECNs; and

              (ii)   having a 4 year funding term which provides funding certainty beyond the
                     ECNs which commence maturing in October 2012.

    * The redemption of the ECNs will result in a simplified capital structure which should make
      the Company easier to value for the investment community.

    * The injection of new capital and the parallel redemption of ECNs will replace existing
      funding parties who have indicated they do not wish to continue funding FSE beyond the
      maturity of the ECNs.

    * The NCNs inject additional working capital into FSE to facilitate the advancement of the
      Project through to completion of the Bankable Feasibility Study.

    * It removes the short term funding pressure on FSE which currently arises from the short
      term maturity of the ECN’s. The ECNs commence maturing in October 2012, with the first
      maturing notes being approximately A$8.0 million in value.

    * Whilst the NCNs and capitalised interest could be converted into a total of 2,228,030,414
      Shares (the equivalent of 41.7% of FSE’s issued Shares post conversion), the conversion
      price, without adjustment, represents a premium of 227% to the existing Share price of
      A$0.011

The disadvantages of the Transactions are that:

    * If all the NCNs are converted into Shares by Ariona or an associate of Ariona, there
      will be an effective change of control of FSE (for the benefit of Ariona) without a
      control premium paid to non-participating Shareholders.

    * If the Share Acquisition only occurs, there would have been a transfer of a significant
      shareholding in FSE without non-participating Shareholders participating in any
      control premium and the existence of an additional substantial shareholder with in
      excess of 25% of the issued capital of FSE may discourage possible future takeover
      offers for FSE.

    * The structure of the NCNs may discourage future takeover offers for FSE (subject to
      the passing of Resolution 2).

In the event that Resolutions 1 and 2 are not approved by Shareholders, then both the Share
Acquisition and the NCN Issue will not proceed.

If approved under Resolution 2, the completion of the NCN Issue is not dependent on the approval
of the Share Acquisition.

If the NCN Issue is not approved under Resolution 2, then the Share Acquisition may not proceed.

A$8.45 million of the ECNs mature and are due and payable in October 2012. The balance of the
ECNs progressively mature through to October 2014. In the event that the NCN Issue does not
proceed, FSE will be required to raise alternative forms of capital which may be on different terms
                                                 4

and conditions to the current funding package presented in this Explanatory Statement. There is a
significant risk that FSE will not be able to raise the significant funding to repay the ECNs as they
mature.

In the event that the NCN Issue does not proceed and FSE cannot procure alternative
funding to meet the maturity of the ECNs, then FSE may not be able to meet its financial
obligations as and when they fall due.

In the event that the maturing ECNs cannot be repaid, then FSE would be in default of its
obligations and the ECN holders may elect to implement their rights under the ECN facility
which may include winding up the Company and appointing administrators to the
Company.
                                                    5

RESOLUTION 1 - APPROVAL OF TRANSFER OF SHARES AND ACQUISITION OF
RELEVANT INTEREST

FSE has been informed that Ariona has agreed to acquire 622,000,000 Shares plus any additional
Shares, up to 178,000,000 million Shares, held by Sekoko at the conclusion of the meeting (a possible
total of 800 million Shares) from Sekoko for A$0.01 per share (a possible total of A$8 million). This
represents a maximum shareholding of approximately 25.7% of the issued capital of FSE. In
addition, Ariona will acquire a 10% interest in the Waterberg Coal Project (which FSE holds an
indirect 60% interest in) either through acquiring a 25% shareholding in Sekoko Coal (Proprietary)
Limited that holds a 40% interest in the Waterberg Coal Project or directly from Sekoko, depending
on South African regulatory approvals, for approximately A$20.5 million, with Sekoko maintaining a
30% interest in the project. As a result of these acquisitions Ariona will be the largest shareholder in
FSE and the ownership of the Waterberg Coal Project will be either:

       FSE             60%

       Sekoko          40%*

       * includes an indirect interest in the Joint Venture for Ariona through a 25% shareholding in Sekoko;
       or

.      FSE             60%

       Sekoko          30%

       Ariona          10%

A summary of the Share Purchase Agreement entered into between Ariona and Sekoko is set out in
Part 1 of Annexure A.

Further information and explanation concerning Resolution 1 is set out below:

1.    SHAREHOLDER APPROVAL - ITEM 7 OF SECTION 611 OF THE
      CORPORATIONS ACT

      Pursuant to section 606 of the Corporations Act, a person must not acquire shares in a listed
      company if, because of the transaction, the person’s (or someone else’s) voting power in the
      company increases from 20% or below to more than 20% or from a starting point that is
      above 20% and below 90%. However, pursuant to item 7 of section 611 of the Corporations
      Act, an acquisition previously approved by a resolution passed at a general meeting of the
      listed company is exempt from the prohibition in section 606.

      Subject to completion of the Share Acquisition and the number of Shares held by Sekoko at
      the conclusion of the meeting, Ariona’s maximum voting power in FSE will increase from zero
      to approximately 25.7%.

      Assuming all of the NCNs, which are the subject of Resolution 2, are converted into Shares
      and all of the interest on them is capitalised and also converted into Shares, the maximum
      voting power of Ariona will be 56.7% (if the conversion price is not adjusted in
      accordance with the terms of the NCNs. The approval for the acquisition of this
      relevant interest pursuant to the conversion of the NCNs is set out in Resolution 2.
                                                  6

     On a fully diluted basis, assuming all of FSE’s options are exercised (both the current options
     and the Incentive Options, which are the subject of Resolution 3), the maximum voting power
     of Ariona will be 50.5% (based on the above assumptions relating to the NCNs.

     Resolution 1 and Resolution 2 are not interdependent or inter-conditional. In other words, if
     Resolution 1 is not approved by Shareholders (that is, the Share Acquisition will not proceed),
     Resolution 2 may be approved (and the NCN Issue may still proceed).

     Accordingly, Shareholder approval of the transfer of the Consideration Shares to Ariona
     pursuant to Resolution 1 is being sought for the purposes of item 7 of section 611 of the
     Corporations Act.

     For shareholder approval pursuant to item 7 of section 611 to be effective, Shareholders must
     be provided with all the information known to FSE or to Ariona or its associates that is
     material to the decision on how to vote on the Resolution, including:

     •     the identity of the entity proposing to make the acquisition of the Shares and its
           associates;

     •     the maximum extent of the increase in that entity’s voting power in FSE that would
           result from the acquisition;

     •     the voting power that the entity would have as a result of the acquisition;

     •     the maximum extent of the increase in voting power of each of that entity’s associates
           that would result from the acquisition; and

     •     the voting power that each of that entity’s associates would have as a result of
           acquisitions.

     ASIC Regulatory Guide 74 specifies information required to be provided to the Shareholders
     because their approval of the proposed issues of Shares in FSE is sought. Accordingly, this is
     the basis on which the information in this Explanatory Statement regarding the Share
     Acquisition is provided.

2.   WHO CAN VOTE AND WHAT MAJORITY IS REQUIRED

     Resolution 1 requires an ordinary resolution which is a simple majority of those Shareholders
     present and voting either in person or by proxy at the meeting, either on a show of hands or
     on a poll if one is called in accordance with the applicable requirements.

     It is a condition of approval under item 7 of section 611 that no votes are cast in favour of the
     Resolution by the:

     •   persons proposing to make the acquisition and their associates (i.e. Ariona and its
         associates); or

     •   persons from whom the acquisition is to be made and their associates (i.e. Sekoko and its
         associates).

3.   INTERESTS OF DIRECTORS IN THE RESOLUTION

     None of the Non Conflicted Directors have any interest in the Transaction.
                                                 7

     Mr Tim Tebeila is considered to have a material personal interest in the Share Acquisition (as
     the Chairman of Sekoko and given his interest in 85.5% of Sekoko’s share capital).

4.   ADVANTAGES AND DISADVANTAGES

     The Directors consider that the proposed acquisition of Shares by Ariona has the following
     advantages and disadvantages:

     Advantages:

     •   Introduces a new funding partner into FSE and the Waterberg Coal Project, which has the
         support of international institutional and private investors focusing on global resource
         opportunities. The financial backing of Ariona will support FSE in proceeding with the
         development of the Waterberg Coal Project.

     •   Ariona is making a substantial investment into FSE and the Waterberg Coal Project of
         over A$69 million.

     •   Ariona has committed to working with FSE and Sekoko in procuring the funding
         requirements for the long term development of the Waterberg Coal Project.

     •   Ariona, through its two new nominated directors, brings strong experience in global
         mining projects which will be beneficial to FSE in the development of the Waterberg Coal
         Projects.

     Disadvantages:

     The Directors consider that the disadvantages are that a substantial shareholding in the
     Company would have transferred without a control premium being paid to non-participating
     Shareholders and the introduction of an additional substantial shareholder with over 25% of
     the issued capital of FSE may act as deterrent to possible future takeover offers for FSE.

5.   WHAT WILL HAPPEN IF RESOLUTION 1 IS NOT PASSED?

     If Resolution 1 is not passed, then Sekoko will retain its 33.80% shareholding in FSE and
     continue as the major shareholder of FSE. If Resolution 1 is not passed, but Resolutions 2
     and 3 are passed, then on conversion of the New Convertible Notes, Ariona’s maximum
     voting power in FSE will be 41.7% (or 37.2% on a fully diluted basis) assuming capitalisation
     of all interest and conversion of that interest and assuming no adjustment of the conversion
     price of the NCNs.

6.   DO THE INDEPENDENT DIRECTORS RECOMMEND THE SHARE ACQUISITION?

     Yes.

     Each of the Directors who are independent of this transaction believes that the Share
     Acquisition will be in the best interests of FSE and Shareholders for the reasons set out below:

     •   Introduces a new funding partner into FSE and the Waterberg Coal Project, which has the
         support of international institutional and private investors focusing on global resource
         opportunities. The financial backing of Ariona will allow FSE to proceed with the
         development of the Waterberg Coal Project.
                                                   8

     •     Ariona is making a substantial investment into FSE and the Waterberg Coal Project of
           over A$69 million.

     •     Ariona has committed to working with FSE and Sekoko in procuring the funding
           requirements for the long term development of the Waterberg Coal Project.

     •     Ariona, through its two new nominated directors, brings strong experience in global
           mining projects which will be beneficial to FSE in the development of the Waterberg Coal
           Projects

     Accordingly, the independent Directors unanimously recommend that Shareholders
     vote in favour of Resolution 1.

     Each of the Directors who are independent of this resolution approved both the proposal to
     put Resolution 1 to Shareholders and this Explanatory Statement, and recommend that
     shareholders vote in favour of the Resolution. Each of the Directors who are independent of
     this resolution will vote in favour of Resolution 1 in respect of the Shares in which they have a
     relevant interest.

     The Chairman of the meeting intends to vote undirected proxies in respect of this resolution in
     favour of this resolution. The Chairman of the meeting will be Mr David Perkins.

     Mr Tebeila is considered to have a material personal interest in the Share Acquisition (as the
     Chairman of Sekoko and given his interest in 85.5% of Sekoko’s share capital) and has not
     therefore made a recommendation.

7.   IMPACT ON FSE

     7.1      Capital Structure

              For the purposes of item 7, section 611 of the Corporations Act, it is important for
              Shareholders to note the effect following completion of the Share Acquisition on the
              “voting power” of Ariona. Under the Corporations Act, voting power is calculated by
              aggregating the total number of votes attached to all voting shares in FSE that the
              person or their associates has a relevant interest in and expressing this as a percentage
              of the total number of votes attached to all the voting shares in FSE.

              FSE currently has 3,113,878,641 Shares on issue. On completion of the Share
              Acquisition, and assuming Ariona acquires the maximum 800,000,000 Shares from
              Sekoko and assuming no other transfers of shares currently held occur (except as noted
              below) FSE’s top 5 Shareholders will be:

                      Shareholder                   Number of Shares            % of current total
                                                                                Shares

              Ariona Company SA                         800,000,000                     25.69

              Linc Energy Limited                       283,336,423                      9.10

              Sekoko             Resources              252,645,091                      8.11
              (Proprietary) Ltd*

              BBY Nominees Pty Ltd                      165,023,979                      5.30
                                       9

* - being the current combined holdings of Sekoko Coal (Proprietary) Ltd and Sekoko Resources
(Proprietary)Ltd


On completion of the Share Acquisition and assuming Ariona acquires the full
800,000,000 Shares, Ariona’s voting power will change as follows:

     Shareholder           Current Voting        Maximum Extent         Maximum Voting
                               Power               of Increase in           Power on
                                                 Voting Power on         Completion of
                                                  Completion of         Share Acquisition
                                                 Share Acquisition

        Ariona                    0%                    25.7%                  25.7%



Ariona has confirmed that none of its associated entities (listed in Annexure B) currently
have any relevant interest in FSE.

A table of Ariona’s voting power in FSE if Resolution 1 is passed Resolution 2 is passed,
both Transactions complete, with Ariona acquiring the full 800,000,000 Shares, and
Ariona converts all of the NCNs to Shares, with all interest on them being capitalised
and also converted, is set out in the Explanatory Statement to Resolution 2.

Under the terms of the Sale Purchase Agreement (summarised in Part 1 of Annexure A),
Sekoko will retain a relevant interest in the 800,000,000 Shares transferred to Ariona as a
result of certain provisions under the agreement whereby:

 •   In certain prescribed circumstances, Ariona must cast any votes attaching to the
     Shares acquired by Ariona under the Sale Acquisition in a certain way (further
     details are set out in Part 1 of Annexure A).

 •   Ariona will be restricted from disposing of those Shares until at least US$400
     million of project funding in respect of the Waterberg Coal Project has been
     procured.

The voting arrangement and restriction on disposal of the shares amounts to a relevant
interest in the Shares the subject of the arrangement, being the FSE shares acquired by
Ariona under the Share Acquisition. Accordingly and assuming Sekoko does not dispose,
other than to Ariona under the Share Acquisition, of any Shares, Sekoko will retain its
voting power of 33.8% in FSE (comprising of its relevant interest in the Shares disposed
of under the Sale Acquisition and the Shares it will retain), notwithstanding that the
nature of the voting power (in respect of the Shares transferred to Ariona) has changed
from a direct interest (that is, Shares held in the name of Sekoko or directly on its behalf)
to an indirect interest (via the obligations on Ariona under the Share Purchase
Agreement described in more detail in Part 1 of Annexure A ).
                                           10

7.2   Appointment of New Directors

      Subject to Resolution 2 being passed, the following two new Directors will be appointed
      to the Board. Ariona also has a right to appoint a third member to the Board as its
      discretion in the future.

      The two Directors are as follows:

      David Hillier FCA, AMP (Harvard), MAICD

      Mr Hillier is a chartered accountant by training and spent 12 years with international
      accounting firms Ernst & Young and PricewaterhouseCoopers. Work with major
      international clients in the gold mining, mineral sands and oil and gas industries led to a
      career in the resources industry. Initially working with the NY listed Bond International
      Gold group, Mr Hillier subsequently spent 15 years with Normandy Mining Limited,
      including 6 years as Chief Financial Officer. Normandy was Australia’s largest gold
      producer at the time with exploration and mining activities across the globe.
      Responsibilities included all financial and commercial operations from exploration
      through feasibility studies and financing of the development and operation of large scale
      mines. Mr Hillier was responsible for raising several hundred million dollars of gold
      backed loan facilities in the US to fund mining operations and Treasury operations
      selling millions of ounces of gold annually. He had extensive experience as Normandy’s
      representative on joint venture committees. Since the takeover of Normandy by
      Newmont Mining of the US, Mr Hillier has been Chief Executive and Director of
      various public mining companies.

      Kevin Kartun

      Mr Kartun has 40 years’ experience in exploration and mining geology, resource
      investments and investor relations in southern Africa and Australia. He has worked as a
      geologist in South Africa, Namibia and Australia for various companies including Anglo
      American Corporation Limited, Newmont Limited, Shell SA (Proprietary)
      Limited/Billiton and Gold Fields of South Africa Limited. His experience covers a wide
      range of commodities, including platinum, gold, diamonds, base metals, mineral sands,
      uranium, coal and synfuels.

      Mr Kartun holds a B.Sc. (Honours) and Ph.D. in Geology from the University of Cape
      Town and is a Fellow of the Australian Institute of Mining and Metallurgy, a Fellow of
      the Geological Society of South Africa, a Fellow of the South African Institute of
      Mining and Metallurgy, and a Member of PDAC.

      Ariona has confirmed that the proposed director nominees have no associations with
      Ariona, FSE or their associates nor do they have any interest in the issue of the NCNs
      or the Share Acquisition.

      Subject to Resolution 2 being passed, Ariona will also retain the right to appoint 3
      nominees to the Board for as long as more than 50% of the NCNs remain on issue.

7.3   The future of FSE

      Ariona Company SA has informed the Directors that its intentions (in accordance with
      ASIC Regulatory Guide 74.25(e)) are as follows:

         •   it has no intention to change the business of FSE;
                                                11

               •   it may inject further capital into FSE, should there be a requirement to do so
                   and will, if Resolution 2 is passed, inject $40.7 million of further capital, by way
                   of subscription for the NCNs, into FSE;

               •   it has no intention to change the current employment arrangements of FSE;

               •   other than as described in this Explanatory Statement, Ariona has no present
                   intention regarding any proposal whereby any property will be transferred
                   between FSE and Ariona or any person associated with either of them;

               •   Ariona has no intention to otherwise redeploy the fixed assets of FSE; and

               •   Ariona notes that FSE has not declared or paid any dividend and is unlikely to
                   do so in the near term and Ariona does not intend to change that policy.

8.   INDEPENDENT EXPERT’S REPORT

     BDO was commissioned by the Directors of FSE to provide an Independent Expert’s Report
     to assess whether the advantages of the proposed Share Acquisition outweighed the
     disadvantages to Shareholders not associated with Ariona.

     The Independent Expert’s Report concludes that:

     “We have considered the terms of the Share Transfer as outlined in the body of this
     report and have concluded that the advantages of the Share Transfer outweigh the
     disadvantages of the Share Transfer for Shareholders ”
     Shareholders are urged to carefully read the Independent Expert’s Report in relation to the
     Share Acquisition (a copy of which is contained in the separate booklet and marked Annexure
     D) to understand the scope of the report, the methodology of the valuation and the sources of
     information and assumptions made.

9.   ADDITIONAL INFORMATION

     9.1    Share Purchase Agreement

            A summary of the Share Purchase Agreement entered into between Ariona and Sekoko
            is set out in Part 1 of Annexure A.

     9.2    Status of Conditions

            In addition to Shareholder approval, the Share Acquisition is subject to a number of
            conditions detailed in the Share Purchase Agreement between Ariona and Sekoko. The
            conditions, and their status as at the date of this document, are set out in Part 2 of
            Annexure A.

            One of the conditions set out in the Share Purchase Agreement relates to the approval
            of the NCN Issue the subject of Resolution 2. If Resolution 2 is not passed, then the
            Share Acquisition may not proceed.
                                          12

9.3   Directors’ interests in FSE

      As at the date of this document, the following Directors have the following relevant
      interests (for the purposes of the Corporations Act) in Shares and in options over the
      unissued share capital of FSE:

                  Director                 Relevant Interest in         Options (exercise
                                                 Shares               price and expiry date)

        Mr Tim Tebeila (Chairman,              1,052,645,091            110,000,000 (6 cent
        Director)                                                           June 2013)

        Mr David Perkins (Deputy                 2,500,000                      Nil
        Chairman)

        Dr Pius Chilufya Kasolo                     Nil                         Nil
        (Non Executive Director)

        Mr Morore Benjamin (Ben)                    Nil                         Nil
        Mphahlele (Non Executive
        Director)

        Mr Kobus Terblanche (Non                    Nil                         Nil
        Executive Director)



9.3   Overview of Ariona Company SA

      Name: Ariona Company SA (Ariona)

      Address: Suite 13, 1st Floor, Ollaji Trade Centre, Francis Rachel Street, Victoria, Mahe,
      Republic of Seychelles

      Incorporated: Republic of Seychelles

      IBC No: 061983

      Director: Mr Richard Maclellan (Sole Director)

      Ariona Company SA is a Special Purpose Vehicle (SPV) that has been incorporated for
      the purpose of investment in mining opportunities. It does not carry on any other
      business activities save for investment in suitable mining opportunities. Its associates
      and consortium members are set out in Annexure B.

      Ariona has no employees and its Sole Director is Mr Richard Maclellan.
                                                          13


RESOLUTION 2 - APPROVAL OF ISSUE OF NEW CONVERTIBLE NOTES AND
    ISSUE OF SHARES ON CONVERSION OF NEW CONVERTIBLE NOTES

FSE has entered into an agreement with Ariona under which Ariona will provide A$40.7 million of
funding to FSE under a secured convertible note facility. A concise summary of the terms of the
NCNs are below:

 Term                                 4 Years

 Coupon                               8.0% per annum

 Interest Payments                    Payable half yearly. For the first 24 months, interest is to be paid in
                                      cash or capitalised at the election of FSE. After the first 24 months,
                                      interest is to be paid in cash or, if so agreed by the Company and the
                                      Majority Noteholder, capitalised.

 Tranches                             A$30.7 million is available for drawdown on completion with a
                                      further A$10 million available for drawdown as required to meet
                                      budgeted expenses over a 12 month period from completion.


 Conversion Price                     A$0.025 per Share*

 Conversion Terms                     Convert into Shares at the election of the NCN holder. This applies
                                      to the face value of the NCNs and, at the election of the Noteholder
                                      to capitalised and unpaid interest

 Transfer                             Notes may be transferred.
*- Subject to adjustment for capital reorganisations. A summary of the capital reorganisation provisions can be found in
Part 3 of Annexure A.

The security is in the form of guarantees and indemnities, and rights and pledges in favour of the
Security Holder over the Company’s interests in the Waterberg Coal Project.

A Summary of the NCN facility terms (in the form of an Investment Agreement and the
accompanying Secured Convertible Note Deed Poll and the related securities) is set out in Part 3 of
Annexure A.

Further information and explanation concerning Resolution 2 is set out below:

1.     APPROVAL TO GIVE FINANCIAL BENEFIT TO RELATED PARTY

       Subject to a number of exceptions, section 208 of the Corporations Act provides that before a
       public company can give a financial benefit to a related party of that company, the company
       must obtain the approval of its shareholders.

       The Corporations Act gives issuing securities to a related party as one example of “giving a
       financial benefit” to a related party – section 229(3)(e).

       FSE seeks Shareholder approval to give the financial benefit described below to Ariona under
       the NCN Issue:
                                                 14

      Related Party          Nature of Relationship                    Nature of Financial Benefit

      Ariona Company         Pursuant to section 228(6) of the         FSE is issuing a total of
      SA                     Corporations Act, it is reasonable that   A$40,700,000 convertible
                             Ariona Company SA be taken as             notes to Ariona Company SA.
                             having reasonable grounds to believe
                             that it will become a related party in    The convertible notes will be
                             the future by becoming a controlling      secured and pay interest at the
                             shareholder of FSE as a result of         rate of 8.0% per annum and
                             having completed the Share                convert into shares in FSE at
                             Acquisition and converting sufficient     A$0.025 (subject to
                             of the NCNs to give it control.           adjustment).



2.   SHAREHOLDER APPROVAL - LISTING RULE 7.1

     Under ASX Listing Rule 7.1, a company may not issue more than 15% of its share capital in
     any one year without shareholder approval, except in certain circumstances.

     Essentially, the formula in Listing Rule 7.1 provides that a company must not make or agree to
     make, during a 12 month period, a new issue of equity securities where that issue or those
     issues would represent more than 15% of the company's issued share capital without first
     obtaining approval of its shareholders in general meeting. The term "equity securities" is
     defined in the Listing Rules to include convertible securities.

     The Directors seek approval from Shareholders pursuant to ASX Listing Rule 7.1 for the issue
     of the NCNs.

     The following information about the NCNs is provided to Shareholders in accordance with
     the requirements of ASX Listing Rule 7.3:

     (a)   Each NCN has a face value of $1.00. Accordingly, if the full facility is drawn down by
           FSE there would be 40,700,000 convertible notes issued. If all of the NCNs are
           converted, 1,628,000,000 Shares would be issued. (Taking into account that interest may
           be capitalised and capitalised interest may also be converted, a maximum of
           2,228,030,414 Shares may be issued as a result of the conversion). Any shares issued
           that are attributable to the capitalised interest on the NCNs, will only be issued pursuant
           to the 15% cap set out in Listing Rule 7.1, or with Shareholder approval.
     (b)   $30.7 million of the NCNs will be issued within three months of the Date of the
           Meeting. The ASX has granted the Company a waiver of Listing Rule 7.3.2 to permit the
           Company to issue no more than $10 million of the total NCNs at any time no later than
           12 months from the day that is 5 Business Days after the date of the Meeting.
     (c)   The NCNs have a face value of $1.00 and are convertible at the election of the NCN
           Holder at A$0.025 per Share up to 4 years from the date they are issued.
     (d)   The NCNs will be issued to Ariona.
     (e)   In addition to the terms of the NCNs described above, if the NCNs (and capitalised
           interest (if applicable)) are converted, the shares issued will be fully paid ordinary shares
           ranking equally with all other Shares currently on issue. A summary of the terms and
           conditions of the NCNs is set out in Part 3 of Annexure A.
                                                15

     (f)   Funds raised by the issue of the NCNs will be used to redeem the ECNs at face value,
           pay outstanding interest on the ECNs and for working capital purposes as set out in the
           table in the Background to the Explanatory Statement.


3.   WHO CAN VOTE AND WHAT MAJORITY IS REQUIRED

     Resolution 2 requires an ordinary resolution which is a simple majority of those Shareholders
     present and voting either in person or by proxy at the meeting, either on a show of hands or
     on a poll if one is called in accordance with the applicable requirements.

     FSE will disregard any votes cast on Resolution 2 by Ariona Company SA, BBY Nominees Pty
     Limited, Jaguar Funds Management Pty Ltd and BBY Limited (and any person who might
     obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities) or
     their associates.

4.   THE ISSUE OF THE CONVERSION SHARES TO ARIONA - ITEM 7 OF
     SECTION 611 OF THE CORPORATIONS ACT

     Shareholder approval is also being sought for the conversion of the NCNs by Ariona into
     Shares.

     Ariona has the option, but not an obligation, to convert the NCNs into Shares at any time
     during the term of the NCNs (which is a period of 4 years).

     Pursuant to section 606 of the Corporations Act, a person must not acquire shares in a listed
     company if, because of the transaction, the person’s (or someone else’s) voting power in the
     company increases from 20% or below to more than 20% or from a starting point that is
     above 20% and below 90%. However, pursuant to item 7 of section 611 of the Corporations
     Act, an acquisition previously approved by a resolution passed at a general meeting of the
     listed company is exempt from the prohibition in section 606.

     As the interest payments on the NCNs may be capitalised during the term of the NCNs, the
     maximum number of Shares that could be issued to Ariona on conversion is 2,228,030,414.

     Shareholder        Current Voting      Maximum Extent of           Maximum Voting
                        Power               Increase in Voting          Power on Conversion of
                                            Power on Conversion         NCNs and capitalised
                                            of NCNs and                 interest
                                            capitalised interest


     On the assumption that Resolution 1 and 2 are both passed, the Share Acquisition
     Completes with Ariona acquiring 800,000,000 Shares and Ariona converts all of the
     NCNs that are issued (assuming the full $40.7 million facility is drawn down) and
     including any capitalised interest on the NCNs

     Ariona                    0%           31% (increase above                   56.7%
                                            25.7% resulting from
                                            Ariona         acquiring
                                            800,000,000 Shares)


     On the assumption that Resolution 1 is NOT passed, the Share Acquisition does
     NOT occur, but Resolution 2 is passed and Ariona converts all of the NCNs that are
                                                 16

      issued (assuming the full $40.7 million facility is drawn down) and including any
      capitalised interest

      Ariona              0%                 41.7%                      41.7%



      Ariona has confirmed in accordance with ASIC Regulatory Guide 74, that none of its
      associated entities (listed in Annexure B) currently have any relevant interest in FSE.

5.    INTERESTS OF DIRECTORS IN THE RESOLUTION

      None of the Non Conflicted Directors other than Mr David Perkins have any interest in the
      Transaction.

      Mr David Perkins (the Chair of the meeting) will be prohibited from voting on this resolution
      (except as proxy for shareholders who are entitled to vote on this resolution) pursuant to the
      Listing Rules. Mr Perkins is a director of BBY Limited. BBY Limited will receive a fee on the
      completion of the NCN Issue to Ariona.

6.    ADVANTAGES AND DISADVANTAGES

      The Directors consider that the proposed NCN Issue to Ariona Company SA has the
      following advantages and disadvantages:

      Advantages:

     * FSE will be recapitalised with sufficient funding to redeem the ECNs and provide adequate
       funding for the completion of the Bankable Feasibility Study for the Waterberg Coal Project.

     * It introduces a new funding partner (in Ariona) into FSE and the Waterberg Coal Project,
       which has the support of international institutional and private investors focusing on global
       resource opportunities. The financial backing of Ariona will support FSE in proceeding
       with the development of the Waterberg Coal Project.

     * Ariona through its two new nominated directors bring strong experience in global mining
       projects which will be beneficial to FSE in the development of the Waterberg Coal Projects.

     * The New Convertible Note facility provides FSE with a better form of funding than the
       ECNs by:

               (i)    having an 8.0% coupon per annum verses the current 10.0% coupon per annum
                      payable on the ECNs; and

               (ii)   having a 4 year funding term which provides funding certainty beyond the
                      ECNs which commence maturing in October 2012.

     * The interest on the NCN’s can be capitalised for 24 months at the election of FSE which
       should reduce the short term cash requirements of the Company. After the first 24 months,
       interest is to be paid in cash unless the Company and the Majority Noteholder agree to
       capitalise it.

     * The conversion premium on the NCN’s at A$0.025 per Share (without adjustment) is at a
       227% premium to the existing Share price of A$0.011.
                                                17

     * The redemption of the ECNs will result in a simplified capital structure which should make
       the Company easier to value for the investment community.

     * The injection of new capital and the parallel redemption of ECNs will replace existing
       funding parties who have indicated they do not wish to continue funding FSE beyond the
       maturity of the ECNs.

     * It removes the short term funding pressure on FSE which currently arises from the short
       term maturity of the ECN’s. The ECNs commence maturing in October 2012, with the first
       maturing notes being approximately A$8.0 million in value.

     * It provides sufficient working capital to allow the Company to advance its development to
       get through completion of the Bankable Feasibility Study.

      Disadvantages:

     * In the event that the NCNs are not converted into Shares at their maturity, then FSE will
       need to redeem the NCN’s at maturity.

     * The NCN facility is secured against the Company’s interest in the Waterberg Coal Project.

     * If a substantial number of the NCNs are converted to Shares by Ariona (or a transferee of
       NCNs who is an associate of Ariona) Ariona would achieve control of FSE without a
       control premium being paid to non-participating Shareholders. The structure of the NCNs
       may discourage future takeover offers for FSE.

7.    INDEPENDENT EXPERT’S REPORT

      As detailed in the Explanatory Statement to Resolution 1 above (at item 8) BDO was
      commissioned by the Directors of FSE to provide an Independent Expert’s Report to assess
      whether the proposed Share Acquisition was fair and reasonable to the Shareholders not
      associated with Ariona.

      The Independent Expert was also commissioned to provide an opinion as to the value of the
      financial benefit being received by Ariona as a result of the NCN Issue the subject of
      Resolution 2.

      The Independent Expert’s Report concludes that:

      “We have considered the terms of the Funding Facility as outlined in the body of this
      report and have concluded that the Funding Facility is fair and reasonable to
      Shareholders.”
      Shareholders are urged to carefully read the Independent Expert’s Report (a copy of which is
      contained in the separate booklet accompanying this document and marked Annexure D) to
      understand the scope of the report, the methodology of the valuation and the sources of
      information and assumptions made.

8.    WHAT WILL HAPPEN IF RESOLUTION 2 IS NOT PASSED?

      FSE currently has A$8.45 million of ECNs that mature and are due and payable in October
      2012 with the balance of the ECNs progressively maturing through to October 2014. In the
      event that the NCN Issue does not proceed, FSE will be required to raise alternative forms of
      capital which may be on different terms and conditions to the current funding package
      presented in this Explanatory Statement.
                                                  18

      In the event that the NCN Issue does not proceed and FSE cannot procure alternative
      funding to meet the maturity of the ECNs, then FSE may not be able to meet its
      financial obligations when they fall due.

      In the event that the maturing ECNs cannot be repaid, then FSE would be in default
      of its obligations and the ECN holders may elect to implement their rights under the
      ECN facility which may include winding up the Company and appointing
      administrators to the Company.

9.    DO THE NON CONFLICTED DIRECTORS RECOMMEND THE NCN ISSUE?

      Yes.

      Each of the Directors who are independent of this Resolution believes that the NCN Issue will
      be in the best interests of FSE and Shareholders for the reasons set out in point 6 above.

      Accordingly, the independent Directors unanimously recommend that Shareholders
      vote in favour of Resolution 2.

      Each of the Directors who are independent of this resolution approved both the proposal to
      put Resolution 2 to Shareholders and this Explanatory Statement, and recommend that
      shareholders vote in favour of the Resolution. Each of the Directors who are independent of
      this resolution will vote in favour of Resolution 2 in respect of the Shares in which they have a
      relevant interest.

      The Chairman of the meeting intends to vote undirected proxies for this resolution in favour
      of this resolution. The Chairman of the meeting will be Mr David Perkins

10.   ADDITIONAL INFORMATION

10.1 NCN Facility Terms

      A Summary of the NCN facility terms is set out in Part 3 of Annexure A.

10.2 Status of Conditions

      In addition to Shareholder approval, the NCN Issue is subject to a number of conditions
      detailed in an Investment Agreement that FSE has entered into with Ariona. The conditions,
      and their status as at the date of this document, are set out in Part 4 of Annexure A.

      Nothing has come to the attention of the Directors which would cause them to believe that
      the conditions set out in Part 4 of Annexure A will not be satisfied.

10.3 Directors’ interests in FSE

      As at the date of this Document, the following Directors have the following relevant interests
      (for the purposes of the Corporations Act) in Shares and in options over the unissued share
      capital of FSE:

                      Director                     Relevant Interest in              Options
                                                         Shares

        Mr Tim Tebeila (Chairman,                                              110,000,000 (6 cent
        Director)                                      1,052,645,091          exercise price, expiring
                                                                                    June 2013)
                                                  19

         Mr David Perkins (Deputy
         Chairman)                                       2,500,000                       Nil

         Dr Pius Chilufya Kasolo (Non
         Executive Director)                                Nil                          Nil

         Mr Morore Benjamin (Ben)
         Mphahlele (Non Executive Director)                 Nil                          Nil

         Mr Kobus Terblanche (Non
         Executive Director)                                Nil                          Nil



10.4 Shareholder Approval for the Issue of the Conversion Shares - Listing Rule 7.1

     Under ASX Listing Rule 7.1, a company may not issue more than 15% of its share capital in
     any one year without shareholder approval, except in certain circumstances. One of the
     exceptions is Exception 4 in Listing Rule 7.2 which provides that the issue of shares on the
     conversion of convertible securities does not require shareholder approval if the convertible
     securities were issued in accordance with the Listing Rules. On the basis that Resolution 2 is
     passed, the issue of 1,628,000,000 Shares on conversion of the NCNs would not require
     shareholder approval. Further, an approval pursuant to Listing Rule 7.1 is not required in
     order to issue the Conversion Shares to Ariona as approval is being obtained under item 7 of
     section 611 of the Corporations Act (see Exception 16 in Listing Rule 7.2).

10.5 A change after item 7 approval but before acquisition is completed

     If Resolution 2 is passed, FSE may determine at some point in the future that Shareholders
     should be given the opportunity to give fresh approval under item 7 of section 611 of the
     Corporations Act if:

     •      a change in circumstances happens after Shareholder approval of Resolution 2 but
            before the NCNs are converted into Shares; and

     •      the change means the transaction (i.e. the acquisition of a relevant interest in Shares as a
            result of the conversion of the NCNs and capitalised interest by Ariona) is materially
            different from the one approved by Shareholders under Resolution 2.

     This would be the case if subsequent events increased the voting power that Ariona would
     have after completion of conversion of the NCNs and capitalised interest into Shares beyond
     the maximum voting power identified above - for example, Ariona purchased Shares on
     market before converting any NCNs.

10.6 Issue of Shares to BBY Nominees

     Under the terms of a subscription agreement and associated A$2.2M facility entered into on 26
     April 2012, FSE is required to issue 68,253,968 Shares to BBY Nominees Pty Ltd. Once those
     Shares are issued (which is expected to occur after the meeting), Ariona’s maximum voting
     power , if Resolution 1 is passed and Ariona acquires 800,000,000 Shares and if Resolution 2 is
     passed and all interest payable on the NCNs is capitalised and Ariona converts all of the NCNs
     and capitalised interest into Shares, would be 56% (50% on a fully diluted basis).
                                                  20

RESOLUTION 3 – APPROVAL OF ISSUE OF UNLISTED INCENTIVE OPTIONS

As detailed in the Background to this Explanatory Statement above, FSE currently has ECNs on
issue.

A majority of the funds raised pursuant to the NCN Issue (which is the subject of Resolution 2) will
be used for the redemption of the ECN at face value and the payment of any outstanding interest.

All the ECNs are held by BBY Nominees Pty Ltd and Jaguar Funds Management Pty Ltd. They are
parties to the Investment Agreement and in it have agreed to the early redemption of their respective
ECNs.

As an incentive to agree to the early redemption of the ECNs, the ECN Holders were offered and
accepted, subject to Shareholder approval, a total of 300,000,000 options over the unissued share
capital of FSE, exercisable at A$0.025 per Share and expiring 2 years after the date of issue, and
otherwise on the terms set out in Annexure C (the Incentive Options).

The Directors believe that the early redemption of the ECNs is in the best interests of Shareholders
because:

      •   the coupon payment on the NCNs of 8.0% per annum is significantly better that the coupon
          payment on the ECN’s of 10.0% per annum;

      •   the frequency of the coupon payments on the NCNs is on a half yearly basis, which is
          significantly better that the coupon payments on the ECN’s, which are on a monthly basis;
          and

      •   redeeming the ECNs will allow FSE to maintain a simplified capital structure rather than
          having two sets of convertible notes on issue. The refined capital structure will make the
          Company more appealing for investors as FSE will be easier and more transparent to value.

Listing Rule 7.1 provides that a company must not issue more equity securities than the number
calculated in accordance with a formula contained in that Listing Rule without approval of its
shareholders.

Essentially, the formula in Listing Rule 7.1 provides that a company must not make or agree to make,
during a 12 month period, a new issue of equity securities where that issue or those issues would
represent more than 15% of the company's issued share capital without first obtaining approval of its
shareholders in general meeting. The term "equity securities" is defined in the Listing Rules to
include shares and options to acquire shares.

The Directors seek approval from Shareholders pursuant to ASX Listing Rule 7.1 for the issue of the
Incentive Options.

The following information about the Incentive Options is provided to Shareholders in accordance
with the requirements of ASX Listing Rule 7.3:

(a)       The Incentive Options (300,000,000 will be issued) if exercised, will result in 300 million
          Shares being issued.

(b)       The Incentive Options will be issued within three months of the Date of the Meeting.

(c)       Each Incentive Option will have an exercise price of A$0.025 and an expiry date of 2 years
          from the date of issue.
                                                 21

(d)    The Incentive Options will be issued to BBY Nominees Pty Ltd and Jaguar Funds
       Management Pty Limited.

(e)    In addition to the terms of the Incentive Options described above and set out below, if the
       Incentive Options are exercised, the shares issued will be fully paid ordinary shares ranking
       equally with all other Shares currently on issue.

(f)    The issue price of the Incentive Options is nil. No funds will be raised from the issue of the
       Incentive Options. If the Incentive Options are exercised, the funds raised will be used for
       working capital purposes, and other purposes at the discretion of the Board. The Incentive
       Options will be issued all on the same day.

The full terms and conditions of the Incentive Options are set out in Annexure C.

Resolution 3 is subject to and conditional on Resolution 2 above being passed. If Resolution 2 is not
passed, no Incentive Options will be issued.

Directors' recommendation

Each of the Directors who are independent of this Resolution believes that the NCN Issue will be in
the best interests of FSE and Shareholders for the reasons set out above.

Mr David Perkins (the Chair of the meeting) will be prohibited from voting on this resolution
(except as proxy for shareholders who are entitled to vote on this resolution) pursuant to the Listing
Rules. Mr Perkins is a director of BBY Limited. BBY Limited will receive a fee on the completion of
the NCN Issue to Ariona.

Accordingly, the independent Directors unanimously recommend that Shareholders vote in
favour of Resolution 3.

Each of the Directors who are independent of this resolution approved both the proposal to put
Resolution 3 to Shareholders and this Explanatory Statement, and recommend that shareholders
vote in favour of the Resolution. Each of the Directors who are independent of this resolution will
vote in favour of Resolution 3 in respect of the Shares in which they have a relevant interest.

The Chairman of the meeting intends to vote undirected proxies for this resolution in favour of this
resolution. The Chairman of the meeting will be Mr David Perkins.
                                                  22

RESOLUTION 4 – SUBSEQUENT APPROVAL OF SHARE ISSUE

FSE announced to the ASX on 22 February 2012 through the lodgement of an Appendix 3B
pursuant to Listing Rule 3.10 of the issue of 155,202,857 Shares (Issued Shares).

Listing Rule 7.1 provides that a company must not, without Shareholder approval or subject to
specified exceptions, issue or agree to issue during any 12 month period equity securities if the
number of those securities exceeds 15% of the number of Shares on issue at the commencement of
that 12 month period.

Listing Rule 7.4 sets out an exception to Listing Rule 7.1. It provides that where a company in
general meeting approves a previous issue of securities, then provided that the previous issue did not
breach Listing Rule 7.1, those securities will be treated as having been issued with Shareholder
approval for the purpose of Listing Rule 7.1.

Whilst the issue of the Issued Shares did not require the prior approval of Shareholders as it was
within FSE’s existing 15% placement capacity, the purpose of Resolution 4 is to approve the issue of
these Issued Shares in accordance with the requirements of Listing Rule 7.4 to provide FSE with
flexibility to issue further securities, without obtaining Shareholder approval at the time of issue, in
accordance with the limit under Listing Rule 7.1 should the need arise in the future.

The following information about the Issued Shares is provided to Shareholders in accordance
with the requirements of Listing Rule 7.5:

(a)    the total number of Issued Shares was 155,202,857.

(b)    the Issued Shares had an issue price of A$0.0063 per share.

(c)    the Issued Shares were fully paid ordinary shares in the capital of FSE.

(d)    no funds were raised by the issue of the Issued Shares, however the Issued Shares were
       issued as payment to BBY Nominees Pty Ltd (in its capacity as custodians of the ECNs), in
       lieu of interest payable on the notes of A$977,778.

The approval under this Resolution 4 is not sought for any other purpose other than to provide FSE
with the flexibility to issue further securities, without obtaining Shareholder approval at the time of
issue. The requirement to obtain Shareholder approval for a future issue of securities, at the time of
issue, could limit FSE's opportunity to take advantage of opportunities that may arise.

Directors' recommendation

The Directors unanimously recommend that Shareholders vote in favour of Resolution 4 on
the basis set out above.
                                                  23

RESOLUTION 5 – SUBSEQUENT APPROVAL OF CONVERTIBLE NOTE ISSUE

FSE announced to the ASX on 19 October 2011 through the lodgement of an Appendix 3B
pursuant to Listing Rule 3.10 of the issue of 3 fully paid A$100,000 Convertible Notes, which are
convertible into 15,000,000 Shares (Issued Notes).

Listing Rule 7.1 provides that a company must not, without Shareholder approval or subject to
specified exceptions, issue or agree to issue during any 12 month period equity securities if the
number of those securities exceeds 15% of the number of Shares on issue at the commencement of
that 12 month period.

Listing Rule 7.4 sets out an exception to Listing Rule 7.1. It provides that where a company in
general meeting approves a previous issue of securities, then provided that the previous issue did not
breach Listing Rule 7.1, those securities will be treated as having been issued with Shareholder
approval for the purpose of Listing Rule 7.1.

Whilst the issue of the Issued Notes did not require the prior approval of Shareholders as it was
within FSE’s existing 15% placement capacity, the purpose of Resolution 5 is to approve the issue of
these Issued Shares in accordance with the requirements of Listing Rule 7.4 to provide FSE with
flexibility to issue further securities, without obtaining Shareholder approval at the time of issue, in
accordance with the limit under Listing Rule 7.1 should the need arise in the future.

The following information about the Issued Notes is provided to Shareholders in accordance with
the requirements of Listing Rule 7.5:

(a)      the total number of Issued Notes is three (3) A$100,000 notes.

(b)      the Issued Notes had an aggregate total consideration of A$300,000 and are convertible into
         Shares at A$0.020 per Share. The key terms of the Issued Notes are summarised below.

(c)      the Issued Notes were issued to BBY Nominees Pty Ltd.

(d)      funds raised by the issue of the Issued Notes were used for meeting commitments of FSE in
         connection with the development of the Waterberg Coal Project and general working capital
         purposes.

Key terms of the Issued Notes:

Issuer                  FSE

Security                Unsecured

Issue Price             A$100,000 per Convertible Note (x 3 tranches)

Interest Rate           10% p.a. payable semi-annually

Term                    3 years from the date of issue

Conversion Process Holders may elect to convert them at any time prior to 2.00pm WST on the
                   last day of the term. These Convertible Notes form part of the ECNs and, if
                   Resolution 2 is passed will be redeemed at completion of the NCN Issue.
                                                  24

Pricing                Convertible at A$0.02 per Share – i.e. convertible into 5,000,000 Shares per
                       note

The approval under this Resolution 5 is not sought for any other purpose other than to provide FSE
with the flexibility to issue further securities, without obtaining Shareholder approval at the time of
issue. The requirement to obtain Shareholder approval for a future issue of securities, at the time of
issue, could limit FSE's opportunity to take advantage of opportunities that may arise.

Directors' recommendation

The Directors unanimously recommend that Shareholders vote in favour of Resolution 5 on
the basis set out above.
                                          25

GLOSSARY

Ariona means Ariona Company SA, a company established under the laws of the Republic of
the Seychelles, Registration No. 016983.

ASIC means the Australian Securities and Investments Commission.

ASIC Regulatory Guide 74 means ASIC Regulatory Guide 74 – Acquisitions approved by members,
dated December 2011.

ASX means ASX Limited (ACN 008 624 691), trading as the Australian Securities Exchange.

BDO means BDO Corporate Finance (WA) Pty Ltd (ACN 124 031 045) (Australian Financial
Services Licence Number 316158).

Bankable Feasibility Study means a bankable feasibility study in accordance with the
requirements of the joint venture agreements for the Waterberg Coal Project.

Board means the board of Directors.

Business Day means a day which is not a Saturday, Sunday or bank or public holiday in Perth.

Chairman means the chairman of the meeting determined under the Constitution.

Constitution means the constitution of FSE.

Conversion Shares means the Shares to be issued on conversion of the NCN and capitalised
interest on the NCNs.

Corporations Act means Corporations Act 2001 (Cth).

Date of the Meeting means the day on which the general meeting of members of FSE to
which this notice relates is held.

Director means a director of FSE.

ECN means FSE’s current convertible notes, totalling A$21.3 million.

ECN Holders means the current holders of the ECNs.

Explanatory Statement means this explanatory memorandum to this Notice of General
Meeting.

FSE or the Company means Firestone Energy Limited (ACN 110 475 799).

Incentive Options means the 300,000,000 options over the unissued share capital of FSE to
be issued and as detailed under Resolution 3 in this Explanatory Statement.

Independent Expert means BDO.

Independent Expert's Report means the report set out in the separate booklet
accompanying this document and marked Annexure D.

JSE means the Johannesburg Stock Exchange on which FSE has a secondary listing
(JSE:FSE).

Listing Rules means the listing rules of the ASX.
                                           26

Majority Noteholder means the holder of NCNs that holds, or holders of NCNs that
together hold, 66.66% in value of the total principal money in respect of all NCNs on issue at
the relevant time.

NCNs Notes means the convertible notes to be issued to Ariona the subject of the NCN
Issue.

NCN Issue means the issue of $40,700,000 new convertible notes to Ariona as detailed under
Resolution 2 in this Explanatory Statement.

Non Conflicted Directors means the following directors of FSE:

•    Mr David Perkins;

•    Dr Pius Chilufya Kasolo;

•    Mr Morore Benjamin Mphahlele; and

•    Mr Kobus Terblanche.

Notice of General Meeting means the Notice of General Meeting of Shareholders to be held
on 5 October 2012.

Related Body Corporate has the meaning given to that term in the Corporations Act.

Resolution means a resolution as set out in the Notice of General Meeting.

Sekoko means Sekoko Resources (Proprietary) Limited and/or Sekoko Coal (Proprietary)
Limited (as applicable).

Share means a fully paid ordinary share in the capital of FSE.

Share Acquisition means the transfer of up to 800,000,000 Shares from Sekoko to Ariona as
detailed under Resolution 1 in this Explanatory Statement.

Shareholder means a member of FSE.

Transactions means the Share Acquisition and the NCN Issue and Transaction means the
Share Acquisition or the NCN Issue (as applicable).
                                              ANNEXURE A

                 Transaction Documentation Summary and Conditions Precedent

PART 1 – Summary of Share Purchase Agreement
The following is a summary provided by Sekoko of the share sale and purchase agreement entered
into on 13 June 2012 between Sekoko Coal (Proprietary) Limited (Sekoko or Coal), Sekoko
Resources (Proprietary) Limited (Resources) and Ariona Company S.A (Ariona) (Share Purchase
Agreement) as it has been amended by deeds of amendment of 13 July 2012, 24 July 2012 and 8
August 2012 respectively.

(Capitalised terms used in this summary bear the same meaning as in the Glossary or in the summary
below or if not so defined then in the Share Purchase Agreement.)
1         The acquisitions

1.1          The Share Purchase Agreement provides for the acquisition by Ariona of:
1.1.1                 622,000,000 Shares plus any additional Shares (up to 178,000,000 Shares) held by
                      Sekoko at the conclusion of the meeting (FSE Shares) for a consideration of
                      A$0.01per Share acquired (Purchase Price); and

1.1.2                 a 10% interest in the Joint Ventures established between Sekoko and FSE (through
                      FSE subsidiaries - Lexshell 126 General Trading (Proprietary Limited) (Lexshell)
                      and Checkered Flag Investments 2 (Pty) Ltd (Flag)), for a consideration of A$20.5
                      million (Subscription Money), which interest is acquired:

1.1.2.1                      subject to approval under section 11 of the (South African) Mineral and
                             Petroleum Resources Development Act, No. 28 of 2002 (MPRDA) (Share
                             Subscription Section 11 Approval), through the subscription by Ariona
                             for such number of fully paid ordinary shares in the capital of Sekoko Coal
                             (Proprietary Limited (Coal) which on the date those shares are issued will
                             be equal to 25% of the shares comprising the issued share capital of Coal
                             (Subscription Shares);
                           or alternatively
1.1.2.2                      should the Share Subscription Section 11 Approval be refused (as
                             evidenced by written notice to that effect from the DMR or the relevant
                             Minister), through the acquisition from Sekoko of a 10% Participation
                             Interest (as defined in the Share Purchase Agreement) in each of the two
                             Joint Venture comprising the Waterberg Coal Project (including a 10%
                             right, title and interest in and to all of the assets held for the purposes of
                             those Joint Ventures) (JV Interest) (Alternative Transaction).

1.2          Subject to Share Subscription Section 11 Approval not having been either obtained or
             refused before Completion, Ariona agrees (at completion of the sale and purchase of the


282291AGC/3292651.2
                                                 28

           FSE Shares (Completion)) to lend to Coal an amount equal to the Subscription Money
           (Temporary Loan), on the basis that the Temporary Loan is:

1.2.1            interest free;

1.2.2            repayable at the earlier of (i) the Issue Date of the Refusal Date (see below for
                 meanings of these expressions) and (ii) the third Business Day after the date a
                 demand is made for repayment by Ariona after an Event of Default (as defined in
                 the Share Purchase Agreement) has occurred;

1.2.3            secured by a guarantee by Sekoko Resources (Proprietary) Limited (Resources)
                 with recourse limited to a cession and pledge by Resources of 25% of the issued
                 shares in the capital of Coal (Security), and amounts recovered under that Security.

1.3        In the event that the Share Subscription Section 11 Approval is:

1.3.1            obtained, Ariona will subscribe for the Subscription Shares and Coal will apply the
                 proceeds of such subscription to repay the Temporary Loan; and

1.3.2            refused, Ariona will acquire the JV Interest from Coal and Coal will apply the
                 proceeds of such sale to repay the Temporary Loan.

1.4        All title to, property in and risk in respect of the FSE Shares and the JV Interest remains
           with Sekoko until Completion or completion of the Alternative Transaction (as
           applicable).

2       Key dates

2.1        Satisfaction Date: date that FSE Shareholders approve the Share Acquisition (i.e. the
           subject of Resolution 1);

2.2        Completion Date: the Business Day after fulfilment or waiver of all the Conditions
           Precedent;

2.3        Issue Date: 2nd Business Day after Share Subscription Section 11 Approval is obtained;
           and

2.4        Refusal Date: 2nd Business Day after the date on which the DMR notifies Ariona, Sekoko
           or Resources that the Share Subscription Section 11 Approval is or has been refused.

3       Conduct pending Completion and Issue Date / Refusal Date

3.1        JV Assets: reasonable endeavours: Resources and Coal have given undertakings to Ariona
           (until the Issue Date or the Refusal Date) to use their reasonable endeavours to protect
           and maintain the validity and good standing of the JV Assets and to ensure that the
           business of each Joint Venture is conducted with due care and in accordance with normal
           and prudent practice.

3.2        JV Assets: Ariona consents: Until the Issue Date or the Refusal Date, Resources and Coal
           must use reasonable endeavours to ensure that, unless Ariona consents in writing, a
                                               29

         number of matters are not undertaken in respect of the Joint Ventures, including the
         establishment of an Incorporated Joint Venture otherwise than as contemplated in the
         Share Purchase Agreement and the shareholders’ agreement contemplated in it
         (Shareholders’ Agreement), the incurring of liabilities, the borrowing of money, the
         cessation of business, making of substantial changes to the business of the Joint
         Ventures, the employment of new employees and the termination of employees’
         employment .

3.3      Resources and Coal restrictions: Until the Completion Date, Resources and Coal must
         not engage in discussions with third parties with regard to the disposal of shares in the
         capital of FSE to the extent they are, at the time, comprised in the FSE Shares. Until the
         Issue Date or the Refusal Date, Resources and Coal must not, except to Ariona, sell any
         interest of any kind in either of the Joint Ventures or any of the JV Assets.

3.4      Coal Assets: undertakings: Resources and Coal have given undertakings to Ariona (until
         the Issue Date or the Refusal Date) to protect and maintain the validity and good
         standing of the assets of Coal, to maintain each policy of insurance held by Sekoko and
         to manage and conduct its business with due care and in accordance with normal and
         prudent practice.

4     Joint Venture Agreements / Management Board

      Coal and Resources (on its behalf and as agent for Uzalile Property Investments (Proprietary)
      Limited (Uzalile) agree that, with effect from Completion:

4.1      they consent to, and waive any rights any of them may have which is in any way
         inconsistent with Coal selling and Ariona buying the JV Interest;

4.2      the 10% Participation Interest in the Joint Ventures acquired by Ariona includes a 10%
         undivided right, title and interest in all of the JV Assets;

4.3      the management board constituted under each Joint Venture Agreement shall consist of
         6 members;

4.4      for as long as Ariona holds a Participation Interest of at least 10% in the relevant Joint
         Venture, Ariona shall have the right to appoint 2 of those members;

4.5      the presence of at least 1 of the members appointed by Ariona shall be required for a
         quorum.

5     Negotiation of Shareholders Agreement

5.1      Until Completion (or if it is later, then until the Issue Date or Refusal Date), Coal,
         Resources and Ariona are to enter into good faith negotiations and endeavour to involve
         FSE in those negotiations, for the corporatisation of the Joint Ventures by merging them
         into Coal (or another entity) through negotiating and implementing the Shareholders’
         Agreement, with the terms set out in Schedule 2 to the Share Purchase Agreement
         forming the basis upon which they are agreeable to the corporatisation and an agreed
         outline of the provisions they wish to be included in the Shareholders” Agreement.
                                                 30

5.2        Until the Shareholders Agreement has been fully executed and all its conditions
           precedent have been satisfied, the Joint Venture Agreements shall continue in full force
           and effect.

5.3        If FSE, Flag and Lexshell do not agree to the corporatization of the Joint Ventures using
           Coal as the vehicle for the future conduct of the Businesses the Parties agree that they
           will negotiate in good faith with each other and with FSE, Flag and Lexshell to identify
           and agree on:

5.3.1             another corporate vehicle for the future conduct of the businesses of the Joint
                  Ventures, which may be Lexshell or a newly incorporated body; and

5.3.2             the transactions required to achieve the corporatization of the Joint Ventures using
                  that vehicle.

6       Consolidation of the Waterberg Assets

        Pending the execution of the Shareholders’ Agreement, Ariona will not do anything which
        gives rise to (i) the consolidation or merger of the assets of the Waterberg Coal Project with
        any other assets or project, or (ii) the involvement of a Historically Disadvantaged South
        African (HDSA) or HDSA Company or a competitor of Resources or Coal in the South
        African coal industry.

7       Section 11 applications

        The parties will co-operate with each other for the preparation and making of all applications
        for Section 11 Approvals to the DMR and the Minister, as soon as practicable after the Share
        Purchase Agreement was entered into and before the Completion Date.

8       Funding of cost of development

8.1        Project Funding:

8.1.1             Ariona will negotiate in good faith (and use reasonable endeavours to agree terms
                  by no later than 6 months after the Bankable Feasibility Study has been completed
                  and approved by the JV participants) with Resources and FSE, the terms on which
                  Ariona will provide or procure, market based project funding required to bring the
                  Waterberg Coal Project to Commercial Productions up to an amount not
                  exceeding an aggregate sum of US$400 million (Funding Cap) which includes
                  funding for the Deferred Carry as described below.

8.1.2             Project funding shall be subject to the written approval of all participants in each
                  Joint Venture.

8.2        Deferred Carry: The terms of the funding will include(in relation to Resources and Coal):

8.2.1             the payment or contribution, on behalf of Resources or Coal (depending on how
                  the Incorporated Joint Venture is structured), of all amounts in US Dollars which
                  Resources or Coal may become liable to contribute by way of equity contributions
                                                   31

                in connection with the development of the Waterberg Coal Project, until the
                project achieves Commercial Production (Deferred Carry Amount);

8.2.2           the Deferred Carry Amount will bear interest at the lower of 9% or Ariona’s actual
                initial cost of debt funding;

8.2.3           50% of the gross aggregate amount received by Resources or Coal as
                dividends/distributions from the Incorporated Joint Venture, is to be paid to
                Ariona in repayment of the Deferred Carry Amount;

8.2.4           all outstanding amounts must be repaid in cash at the end of 20 years from the date
                on which Commercial Production from the Waterberg Coal Project commenced;
                and

8.2.5           if the Incorporated Joint Venture uses project funding from a third party, the
                Deferred Carry will remain available to Resources or Coal (as applicable).

8.3       Resources project funding:

          If Resources procures project financing for the Joint Ventures and that project funding is
          accepted by all participants in the Joint Ventures, Resources will be entitled to receive an
          arranging fee of 1.5% of any such project financing, which fee will be payable by Ariona
          and Flag or Lexshell in proportion to their respective Participation Interests in the
          relevant Joint Venture.

8.4       Penalty on failure to procure funding:

8.4.1           Ariona warrants to Resources and Coal that it will be able to provide or procure
                the provision of the Deferred Carry Amount and the project funding, within a
                reasonable time, after all relevant conditions have been satisfied and the BFS has
                been completed and approved by the participants in the Joint Venture.

8.4.2           If Ariona breaches (i) its obligation with regard to negotiating in good faith and
                using reasonable endeavours to agree terms or (ii) the warranty in respect of the
                Deferred Carry Amount, Ariona shall be obliged (subject to Resources using
                reasonable commercial endeavours to raise alternative finance on commercial
                terms and as soon as reasonably possible), to pay:

8.4.2.1                 all of Resources’ or Coal’s costs reasonably incurred in raising finance for
                        the equity contributions;

8.4.2.2                 the amount of any interest greater than the lower of 9% per annum and a
                        percentage which equates to Ariona's actual initial cost of debt funding,
                        payable by Resources or Coal (as applicable) in respect of that finance; and

8.4.2.3                 if Resources is diluted as a result of Ariona’s breach and Resources’ or
                        Coal’s inability to fund those equity contributions wholly or in part, an
                        amount, by way of liquidated damages, equal to A$2.05 million for each 1%
                        of that dilution.
                                                   32

8.4.3              If Ariona breaches (i) its obligation with regard to negotiating in good faith and
                   using reasonable endeavours to agree terms or (ii) the warranty in respect of the
                   project funding, Ariona shall be obliged (subject to the Joint Ventures or the
                   Incorporated Joint Venture using reasonable commercial endeavours to raise
                   alternative project finance on commercial terms and as soon as reasonably
                   possible), to pay:

8.4.3.1                    all of the Joint Ventures’ or the Incorporated Joint Venture’s costs
                           reasonably incurred in raising alternative project finance;

8.4.3.2                    as liquidated damages, an amount equal to the difference in value to the
                           Joint Ventures or the Incorporated Joint Venture of the funding obtained,
                           compared with the agreed terms for the project funding or a project
                           funding at a rate of 9% per annum on dollar based funding.

9         Exchange of Sekoko JV interest for FSE shares

          Resources agrees that if Ariona acquires the FSE Shares and either subscribes for the
          Subscription Shares or the Alternative Transaction completes and:

9.1          resources or Coal propose a transaction in terms whereof its interest in the Joint
             Ventures is exchanged for shares in FSE;

9.2          the terms of the proposed sale are commercially acceptable to Ariona (acting reasonably)
             and the board of directors of FSE; and

9.3          an independent expert engaged by FSE has opined that those terms are fair and
             reasonable to the un-associated shareholders in FSE,

          then Ariona will vote the FSE Shares in favour of a resolution of the FSE shareholders to
          approve a sale (if Resources or Coal wishes to sell) of Resources' shareholding in Coal or
          Coal’s interest in the Joint Ventures or the incorporated Joint Venture to FSE.

10        Restriction on Ariona with regard to disposals

10.1         Restriction on encumbrance or transfer: Until project funding of at least US$400 million
             (including funding of the Deferred Carry) has been offered to the Joint Ventures or the
             Incorporated Joint Venture in a form capable of acceptance, Ariona will not, without
             Resources’ prior written consent, Encumber any of the FSE Shares or the Subscription
             Shares or the JV Interest (Ariona Acquisitions) or transfer any of the Ariona
             Acquisitions to a third party who is not a member of the consortium of investors
             providing funding to Ariona in connection with the Purchase Price or the Subscription
             Money (who are named in Annexure B), the consideration for the Alternative
             Transaction or the Temporary Loan.

10.2         Restriction re HDSA investors: Ariona must not, while Resources continues to hold an
             interest in the Waterberg Coal Project that is sufficient to satisfy the provisions of South
             African law and administrative policy relating to the involvement of black empowerment
             enterprises in resources projects, without the prior written consent of Resources, sell or
                                                 33

          otherwise dispose of the Subscription Shares or the JV Interest to a HDSA or a HDSA
          Company.

10.3      Sekoko pre-emptive right: If Ariona wishes to dispose of the Subscription Shares or the
          JV Interest whilst Resources continues to hold an interest in the Waterberg Coal Project,
          Ariona must (subject to Flag and/or Lexshell waiving any relevant pre-emptive right)
          offer the Subscription Shares or the JV Interest to Resources at the same price and on
          the same terms and conditions.

11     Eskom MOU

       Resources and Coal must use reasonable endeavours to procure the assignment, with the
       consent of Eskom Holdings SOC Limited, of the Eskom MOU to the Joint Ventures or the
       Incorporated Joint Venture.

12     Indemnities

       To secure certain indemnities in respect of breach of warranty and other matters given by
       Resources and Coal in the Share Purchase Agreement Resource, Coal and Ariona have
       entered into a further agreement under which, if Coal is discovered to have liabilities as at
       Completion under the Share Purchase Agreement which are the subject matter of those
       indemnities, subject to necessary regulatory approvals being obtained, Ariona has the right,
       but not the obligation, to subscribe for shares in Coal at the fair market value of Coal shares
       at the time the relevant liability is to be paid an amount sufficient, together with Coal’s cash
       resources (if any), to pay the relevant indemnified liability.

       The effect of these arrangements, depending on the aggregate of the amounts of the relevant
       indemnified liabilities (if any) may result in Ariona coming to own directly and/or indirectly
       up to a 40% interest in the Waterberg Coal Project with Resources direct or indirect
       ownership interest in it being reduced possibly to zero.

       It is to be noted, however, that a dilution of Resources’ interest in the Waterberg Coal
       Project to less than 25.1% may result in the black empowerment enterprise (BEE)
       requirements for minerals projects in South Africa not being satisfied. In order to comply
       with the BEE requirements, the shareholding Ariona may have in Coal will be limited such
       that its interest in the Waterberg Coal Project, through its Coal shareholding, cannot exceed
       14.9%. If Resources were able to continue to satisfy the BEE requirements and Ariona were
       to subscribe for shares in Resources, instead of Coal, the maximum direct (through Coal) and
       indirect (through Resources via Coal) interest in the Waterberg Coal Project that Ariona
       could hold is 27.4%.

PART 2 – Conditions Precedent to Share Acquisition

       The following is a summary of the conditions precedent to the Share Acquisition which
       remain to be satisfied as at the date of this Notice of Meeting and Explanatory
       Memorandum.
                                               34

                                               Condition

1.    IDC: Industrial Development Corporation of South Africa Limited (IDC) having (i)
      consented in writing to the transactions relevant to certain arrangements between IDC and
      Sekoko, and (ii) agreed in writing that, upon payment to it of the amount owing to it, those
      arrangement will terminate and the shares in FSE pledged to IDC will be released from that
      pledge

2.    Ariona / FSE Connotes: The agreement in relation to the issue of convertible notes by
      FSE to Ariona (i.e. the Investment Agreement) not having been amended without
      Resources’ consent

3.    Ariona / FSE Connotes: Ariona having subscribed for A$30.7 million of the NCNs

4.    Ariona directors: FSE having after the meeting appointed Ariona’s nominees as directors
      of FSE

5.      FSE group consents: FSE, Flag and Lexshell having, in form and substance satisfactory
        to Ariona (acting reasonably) consented or agreed to certain things and waived certain
        warranty breaches and pre-emptive rights (to the extent applicable) connected with the
        Joint Ventures and in connection with Ariona acquiring the JV Interest. The matters
        agreed to are substantially the same as the matters summarised in paragraph 4 of Part 1 of
        this Annexure A.

6.    Regulatory approvals: All approvals under certain applicable South African laws in respect
      of the sale and purchase of the FSE Shares, the subscription for the Subscription Shares
      and, the JV Interest and the making of the Temporary Loan having been obtained.

7.    FSE Shareholder Approvals: FSE shareholders having passed Resolutions 1 and 2

8.    Regulatory approvals: Ariona having been provided with satisfactory evidence that any
      approvals required in relation to any issue of shares in FSE to Sekoko were obtained

9.    FSE undertaking: FSE having undertaken to Ariona that it will not, until Completion has
      occurred: (i) engage in business other than in the normal course of its business, or (ii)
      proceed with any internal restructuring of the FSE subsidiaries or their 60% Participation
      Interests in the Joint Ventures, without Ariona’s prior written consent

10.   Security Agreements: Ariona and Resources having agreed the terms of the documents
      comprising Annexure B (Guarantee and Cession) to the Share Purchase Agreement

11.   Liability Security: Resources and Ariona having entered into an arrangement and
      executing all necessary documents that provides adequate security (which security may
      include the right for Ariona to subscribe for additional equity in Coal) in connection with
      Coal’s ability to pay and/or Resources’ ability to indemnify Ariona in respect of potential
      liabilities of Coal

12.   Affairs of Sekoko: Resources and Ariona having agreed in writing and in greater detail than
      what is set out in Schedule 3 the various acts, matters and things concerning the affairs of
      Sekoko which are contemplated in the Reconstruction Steps to be substituted for Schedule
      3 of the Share Purchase Agreement or that Schedule 3 is adequate.
                                                 35

PART 3 – New Convertible Note Facility Terms
Investment Agreement
The following is a summary of the Investment Agreement entered into on 23 July 2012 between
FSE, Ariona, BBY Nominees Pty Ltd (BBY) and Jaguar Funds Management Pty Ltd (JFM)
(Investment Agreement).

(Capitalised terms used in this summary bear the same meaning as in the Investment Agreement.)

1.      Existing Notes
        • BBY and JFM agree that from the last interest payment date prior to 29 April 2012 in
          respect of the ECNs, until the redemption of the ECNs, interest will be calculated and
          payable on a monthly basis. No interest will be paid in cash; instead, all interest will
          either be payable in Shares issued at a discount, or capitalised to be paid out on
          redemption of the ECNs.
        • All ECNs may be redeemed early.
        • Firestone will issue to BBY and JFM in total (and as between them in proportion to the
          ECNs held by them respectively) 300 million incentive options exercisable over 2 years
          at a price of A$0.025 per Share.
2.      Initial Subscription
        • Castlepines Global Equity Limited, a member of the Ariona consortium, has provided to
          FSE a letter of comfort in respect of the entire possible subscription amount of A$40.7
          million.
        • A$30.7 million will be paid into the Escrow Account once all the conditions precedent
          have been satisfied.
        • The initial subscription for and issue to Ariona of A$30.7 million of NCNs will be made
          on the 5th Business Day after the Conditions Precedent are satisfied.
3.      Escrow Arrangements
        • The Escrow Account will be established by the Escrow Agent (BBY) which will hold,
          invest and disburse the Initial Subscription Monies, and only release amounts on receipt
          of a Withdrawal Notice from Ariona.
        • Interest earned on the Initial Subscription Monies whilst held in the Escrow Account
          must be paid to Ariona.
        • Initial Subscription Monies (and interest) must be released and distributed from the
          Escrow Account as follows:
            •   an amount equal to the amount required to redeem the ECNs and pay any
                capitalised interest on them, to such account as BBY and JFM directs;
            •   the balance of the Initial Subscription Monies to FSE; and
            •   any interest accrued on Initial Subscription Monies to Ariona.
4.      Redemption of Existing Notes
        • The Escrow Agent will make the necessary payments from the Escrow Account to
          ensure the redemption of all Existing Notes, including the payment of any unpaid
          interest that has accrued and has not been satisfied by the issue of Shares.
                                              36

      • This amount is warranted not to exceed A$22.145million.
5.    Directors Nomination Rights
      • Ariona may nominate three persons to be Directors. This does not prejudice the right of
        Ariona as a shareholder of FSE to propose for election as Directors at a general meeting
        persons in addition to its three permitted nominees.
      • Ariona Nominees may be removed and replaced by Ariona from time to time.
6.    Cessation of Director Nomination Rights
      Ariona will retain the right to appoint Ariona Nominees up to Completion, and thereafter
      for as long as more than 50% of the Convertible Notes remain on issue.
7.    Conditions Precedent: The conditions precedent to be satisfied before the initial
      subscription for A$30.7 million of NCNs will occur, and their status as at the date of this
      notice, are set out in Part 4 of this Annexure A.
8.    Additional Facility
      • an Additional Facility of $10 million is available to be drawn by FSE for 12 months from
        Completion of the issue of NCNs in respect of the initial subscription by Ariona of
        A$30.7 million.
      • Draw down on the Additional Facility can be made at intervals of not less than every 3
        months, and must be for no more than next 3 months of cash requirements net of
        existing cash.
      • There are various conditions precedent to draw down of the Additional Facility,
        including as to the provision of a certificate that the amount proposed to be drawn is no
        more than sufficient, net of existing surplus cash, to fund FSE’s budgeted expenses for
        the next 3 months of operations.
      • NCNs issued under Additional Facility will have the same interest payment dates and
        Maturity Date as the NCNs issued for the initial A$30.7 million subscription
9.    Restriction
      FSE is not to use the funds received from Ariona other than in accordance with the agreed
      Budget.
10.   Effect of event of default
      Ariona may terminate its commitments under the agreement, exercise or enforce any of its
      rights under the Finance Documents, or initiate enforcement action in respect of the
      Securities.
11.   Security
      The obligations of FSE under the Investment Agreement, the Convertible Note Deed Poll
      and the Terms and Conditions of Convertible Notes are secured by a somewhat complex
      security structure in accordance with South African practice where securities are intended to
      secure transferees of secured instruments. The structure involves a South African
      incorporated special purpose vehicle owned and managed by Ariona (Security Holder).
      The Security Holder gives a limited recourse guarantee to Ariona and the holders of NCNs
      of FSE’s relevant obligations and takes a cross indemnity from FSE which is secured over
      the direct and indirect interests of FSE in the Waterberg Coal Project including by
      guarantees and securities granted by Flag and Lexshell.
                                                 37

12.     Release of securities
        To enable the establishment of the Incorporated Joint Venture, Ariona agrees that, if
        required, it will procure that the Security Holder releases and discharges:
        • those Securities given by Lexshell if it is the vehicle through which corporatisation of the
          Joint Ventures is achieved (Corporatisation Vehicle); and
        • from any other Security and any assets which are the subject matter of that security,
          which must be transferred to Lexshell (if it is the Corporatisation Vehicle) to establish
          the Incorporated JV.


Secured Convertible Note Deed Poll
Note that the Secured Convertible Note Deed Poll (a Deed Poll for the benefit of holders of NCNs
to be executed by FSE) is set out as an annexure to the Investment Agreement and will be executed
by FSE before the initial subscription of A$30.7 million for NCNs occurs under the Investment
Agreement.
The following is a summary of the Secured Convertible Note Deed Poll (deed poll)
(Capitalised terms used in this summary bear the same meaning as in the Investment Agreement.)


1.      Issue of notes on Completion Date
        On the Completion Date Ariona must be issued with 30,700,000 Notes that rank equally
        with each other. Each Note has a face value of $1.00.
2.      Issue of notes on Drawdown Date
        On each Drawdown Date specified in a Drawdown Notice, and in accordance with the
        Investment Agreement, Ariona must be issued with the number of NCNs subscribed for by
        Ariona on that Drawdown Date, up to the maximum of 10,000,000 NCNs.
3.      Rights
        Each Noteholder:
        • has the benefit of and may enforce, the deed poll against FSE; and
        • has the benefit of, takes NCNs subject to, and may enforce its rights under the Finance
          Documents.
4.      Note Terms
        Interest
        • 8% per annum
        • Payable 6 monthly (on the 6 month and 12 month anniversary of the Issue Date)
        • For the first 24 months, at the election of the Company, interest is payable in cash or
          capitalised
        • After the first 24 months, interest is payable in cash or if Company and Majority
          Noteholder agree, capitalised
        • Noteholder can on Conversion, elect to receive any outstanding interest in cash or in
          Shares.
                                              38

5.   Conversion
     • At election of Noteholder at any time prior to Maturity Date (4 years from date of issue)
     • Conversion Price - $0.025 per share (subject to adjustment for capital reorganisations).
     • Shares issued on conversion (including in respect of interest) rank equally with all other
       Shares on issue from the Conversion Date.
     • Company has no obligation to convert if it would result in Noteholder exceeding
       takeover threshold of 20% and the shareholder approval under item 7 of section 611
       obtained is no longer valid. However if the value of the NCNs (including any capitalised
       interest) being converted is greater than A$500,000 and the relevant Noteholder so
       requests, the Company must seek any necessary shareholder approval to allow the
       conversion to occur.
     • On issue of Shares on Conversion, FSE must issue a cleansing notice to the market or
       prepare and lodge with ASIC a prospectus in compliance with Chapter 6D of the
       Corporations Act.
6.   Capital Reorganisations
     • Consolidations and share splits – reorganised on same basis.
     • Issues of Shares and convertible securities – on a formula basis to preserve the effective
       value, as at the Completion Date, of converting the NCNs at 2.5 cents per Share – this
       applies to all issues (including issues of convertible securities) with an issue, exercise or
       conversion price of less than 2.5 cents per Share) not just rights issues and bonus issues.
     • Capital Reductions - on a formula basis to preserve the effective value, as at the
       Completion Date, of converting the NCNs at 2.5 cents per Share.
     • Share Buybacks - on a formula basis to preserve the effective value, as at the Completion
       Date, of converting the NCNs at 2.5 cents per Share.
7.   Redemption
     • Any Notes outstanding at Maturity Date, and which are not then subject to a
       Conversion Notice, are to be redeemed.
     • Redemption Payment is to be in Australian dollars, inclusive of any capitalised interest.
8.   Transferability
     Notes can be transferred but will not be quoted on ASX.
9.   Meetings
     • Noteholders entitled to receive all notices and accounts sent to shareholders.
     • Noteholders can attend shareholder meetings but cannot vote or speak at the meetings
       except as provided for in the Corporations Act or the ASX Listing Rules.
                                                 39

PART 4 – Conditions Precedent to NCN Issue
The following is a summary of the conditions precedent to the NCN Issue which remain to be
satisfied as at the date of this Notice of Meeting and Explanatory Memorandum

        Condition

1.      All Australian and South African regulatory approvals necessary or desirable to give effect to the
        Finance Documents having been obtained on terms acceptable to Ariona and the Company.

2.      Resolution 2 having been passed.

3.      The Company having obtained any other approval the Company must obtain to complete all the
        transactions contemplated by this document, the Convertible Note Deed Poll, or any agreement
        relating to the redemption of the ECNs, the issue of the maximum number of NCNs that may be
        issued under the Investment Agreement and the Convertible Note Deed Poll, the granting and
        enforcement of each of the Securities and the issue of Shares on conversion of the Convertible
        Notes.

4.      The Board having appointed, on the date on which E is satisfied, as directors of the Company the
        nominee(s) not exceeding three of Ariona whose names, consents to act as directors of the
        Company and profiles Ariona has provided to FSE. Ariona has advised that it only intends two
        nominees be appointed as Directors for the time being.
                                    40

                              ANNEXURE B

                  Associated entities of Ariona Company SA

No.   Name of Entity
1     Richmond Capital LLP
2     Castlepines Global Equity Limited
3     Al Nahdha Investment
4     Orlisk International Ltd
5     Issar Pty Ltd
6     Standard Bank of South Africa Limited
7     Abu Dhabi Investment Council (ADIC)
8     Starvale Holdings Pty Ltd
                                                 41

                                         ANNEXURE C


                                    INCENTIVE OPTIONS

                                 TERMS AND CONDITIONS


The Options will entitle the holders to subscribe for Shares in the Company on the following terms:

    (a) each Option entitles the holder, when exercised, to one (1) Share in the Company;

    (b) the Options will be exercisable at any time prior to 5.00pm WST two (2) years after the date
        of issue (Expiry Date). Options not exercised on or before the expiry date will
        automatically lapse;

    (c) the exercise price of each Option will be A$0.025 per Share (2.5 cents);

    (d) an Option does not confer the right to a change in exercise price or a change in the number
        of underlying securities over which the Option can be exercised;

    (e) the Option may be exercised by completing an application form for Shares (Notice of
        Exercise) delivered to the Company and received by it any time prior to the Expiry Date;

    (f) upon the exercise of an Option and receipt of all relevant documents and payment in
        cleared funds, the holder will be allotted and issued a Share ranking pari passu with the then
        issued Shares. The Company will apply for quotation of all Shares issued upon exercise of
        the Options on ASX;

    (g) a summary of the terms and conditions of the Options, including the Notice of Exercise,
        will be sent to all holders of Options when the initial holding statement is sent;

    (h) subject to the Corporations Act, the ASX Listing Rules and the Company’s constitution, the
        Options are freely transferable;

    (i) any Notice of Exercise received by the Company’s share registry on or prior to the Expiry
        Date will be deemed to be a Notice of Exercise as at the last Business Day of the month in
        which such notice is received;

    (j) there will be no participating entitlements inherent in the Options and holders will not be
        entitled to participate in new issues of capital. However, the Company will ensure that for
        the purposes of determining entitlements to any such issue, it will announce the terms of
        the issue to ASX prior to the record date in accordance with the requirements of the ASX
        Listing Rules;

    (k) if at any time the issued capital of the Company is reconstructed, all rights of an Option
        holder are to be changed in a manner consistent with the ASX Listing Rules; and

    (l) Shares issued pursuant to the exercise of an Option will be issued not more than 14 days
        after the date of the Notice of Exercise.
                      Firestone Energy Limited
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               Proxy Form

               * For your vote to be effective it must be received by 11.00am (WST) Wednesday 03 October 2012


               How to Vote on Items of Business                                              Signing Instructions
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     Proxy Form                                                                                      Please mark                 to indicate your directions

 STEP 1
               Appoint a Proxy to Vote on Your Behalf                                                                                                              XX
     I/We being a member/s of Firestone Energy Limited hereby appoint
                                                                                                                                       PLEASE NOTE: Leave this box
           the Chairman                                                                                                                 blank if you have selected the
           of the Meeting      OR                                                                                                       Chairman of the Meeting. Do not
                                                                                                                                        insert your own name(s).
     or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy
     to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as
     the proxy sees fit) at the General Meeting of Firestone Energy to be held at BDO Chartered Accountants, Hay Room, 38 Station Street,
     Subiaco, Western Australia on Friday, 05 October 2012 at 11.00am (WST) and at any adjournment of that meeting.

     Important for Resolutions 2 to 5: If the Chairman of the Meeting is your proxy and you have not directed him/her how to vote on Resolutions 2
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     the Meeting will not cast your votes on Resolutions 2 to 5 and your votes will not be counted in computing the required majority if a poll is called
     on these Resolutions. The Chairman of the Meeting intends to vote undirected proxies in favour of Resolutions 2 to 5.
            I/We acknowledge that the Chairman of the Meeting may exercise my proxy even if he/she has an interest in the outcome of that Item
            and that votes cast by him/her, other than as proxy holder, would be disregarded because of that interest.

                                                     PLEASE NOTE:         If you mark the Abstain box for an item, you are directing your proxy not to vote on your
  STEP 2
                Items of Business                         behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.

                                                                                                                                                         st        in
                                                                                                                                                       in        ta
                                                                                                                                           Fo
                                                                                                                                             r
                                                                                                                                                    Aga        bs
                                                                                                                                                              A

     Resolution 1     Approval of Transfer of Shares and Acquisition of Relevant Interest


     Resolution 2     Approval of Issue of New Convertible Notes and Issue of Shares on Conversion of New Convertible
                      Notes

     Resolution 3     Approval of Issue of Unlisted Incentive Options


     Resolution 4     Subsequent Approval of Share Issue


     Resolution 5     Subsequent Approval of Convertible Note Issue




     The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

  SIGN         Signature of Securityholder(s)                           This section must be completed.
     Individual or Securityholder 1                        Securityholder 2                                          Securityholder 3




     Sole Director and Sole Company Secretary              Director                                                  Director/Company Secretary

                                                                                  Contact
     Contact                                                                      Daytime
     Name                                                                         Telephone                                              Date        /         /


      FSE                                                 999999A
                                        This is

                                  ANNEXURE D
                                           to

                     NOTICE OF GENERAL MEETING
                                 dated 30 August 2012

                                           of

                      FIRESTONE ENERGY LIMITED




                   INDEPENDENT EXPERT'S REPORT




              This is an important document and requires your attention.
 You should read this document in its entirety. You may wish to consult your financial
adviser about its contents. If you are in doubt as to how to vote, you should seek advice
      from your accountant, solicitor or other professional adviser prior to voting.
FIRESTONE ENERGY LIMITED
Independent Expert’s Report

9 August 2012
Financial Services Guide


9 August 2012


BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (“we” or “us” or “ours” as appropriate) has
been engaged by Firestone Energy Limited (“Firestone”) to provide an independent expert?s report on
the proposal to issue a convertible note to Ariona Company SA replacing the current convertible notes
and the proposal for Sekoko Resources (Pty) Ltd to sell 800 million shares in Firestone to Ariona
Company SA for A$8 million. You will be provided with a copy of our report as a retail client because
you are a shareholder of Firestone.

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BDO CORPORATE FINANCE (WA) PTY LTD
                                              Financial Services Guide
                                                                Page 2



Fees, commissions and other benefits that we may receive
We charge fees for providing reports, including this report. These fees are negotiated and agreed with
the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed
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Except for the fees referred to above, neither BDO, nor any of its directors, employees or related
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Other Assignments
In June 2010, BDO was engaged by Firestone to prepare an independent experts report on the
transaction whereby Firestone announced it had entered into an agreement with Sekoko Coal Limited
to acquire a 60% interest in a further two properties in the Waterberg Coalfield.

BDO Audit and Assurance (WA) Pty Ltd is the appointed Auditor of Firestone. We do not consider that
this impacts on our independence in accordance with the requirements of Regulatory Guide 112
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This is a draft document and must not be relied on or disclosed or referred to in any
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suffered in connection with the use of this document.
TABLE OF CONTENTS


1.             Introduction                                                                                                                                   2

2.             Summary and Opinion                                                                                                                            3

3.             Scope of the Report                                                                                                                            6

4.             Outline of the Funding Facility & Share Transfer                                                                                               9

5.             Profile of Firestone Energy Limited                                                                                                            12

6.             Profile of Ariona Company SA                                                                                                                   18

7.             Economic analysis                                                                                                                              19

8.             Industry analysis                                                                                                                              20

9.             Valuation approach adopted                                                                                                                     22

10.            Valuation of Firestone                                                                                                                         23

11.            Valuation of consideration                                                                                                                     32

12.            Is the Funding Facility fair?                                                                                                                  32

13.            Is the Funding Facility reasonable?                                                                                                           33

14.            Assessment of the Share Transfer                                                                                                               36

15.            Conclusion                                                                                                                                     38

16.            Sources of information                                                                                                                         39

17.            Independence                                                                                                                                   39

18.            Qualifications                                                                                                                                 40

19.            Disclaimers and consents                                                                                                                       40

Appendix 1 – Glossary of Terms                                                                                                                                42

Appendix 2 – Valuation Methodologies                                                                                                                          44

Appendix 3 – Independent Valuation Report prepared by Venmyn                                                                                                  46




BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 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 Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International
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9 August 2012


The Directors
Firestone Energy Limited
Tempo Offices, Suite B9
431 Roberts Road
Subiaco
WA 6008




Dear Sirs

INDEPENDENT EXPERT’S REPORT
    1. Introduction
On 7 May 2012, Firestone Energy Limited (“Firestone” or “the Company”) announced that it had entered
into a conditional term sheet with Ariona Company SA (“Ariona”) under which Ariona will provide $30.7
million (revised to $40.7 million by a further announcement on 25 July 2012) to the Company under a
secured convertible note facility with a conversion price of $0.025 per share replacing the current
convertible notes (“Funding Facility”).

In addition, the Company announced that Ariona will acquire up to 800 million shares in Firestone from
Sekoko Resources (Pty) Ltd (“Sekoko”), its major shareholder, for $8 million (“Share Transfer”). This
represents approximately 25% of the issued share capital of the Company.
Firestone is seeking the approval of its non-associated shareholders (“Shareholders”) under section 611
item 7 of the Corporations Act 2001 (“the Act”), because separately and together the:

        Funding Facility may result in Ariona holding more than 20% of the issued capital in Firestone; and
        Share Transfer may result in Ariona holding more than 20% of the issued capital in Firestone.

The two proposed transactions are not conditional on each other.

Our report will accompany a Notice of Meeting (“NOM”) and Explanatory Memorandum (“EM”).




                                                                                                          2
    2. Summary and Opinion
        2.1     Purpose of the report
The directors of Firestone have requested that BDO Corporate Finance (WA) Pty Ltd (“BDO”) prepare an
independent experts report (“our Report”) to express two opinions. The first, as to whether or not the
Funding Facility, under which shares may be issued to Ariona on the conversion of the convertible notes, is
fair and reasonable to the Shareholders of Firestone (“Opinion One”), and the second as to whether the
advantages of the Share Transfer outweigh the disadvantages (“Opinion Two”).

Our Report is prepared pursuant to section 208 (Need for member approval for financial benefit) and 611
of the Act and is to be included in the NOM and EM for Firestone in order to assist the Shareholders in
their decision whether to approve the Funding Facility and Share Transfer.

        2.2     Approach
Our Report has been prepared having regard to Australian Securities and Investments Commission (“ASIC”)
Regulatory Guide 111 (“RG 111”), „Content of Experts Reports and Regulatory Guide 112 (“RG 112”)
„Independence of Experts.

In arriving at Opinion One, we have assessed the terms of the Funding Facility as outlined in the body of
this report. We have considered:

    How the value of the shares being acquired compares to the value of the consideration to be paid on
    conversion;
    The likelihood of a superior alternative offer being available to Firestone;
    Other factors which we consider to be relevant to the Shareholders in their assessment of the Funding
    Facility; and
    The position of Shareholders should the Funding Facility not proceed.
In arriving at Opinion Two, we have assessed the terms of the Share Transfer as outlined in the body of
this report. We have considered:
    The advantages and disadvantages of the Share Transfer for the Shareholders;
    Whether a premium for control is being offered in relation to the transfer of Firestone shares and
    whether this is appropriate;
    Other factors which we consider to be relevant to the Shareholders in their assessment of the Share
    Transfer; and
    The position of Shareholders should the Share Transfer not proceed.

        2.3     Opinion
Opinion One

We have considered the terms of the Funding Facility as outlined in the body of this report and have
concluded that the Funding Facility is fair and reasonable to Shareholders.

Opinion Two

We have considered the terms of the Share Transfer as outlined in the body of this report and have
concluded that the advantages of the Share Transfer outweigh the disadvantages of the Share Transfer for
Shareholders.



                                                                                                            3
        2.4     Fairness
Opinion One – Funding Facility

In Section 11 we determined how the Funding Facility consideration compares to the value of a Firestone
share as detailed hereunder.
                                                                            Low              High
                                                      Reference                $               $
Value of a Firestone share                               10.3              0.018           0.018
Consideration: Funding Facility                           11               0.025           0.025

The above valuation ranges are graphically presented below:



        Value of a Firestone share



   Consideration: Funding Facility


                                  0.000     0.005     0.010       0.015    0.020     0.025          0.030


The above pricing indicates that, in the absence of any other relevant information, the Funding Facility is
fair for Shareholders. We also consider the interest rate is representative of an arms length interest rate
when compared to other convertible notes issued.



        2.5     Reasonableness
Opinion One – Funding Facility

We have considered the analysis in Section 13 of this report, in terms of both:

    advantages and disadvantages of the Funding Facility; and
    alternatives, including the position of the Shareholders if the Funding Facility does not proceed.

In our opinion, the position of Shareholders if the Funding Facility is approved is more advantageous than
the position if the Funding Facility is not approved. Accordingly, in the absence of any other relevant
information we consider that the Funding Facility is reasonable for Shareholders.

The respective advantages and disadvantages considered are summarised below:




                                                                                                            4
ADVANTAGES AND DISADVANTAGES

Section            Advantages                              Section       Disadvantages

                                                                         Dilution effect to Firestone's existing
13.4               The proposed Funding Facility is fair   13.5
                                                                         shareholders

13.4               Access to funding                       13.5          Reduced control

                   Avoids the possibility of Firestone
13.4
                   becoming insolvent.

                   Introduction of Ariona's experience
13.4
                   and expertise in the resource sector


Other key matters we have considered include:
Section             Description

13.1                Alternative proposals

13.2                The practical level of control

13.3                Consequences of not approving the Funding Facility


Opinion Two – Share Transfer

We have considered the analysis in Section 14 of this report, in terms of both:

       advantages and disadvantages of the Share Transfer; and
       alternatives, including the position of the Shareholders if the Share Transfer does not proceed.

In our opinion, the advantages of the Share Transfer outweigh the disadvantages of the Share Transfer for
Shareholders.

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES

Section            Advantages                              Section       Disadvantages

14.6               Funding for the Waterberg JV            14.7          Reduced control

                   Introduction of Ariona's experience
14.6
                   and expertise in the resource sector

Other key matters we have considered include:
Section             Description

14.1                Valuation consideration

14.2                Is Sekoko receiving a premium for control?

14.3                Alternative proposals

14.4                The practical level of control

14.5                Consequences of not approving the Share Transfer




                                                                                                                   5
    3. Scope of the Report
    3.1     Purpose of the Report
Funding Facility

Section 606 of the Corporations Act expressly prohibits the acquisition of shares by a party if that
acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued
shares of a public company, unless a full takeover offer is made to all shareholders.

Following the Funding Facility alone, Ariona may hold a maximum of 41.7% of the issued capital of
Firestone, if all the convertible notes are converted to shares. If the Share Transfer is also approved, then
Ariona may hold a maximum of 56.7% of the issued capital of Firestone, if all the convertible notes are
converted to shares.
Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such
shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in
favour of the resolution by any party who is associated with the party acquiring the shares, or by the party
acquiring the shares. Section 611 states that shareholders of the company must be given all information
that is material to the decision on how to vote at the meeting.

ASIC Regulatory Guide 74 deals with "Acquisitions Agreed to by Shareholders". It states that the obligation
to supply shareholders with all information that is material can be satisfied by the non-associated
directors of Firestone, by either:

    undertaking a detailed examination of the proposed Share Transfer themselves, if they consider that
    they have sufficient expertise; or
    by commissioning an Independent Expert Report.
The directors of Firestone have commissioned this Independent Expert's Report to satisfy this obligation.

We note that approval of shareholders is also sought under Section 208 “Need for member approval for
financial benefit” since there is a financial benefit in the proposal to issue convertible notes to Ariona
which will pay interest at 8% per annum and Ariona is expected to become a related party in the future.
Guidance on this is provided by ASIC Regulatory Guide 76 “Related Party Transactions” and ASIC
Regulatory Guide 111.

Share Transfer

Section 606 of the Corporations Act expressly prohibits the acquisition of shares by a party if that
acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued
shares of a public company, unless a full takeover offer is made to all shareholders.

Following the Share Transfer alone, Ariona may hold a maximum of 25.7% of the issued capital of
Firestone. If the Funding Facility is also approved, then Ariona may hold a maximum of 56.7% of the issued
capital of Firestone, if all the convertible notes are converted to shares.

Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such
shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in
favour of the resolution by any party who is associated with the party acquiring the shares, or by the party
acquiring the shares. Section 611 states that shareholders of the company must be given all information
that is material to the decision on how to vote at the meeting.




                                                                                                             6
Regulatory Guide 74 issued by ASIC deals with "Acquisitions Agreed to by Shareholders". It states that the
obligation to supply shareholders with all information that is material can be satisfied by the non-
associated directors of Firestone, by either:

    undertaking a detailed examination of the proposed Share Transfer themselves, if they consider that
    they have sufficient expertise; or
    by commissioning an Independent Expert's Report.
The directors of Firestone have commissioned this Independent Expert's Report to satisfy this obligation.

    3.2     Regulatory guidance
Neither the Listing Rules nor the Act defines the meaning of “fair and reasonable”. In determining
whether the Funding Facility and Share Transfer are fair and reasonable, we have had regard to the views
expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent
expert should consider to assist security holders to make informed decisions about transactions.

This regulatory guide suggests that where the transaction is a control transaction, the expert should focus
on the substance of the control transaction rather than the legal mechanism to affect it. RG 111 suggests
that where a transaction is a control transaction, it should be analysed on a basis consistent with a
takeover bid.

In our opinion, the Funding Facility is a control transaction as defined by RG 111 since Ariona will gain
voting shares in Firestone if the convertible notes are converted to shares and we have therefore assessed
the Funding Facility to consider whether, in our opinion, it is fair and reasonable to Shareholders.

RG111.42 requires that we identify the advantages and disadvantages of the Share Transfer to
Shareholders.

RG 111.43 suggests that an expert should assess whether a premium for control will be provided to the
vendor of any shares. RG 111.44 suggests that the greater the control premium, the greater the
advantages of the transactions to the non-associated shareholders would need to be to support a finding
that the advantages of the proposal outweighed the disadvantages.

RG 111.45 sets out that the expert should inquire whether further transactions are planned between the
entity, the vendor or their associates and if any are contemplated determine if these are at arm's length.
RG 111.46 also suggests that an expert should consider whether the transaction will deter the making of a
takeover bid.

In relation to the matter of the Funding Facility being a transaction providing a financial benefit to a
related party, RG111.63 states that generally an expert need only conduct one analysis of whether the
transaction is „fair and reasonable?, even if the report has been prepared for a reason other than the
transaction being a related party transaction.

    3.3     Adopted basis of evaluation
Opinion One – Funding Facility
RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the
value of the securities subject of the offer. This comparison should be made assuming a knowledgeable
and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at
arm's length. When considering the value of the securities subject of the offer in a control transaction the
expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a


                                                                                                            7
transaction is reasonable if it is fair. It might also be reasonable if despite being „not fair the expert
believes that there are sufficient reasons for security holders to accept the offer in the absence of any
higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

    A comparison between the conversion price of the convertible note and the value of each Firestone
    share being acquired (fairness – see Section 12 “Is the Funding Facility Fair?”); and
    An investigation into other significant factors to which Shareholders might give consideration, prior to
    approving the resolution, after reference to the value derived above (reasonableness – see Section 13
    “Is the Funding Facility Reasonable?”).
Opinion Two – Share Transfer

RG 111 suggests that the main purpose of an independent expert's report is to adequately deal with the
concerns that could reasonably be anticipated of those persons affected by the transaction.
Having regard to RG 111, we have completed our Report as follows:

    An investigation into the advantages and disadvantages of the Share Transfer (section 14);
    An analysis of the matter of any premium for control received by Sekoko (Section 14); and
    An analysis of any other issues that could be reasonably anticipated to concern Shareholders as a
    result of the Share Transfer (Section 14).

This assignment is a Valuation Engagement as defined by APES 225 Valuation Services. A Valuation
Engagement means an engagement or assignment to perform a valuation and provide a valuation report
where we determine an estimate of value of the Company by performing appropriate valuation procedures
and where we apply the valuation approaches and methods that we consider to be appropriate in the
circumstances.




                                                                                                              8
    4. Outline of the Funding Facility & Share Transfer
On 7 May 2012, Firestone announced it had agreed the terms for a $30.7 million (revised to $40.7 million
by a further announcement dated 25 July 2012) funding facility to be provided by Ariona. In addition, the
Company announced that Ariona has agreed to acquire up to 800 million shares in Firestone from Sekoko
for $8 million.

On 29 June 2012, Firestone announced that Sekoko and Ariona have signed a formal Share Sale and
Purchase Agreement (“SPA”).

Funding Facility

Firestone has entered into a conditional term sheet with Ariona under which Ariona will provide $40.7
million to the Company under a secured convertible note facility replacing the current convertible notes.
The terms of the convertible notes will be:


 Term                             4 years

 Coupon                           8.0% pa

 Interest payments                Payable half yearly. For the first 24 months interest is to be paid in
                                  cash or capitalised at the election of Firestone and after the first 24
                                  months interest to be paid in cash or capitalised as agreed by the
                                  Company or Ariona

 Conversion price                 $0.025 per share

 Conversion terms                 Convert into ordinary shares at the election of the noteholder



Ariona will be entitled to nominate up to three directors to the Board of Firestone.

Firestone will, subject to necessary shareholder approval, offer the existing convertible note (“ECN”)
holders who agree to early redemption of their notes, incentive options exercisable over 2 years at a price
of $0.025 per share. The number of incentive options to be issued to an accepting ECN holder shall be pro
rata to its holding of ECNs on the basis that 300 million incentive options would be issued in the case of
100% acceptance.



Share Transfer

Firestone has been informed by Sekoko, its major shareholder, that Sekoko and Ariona have signed a
formal SPA in which Ariona will acquire from Sekoko a minimum of 622 million shares in Firestone for
$6.22 million up to a maximum of 800 million shares in Firestone for $8 million. This represents
approximately 20.0% up to a maximum of 25.7% of the issued capital of Firestone.

Ariona will also acquire a 10% interest in the Waterberg JV from Sekoko for approximately $20.5 million,
reducing Sekoko's interest to 30%.

The transaction will include Ariona undertaking to procure project funding for the development of the
Waterberg Joint Venture of up to US$400 million.




                                                                                                            9
Ariona agrees that until project funding of at least US$400 million has been offered to the Waterberg JV,
Ariona will not, without Sekoko's prior written consent, sell or transfer to a third party, any of its
Firestone shares or its JV interest.

Ariona obtain the right to nominate up to three persons to be directors of Firestone.



As a result of the Share Transfer, Ariona will be the largest shareholder in the Company and the ownership
of the Waterberg JV will be:

 Firestone                                  60%

 Sekoko                                     30%

 Ariona                                     10%




The capital structure below is shown under three scenarios:

          If only the Funding Facility is approved
          If only the Share Transfer is approved
          If both the Funding Facility and the Share Transfer are approved



Scenario 1: If only the Funding Facility is approved

The capital structure following the completion of the Funding Facility will be as follows:

 Firestone                         Existing shareholders           Sekoko                   Ariona                    Total
                                     # shares         %       # shares       %         # shares       %         # shares        %
 Current shares                   2,061,233,550    66.2%   1,052,645,091    33.8%                -   0.0%     3,113,878,641    100%
 Conversion of notes -
 Facility at face value                 -                        -                   1,628,000,000            1,628,000,000
 Conversion of notes -
 capitalisation of interest for
 4 years                                -                        -                     600,030,414              600,030,414
 Total share holding              2,061,233,550    38.6%   1,052,645,091    19.7%   2,228,030,414    41.7%   5,341,909,055     100%



Following the completion of the Funding Facility, Ariona could hold a maximum of 41.7% of the issued
capital.
The calculation above assumes that the convertible notes, including capitalisation of interest over the full
4 year term, are all converted into shares.

Note that Sekoko currently own 852,645,091 shares plus an additional 200 million shares held beneficially
by BBY Nominees Pty Ltd.

Note also that the calculation above does not include the 68,253,968 shares to be issued to BBY under the
terms of a subscription agreement and associated A$2.2 million facility entered into on 26 April 2012.
These shares will not be issued until after the shareholder meeting.




                                                                                                                          10
Scenario 2: If only the Share Transfer is approved

The capital structure following the completion of the Share Transfer will be as follows:

 Firestone                       Existing shareholders           Sekoko                  Ariona                     Total
                                   # shares         %       # shares       %        # shares        %         # shares        %

 Current shares                 2,061,233,550    66.2%   1,052,645,091    33.8%        -           0.0%    3,113,878,641     100%
 Transfer of shares to Ariona         -                  (800,000,000)            800,000,000                    -
 Total share holding            2,061,233,550    66.2%   252,645,091      8.1%    800,000,000      25.7%   3,113,878,641     100%



Following the completion of the Share Transfer, Ariona will hold approximately 25.7% of the issued
capital.

Sekoko will continue hold its remaining 8.1% shareholding.
Note also that the calculation above does not include the 68,253,968 shares to be issued to BBY under the
terms of a subscription agreement and associated A$2.2 million facility entered into on 26 April 2012.
These shares will not be issued until after the shareholder meeting.



Scenario 3: If both the Funding Facility and the Share Transfer are approved

The capital structure following the completion of the Funding Facility and Share Transfer will be as
follows:
 Firestone                       Existing shareholders           Sekoko                   Ariona                    Total
                                   # shares         %       # shares        %        # shares        %        # shares        %
 Current shares                 2,061,233,550    66.2%   1,052,645,091    33.8%         -           0.0%    3,113,878,641    100%
 Conversion of notes                  -                        -                  2,228,030,414             2,228,030,414
 Total share holding            2,061,233,550    38.6%   1,052,645,091    19.7%   2,228,030,414    41.7%   5,341,909,055     100%
 Transfer of shares to Ariona         -                  (800,000,000)             800,000,000                    -
 Total share holding            2,061,233,550    38.6%   252,645,091      4.7%    3,028,030,414    56.7%   5,341,909,055     100%



Following the completion of the Funding Facility and Share Transfer, Ariona could hold a maximum of
56.7% of the issued capital.

This assumes that the convertible notes, including any capitalisation of interest, are all converted into
shares.

If all of the current options on issue and the options proposed to be issued to ECN holders are exercised,
Ariona's maximum share holding will be 50.3%.

Sekoko will continue hold its remaining 4.7% shareholding.

Note also that the calculation above does not include the 68,253,968 shares to be issued to BBY under the
terms of a subscription agreement and associated A$2.2 million facility entered into on 26 April 2012.
These shares will not be issued until after the shareholder meeting.




                                                                                                                        11
      5. Profile of Firestone Energy Limited
5.1     History
Firestone is a Perth based coal exploration company which is co-listed on the ASX and the Johannesburg
Stock Exchange (“JSE”). The Company was incorporated on 11 January 1993 and listed on the ASX on 24
June 1993. Firestone's head office is situated in Subiaco, Western Australia.

In January 2006, Administrators were appointed to the Company and in July 2006, the Administrators and
the Company entered into an amended Deed of Company Arrangement (“DOCA”). The Administrators
accepted a proposal by an investment group for the restructuring and recapitalisation of the Company,
including the settlement of all creditor claims. The proposal was accepted by creditors and the DOCA was
subsequently executed. At a meeting of shareholders held in September 2006, the shareholders of the
Company approved the various resolutions required to complete the restructuring and recapitalisation of
the Company. Following the meeting, on 17 October 2006, the DOCA was terminated and the management
of the Company was returned to the new Directors. As part of the administration process, a large
proportion of the Company's assets were sold to a third party including tenements, mining information,
property, plant and equipment, subsidiary shares and properties.

The Company changed its name to Firestone Energy Limited in December 2007, from the previous
Centralian Minerals Limited. Firestone became dual listed on the JSE in October 2008.

On 18 June 2008, Firestone announced that it had agreed with Sekoko to acquire an interest in a 500
million tonne coal project in the Waterberg Coalfield of South Africa. The agreement was to conditionally
acquire up to a 55% interest in the T1 Properties.

Shareholder approval was granted for the transaction on 18 September 2008 and the Joint Venture (“JV”)
Agreement was finalised on 24 October 2008 (“the Waterberg JV”).

During October 2010, an addendum to the Waterberg JV agreement was signed giving Firestone the
opportunity to increase its potential interest in the T1 Joint Venture from 55% to a maximum of 60%. To
do so, Firestone agreed to pay Sekoko a production royalty fee of ZAR0.50 per tonne of coal sold from the
Waterberg properties up to a maximum aggregate amount of ZAR45 million.

5.2     Waterberg Coal Project
Firestone's current project is the Waterberg coal project in the Limpopo Province of South Africa.
Firestone currently holds a 60% interest in the Waterberg JV.




                                                                                                         12
The project consists of eight farms in the Waterberg coalfield totalling 7,979 hectares. The identified area
over the Smitspan farm (first phase base case) indicates a mine layout covering 507 hectares extending for
3.5km east to west and 1.8km north to south. This area contains 258Mt (ROM) which will produce 120Mt of
domestic coal for local power stations and a further coal of export quality coal with an average yield of
67% on selective mining basis.

Reserves and resources
Firestone has saleable coal reserves of 120Mt where 51Mt are proven and 69Mt are probable.

Life of mine
21 years at an average stripping ratio of 2.1 on saleable tonnes.

Status
Firestone's flagship Waterberg project completed a Bankable Feasibility Study of which the definitive
feasibility study was completed in October 2010 and the off-take agreement with Eskom Holdings Limited
(“Eskom”) was signed in January of 2011. Funding to construct the mine is currently being raised. The
mining right application was submitted in July 2010 and was approved at the regional level by the
Department of Mineral Resources (“DMR”) in June 2011. All supporting documents including Environmental
Impact Assessments and Social Labour Plan were submitted with the Mining Right application.

In April 2012, Sekoko signed a Memorandum of Understanding (“MoU”) for a Coal Supply Agreement with
Africas largest power utility, Eskom to supply thermal coal from its Waterberg Coal Project in the
Lephalale area, Limpopo, to Eskom power stations in the Mpumalanga Province.

Both parties have agreed that, upon compliance of the terms and conditions set out in the MoU, the
parties will enter into a Coal Supply Agreement containing enabling provisions for the Waterberg JV to
supply a minimum of 10Mt of thermal coal on a Free on Rail basis annually to Eskoms two designated
power stations in the Mpumalanga area for a minimum period of thirty years. The production of coal will
commence in 2014 and will ramp up over a period of five years to 10Mt per annum.

A further Bankable Feasibility Study is now underway which is proposing a larger mine.

Capital expenditure

The initial study estimated ZAR0.5billion (A$71.4 million) to establish the first phase of the operation
while the net present value (“NPV”) was estimated between ZAR300 and ZAR500 million (A$42.8 to A$71.4
million). The capital expenditure and NPV of the revised study are not known at this time.




                                                                                                         13
5.3      Historical Balance Sheet
                                                                Reviewed as at       Audited as at      Audited as at
Firestone - Statement of Financial Position                          31-Dec-11           30-Jun-11         30-Jun-10
                                                                              $                   $                 $
CURRENT ASSETS
Cash and cash equivalents                                               883,636          1,892,188          2,130,542
Trade and other receivables                                              19,634             62,110           420,031
Prepayments                                                               5,776                   -                 -
TOTAL CURRENT ASSETS                                                   909,046          1,954,298         2,550,573


NON-CURRENT ASSETS
Property, plant and equipment                                         4,788,576          5,374,513          3,635,535
Interest in joint venture                                            76,911,782         85,197,758         75,849,117
Receivables                                                             968,168            108,618           147,119
TOTAL NON-CURRENT ASSETS                                           82,668,526          90,680,889        79,631,771


TOTAL ASSETS                                                       83,577,572          92,635,187        82,182,344


CURRENT LIABILITIES
Trade and other payables                                              2,384,713          3,432,033          1,958,093
Payable to JV partner                                                 3,029,559                   -                 -
Convertible note                                                      8,688,525          1,330,587          1,531,394
TOTAL CURRENT LIABILITIES                                          14,102,797           4,762,620         3,489,487


NON-CURRENT LIABILITIES
Convertible note                                                     12,139,521         20,372,463         14,530,114
TOTAL NON-CURRENT LIABILITIES                                      12,139,521          20,372,463        14,530,114




TOTAL LIABILITES                                                   26,242,318          25,135,083        18,019,601


NET ASSETS                                                         57,335,254          67,500,104        64,162,743


EQUITY
Issued capital                                                       75,402,271         73,135,309         62,704,850
Reserves                                                            (6,320,788)          3,879,461          6,210,265
Accumulated losses                                                 (11,746,229)         (9,514,666)       (4,752,372)
TOTAL EQUITY                                                       57,335,254          67,500,104        64,162,743

Source: Firestone’s reviewed accounts for the half-year ended 31 December 2011 and 2011 Annual Report




                                                                                                                    14
5.4     Historical Statement of Comprehensive Income
                                                                        Reviewed half-
                                                                               year to    Audited year to    Audited year to
Firestone - Statement of Comprehensive Income
                                                                            31-Dec-11          30-Jun-11          30-Jun-10
                                                                                     $                  $                  $
Continuing operations
  Revenue                                                                       27,854             57,894             62,386
  Other income                                                                  12,917             20,877             28,863


  Profit/(loss) on disposal of PP&E                                                  -             (3,521)                 -
  Foreign exchange gain/(loss)                                                       -              3,631            144,762
  Occupancy costs                                                              (13,800)           (73,600)           (76,242)
  Legal fees                                                                 (176,456)           (740,755)          (642,791)
  Administration costs                                                       (286,670)           (407,364)          (542,641)
  Travel and accommodation                                                     (65,793)          (175,521)          (218,903)
  Directors fees                                                             (130,004)           (253,679)          (252,911)
  Employee and consultant costs                                                 (6,530)          (173,618)          (420,075)
  Listing and share registry costs                                           (118,916)           (278,057)          (237,201)
  Finance costs                                                             (1,474,164)        (2,738,581)        (1,281,555)
(Loss) before income tax                                                   (2,231,562)        (4,762,294)        (3,436,308)
  Income tax benefit/(expense)                                                       -                  -                  -
(Loss) from continuing operations                                          (2,231,562)        (4,762,294)        (3,436,308)


Loss attributable to the members of Firestone Energy Limited               (2,231,562)        (4,762,294)        (3,436,308)


Other comprehensive income
Foreign currency translation reserve                                       (10,200,250)        (2,330,804)           433,349


Total comprehensive loss                                                 (12,431,812)         (7,093,098)        (3,002,959)

Source: Firestone’s reviewed accounts for the half-year ended 31 December 2011 and 2011 Annual Report


5.5     Capital Structure
The share structure of Firestone as at 2 August 2012 is outlined below:


                                                               Number
 Total ordinary shares on issue                       3,113,878,641
 Top 20 shareholders                                  2,290,835,256
 Top 20 shareholders - % of shares on issue                    73.57%

Source: Computershare




                                                                                                                         15
The range of shares held in Firestone as at 2 August 2012 is as follows:


                                                      Number of      Number of Shares          Percentage of
 Range of Shares Held                               Shareholders                                Issued Shares

 1 - 1,000                                                 2,333              1,006,462                 0.03%
 1,001 - 5,000                                             1,639              5,046,193                 0.16%
 5,001 - 10,000                                            1,350            67,753,926                  2.18%
 10,001 - 100,000                                            978           325,058,934                 10.44%
 100,001 - and over                                          178          2,715,013,126                87.19%
 TOTAL                                                     6,478         3,113,878,641                100.00%

Source: Computershare

The ordinary shares held by the most significant shareholders as at 2 August 2012 are detailed below:
                                                Number of Shares          Percentage of
 Name                                                       Held           Issued Shares

 Sekoko Resources Pty Ltd                            852,645,091                 27.38%
 BBY Nominees Pty Ltd                                365,023,979                 11.72%
 Computershare Company Nominees Limited              375,455,596                 12.06%
 Linc Energy Limited                                 283,336,423                  9.10%
 Bell Potters Nominees Limited                        76,500,000                  2.46%
 Subtotal                                          1,952,961,089                 62.72%
 Others                                            1,160,917,552                 37.28%
 Total ordinary shares on Issue                  3,113,878,641                 100.00%

Source: Computershare

Note that Sekoko own an additional 200 million shares held beneficially by BBY Nominees Pty Ltd. Sekoko
effectively hold 33.8% of the current issued capital.


The Firestone unlisted options as at 2 August 2012 are outlined below:


Number of Unlisted Options        Expiry Date       Exercise Price ($)     Cash raised if exercised
30,000,000                        30-Nov-12         0.05                   $1,500,000
110,000,000                       30-M ay-13        0.06                   $6,600,000
96,904,767                        30-Jun-13         0.06                   $5,814,286
25,875,000                        30-Jun-14         0.06                   $1,552,500
48,395,000                        31-M ay-14        0.04                   $1,935,800
311,174,767                                                                $17,402,586

Source: Computershare




                                                                                                                16
The Firestone listed options on issue as at 2 August 2012 are outlined below:


Number of Listed Options        Expiry Date            Exercise Price ($)    Cash raised if exercised
39,370,000                      31-M ay-14             0.04                  $1,574,800
39,370,000                                                                   $1,574,800

Source: Computershare


5.6     Convertible notes
As at the date of this report, Firestone had the following convertible notes on issue:


                                Face
                 Number     value per   Total Face     Redemption/                                 Conversion      Balance to
 Date of issue   of Notes        note        Value      Conversion       Balance   Maturity Date        price         convert
                                   $              $              $             $                            $
   02-Oct-09       12        500,000     6,000,000                     6,000,000     02-Oct-12          0.0400   150,000,000
   16-Nov-09        3        500,000     1,500,000                     1,500,000    16-Nov-12           0.0400    37,500,000
   18-Dec-10        3        500,000     1,500,000                     1,500,000    16-Mar-13           0.0400    37,500,000
   21-Jan-10        3        500,000     1,500,000                     1,500,000    04-Feb-13           0.0400    37,500,000
   23-Feb-10        3        500,000     1,500,000                     1,500,000    03-Mar-13           0.0400    37,500,000
   16-Mar-10        3        500,000     1,500,000                     1,500,000    16-Mar-13           0.0400    37,500,000
   30-Apr-10        3        500,000     1,500,000                     1,500,000     30-Apr-13          0.0400    37,500,000
   04-Jun-10        1        500,000         500,000                     500,000     04-Jun-13          0.0400    12,500,000
   04-Jun-10        4        100,000         400,000                     400,000     04-Jun-13          0.0400    10,000,000
   13-Jul-10        9        100,000         900,000                     900,000     13-Jul-13          0.0400    22,500,000
   08-Nov-10        6        100,000         600,000                     600,000    08-Nov-13           0.0249    24,096,386
   22-Nov-10        6        100,000         600,000                     600,000    23-Nov-13           0.0249    24,096,386
   22-Dec-10        6        100,000         600,000                     600,000    22-Dec-13           0.0250    24,000,000
   23-Jan-11        6        100,000         600,000                     600,000     24-Jan-14          0.0233    25,751,073
   22-Feb-11        9        100,000         900,000                     900,000    22-Feb-14           0.0221    40,723,982
   24-May-11        6        100,000         600,000                     600,000    24-May-14           0.0200    30,000,000
   22-Jun-11        6        100,000         600,000      (300,000)      300,000     22-Jun-14          0.0200    15,000,000
   19-Oct-11        3        100,000         300,000                     300,000     19-Oct-14          0.0200    15,000,000
                                        21,600,000       (300,000)    21,300,000                                 618,667,826




                                                                                                                    17
6. Profile of Ariona Company SA
Background

Ariona Company SA is a special purpose vehicle incorporated in the Seychelles (IBC number 061983) for the
purpose of „investment in mining opportunities. It does not carry on any other business activities save for
investment in suitable mining opportunities.

Arionas only asset is its investment in the Waterberg Joint Venture. Ariona has a single director named as
Mr Richard Maclennan and has no employees.

Ariona is owned by a consortium of investors as set out in the table below.



 Name of entity

 Richmond Capital LLP
 Castlepines Global Equity Limited
 Al Nahdha Investment
 Orlisk International Ltd
 Issar Pty Ltd
 Standard Bank of South Africa Limited
 Abu Dhabi Investment Council
 Starvale Holdings Pty Ltd




                                                                                                         18
 7. Economic analysis
7.1             Current Economic Conditions
Having picked up in the early months of 2012, growth in the world economy has since softened. Current
assessments are that global GDP will grow at no more than average pace in 2012. Most commodity prices
have declined, which has helped to reduce inflation and provided scope for some countries to ease
macroeconomic policies. Australia's terms of trade peaked nearly a year ago, though they remain
historically high.

China's growth has moderated to a more sustainable pace, but does not appear to be slowing further.
Conditions in other parts of Asia have recovered from the effects of last year's natural disasters, though
the ongoing trend is unclear and could be dampened by the effects of slower growth outside the region.
Growth in the United States continues, but at only a modest pace. The most significant area of weakness
continues to be Europe, where economic activity has been contracting and policymakers confront the very
difficult task of seeking to put both bank and sovereign balance sheets onto a sound footing, while
promoting conditions for improved long-term growth.

Financial markets have responded positively to signs of progress, but Europe will remain a potential source
of adverse shocks for some time. Low appetite for risk has seen long-term interest rates faced by highly
rated sovereigns, including Australia, decline to exceptionally low levels. Nonetheless, capital markets
remain open to corporations and well-rated banks and Australian banks have had no difficulty accessing
funding, including on an unsecured basis. Share markets have remained volatile, though in net terms they
have generally risen over the past couple of months.

In Australia, most indicators suggest growth close to trend overall. Labour market data show moderate
employment growth, even with job shedding in some industries, and the rate of unemployment has thus
far remained low.

Inflation remains low, with underlying measures near 2 per cent over the year to June, and headline CPI
inflation lower than that. The effects of the price on carbon will start to affect these measures over the
next couple of quarters. The Bank's assessment of the outlook for inflation is unchanged: it is expected to
be consistent with the target over the next one to two years. Maintaining low inflation over the longer
term will, however, require growth in domestic costs to continue their recent moderation as the effects of
the earlier exchange rate appreciation wane.

As a result of the sequence of earlier decisions, monetary policy is easier than it was for most of 2011,
with interest rates for borrowers a little below their medium-term averages. While it is too soon to see
the full impact of those changes, dwelling prices have firmed a little over the past couple of months, and
business credit has over the past six months recorded its strongest growth for several years. The exchange
rate, however, has remained high, despite the observed decline in the terms of trade and the weaker
global outlook.

At today's meeting, the Board judged that, with inflation expected to be consistent with the target and
growth close to trend, but with a more subdued international outlook than was the case a few months
ago, the stance of monetary policy remained appropriate.

Source: www.rba.gov.au Statement by Glenn Stevens, Governor: Monetary Policy Decision 7 August 2012




                                                                                                        19
     8. Industry analysis
     8.1     Coal
Coal deposits are found below the earths surface with the quality of a coal deposit determined by the
length of time in formation, commonly known as its „organic maturity, temperature and pressure. The
rank of coal refers to the physical and chemical properties that coals of different maturities possess.
Lower rank coals such as lignite generally possess a much lower organic maturity, have a soft texture, a
dull earthly appearance and are characterized by high moisture levels and low energy (carbon) content.
Higher ranked coals such as Anthracite, which is the highest ranking coal, are harder, stronger, contain
less moisture, and produce more energy.

To date coal has been mined by two broad methods, opencast mining and underground mining, the choice
of extraction method determined by the geology of the coal deposit.



     8.2     Prices
Coal is a global commodity and, as such, prices are determined by global supply and demand factors. With
both the international community and the worlds dependency on energy growing, fuel products are the
single most important input affecting global economic growth. As a result coal is a highly marketable
commodity, and with world consumption estimated to increase 60% by 2030, the long term price outlook is
strong.

During 2007-2008, elevated demand for coal as the cheapest source of power caused prices to increase by
around 200%. This diverged from historical trends where coal has generally traded at a lower, more stable
price than more volatile commodities such as oil and gas. Speculation about sustainability of prices in light
of the economic slowdown and a slackening steel market caused the correction from the highs
experienced, however in comparison to an average between US$20/tonne (“t”) to US$40/t throughout the
1990's, the current price is still well above historical levels.


           250                                   Coal Price
           200

           150
  US$/t




           100

            50

             0




                    Monthly Coal Futures Price      Coal Forward Price         Coal Forecast Price


Source: Bloomberg




                                                                                                           20
Coal prices have retracted substantially since the commodity boom from 2005 to 2008. This spike was not
only fuelled by the surge in demand from developing economies such as China but was also exacerbated by
supply side factors. Disruptions to global supply occurred as a result of extremely heavy snowfall in China
and long term power shortages in South Africa.

Prices are expected to remain fairly stable at current levels as is shown by the forecast in the chart
above. This is primarily due to expectations of a recovery in the world economy over the coming years
with the continued expansion of India and China in particular driving demand for both energy and iron and
steel production.




                                                                                                        21
   9. Valuation approach adopted
There are a number of methodologies which can be used to value a business or the shares in a company.
The principal methodologies which can be used are as follows:

    Capitalisation of future maintainable earnings (“FME”)
    Discounted cash flow (“DCF”)
    Quoted market price basis (“QMP”)
    Net asset value (“NAV”)
    Market based assessment
A summary of each of these methodologies is outlined in Appendix 2.

Different methodologies are appropriate in valuing particular companies, based on the individual
circumstances of that company and available information. In our assessment of the value of Firestone's
shares we have chosen to employ the following methodologies:

    Net Asset Value (“NAV”) – primary method
    Quoted Market Price Basis (“QMP”) – secondary method
We have chosen these methodologies for the following reasons:
    Firestone does not generate regular trading income. Therefore there are no historic profits that could
    be used to represent future earnings. This means that the FME valuation approach is not appropriate;
    Firestone has no foreseeable future net cash inflows and therefore the application of DCF is not
    possible;
    Firestone's most significant asset is its interest in the Waterberg Coal Project and as such we require
    a specialist valuation of that project;
    We instructed Venmyn Rand (Pty) Ltd trading as Venmyn (“Venmyn”) to provide an independent
    specialist current market valuation of the coal assets of the JV between Sekoko and Firestone at their
    Waterberg Coal Project. Venmyn's full report may be found in Appendix 3;
    Venmyn has applied the Multiples of Exploration Expenditure (“MEE”) approach and the Comparable
    Transaction Value Method (“CTVM”) to value the Waterberg Coal Project; and
    Firestone is listed on the ASX and JSE and this provides an indication of the market value where an
    observable market for the securities exists.




                                                                                                          22
    10.           Valuation of Firestone
    10.1 Net Asset Valuation of Firestone
The value of Firestone's assets on a going concern basis is reflected in our valuation below:

We have been advised that there has not been a significant change in the net assets of Firestone since 31
December 2011.
                                                                Reviewed           Adjusted
Firestone - Statement of Financial Position    Note            31-Dec-11           valuation
                                                                        $                 $
CURRENT ASSETS
Cash and cash equivalents                                         883,636            883,636
Trade and other receivables                                        19,634             19,634
Prepayments                                                         5,776              5,776
TOTAL CURRENT ASSETS                                             909,046            909,046


NON-CURRENT ASSETS
Property, plant and equipment                                   4,788,576          4,788,576
Interest in joint venture                        1             76,911,782         75,229,104
Receivables                                                       968,168            968,168
TOTAL NON-CURRENT ASSETS                                      82,668,526         80,985,848


TOTAL ASSETS                                                  83,577,572         81,894,894


CURRENT LIABILITIES
Trade and other payables                                        2,384,713          2,384,713
Payable to JV partner                                           3,029,559          3,029,559
Convertible note                                                8,688,525          8,688,525
TOTAL CURRENT LIABILITIES                                     14,102,797         14,102,797


NON-CURRENT LIABILITIES
Convertible note                                               12,139,521         12,139,521
TOTAL NON-CURRENT LIABILITIES                                 12,139,521         12,139,521



TOTAL LIABILITES                                              26,242,318         26,242,318


NET ASSETS                                                    57,335,254         55,652,576


Number of shares on issue                        2                             3,113,878,641


Value per share                                                                       0.018




                                                                                                       23
The table above indicates the net asset value of a Firestone share is $0.018.

The following adjustments were made to the net assets of Firestone as at 31 December 2011 in arriving at
our valuation.

Note 1: Valuation of Firestone's mineral assets

We instructed Venmyn to provide an independent market valuation of the Waterberg JV. Firestone holds a
60% interest in the JV. Venmyn considered a number of different valuation methods when valuing the
Waterberg Coal Project. Venmyn have used the MEE approach and the CTVM and applied a discount to
arrive at a fair value of the Waterberg JV. We consider this methodology to be appropriate.

The value of the coal assets of the JV between Firestone and Sekoko, as calculated by Venmyn, is set out
below:

Mineral Assets                                                         Fair value (ZARm)         Interest

Sekoko Coal - Firestone JV Waterberg Coal Project                                1027.72            100%




The table below shows the value of Firestone's interest in coal assets at their Waterberg Coal Project:

Mineral Assets                                            Fair value            Currency         Interest

Sekoko Coal - Firestone JV Waterberg Coal Project      1,027,720,000                ZAR             100%
Conversion 1 ZAR : 0.122 AUD                             125,381,840                AUD             100%
Firestone's interest in the Waterberg Coal Project       75,229,104                 AUD              60%

Source: www.oanda.com 14 May 2012

The table above indicates that Firestone's 60% interest in the coal assets at their Waterberg Coal Project
is $75.23 million.

Note 2: Shares on issue
The shares on are issue are shown on an undiluted basis due to the current options on issue being „out of
the money.



    10.2 Quoted Market Prices for Firestone’s Securities
To provide a comparison to the valuation of Firestone in Section 10.1, we have also assessed the quoted
market price for a Firestone share on the ASX and JSE.
The quoted market value of a company's shares is reflective of a minority interest. A minority interest is
an interest in a company that is not significant enough for the holder to have an individual influence in the
operations and value of that company.
RG 111.11 suggests that when considering the value of a company's shares for the purposes of approval
under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to
pay a premium for control due to the advantages they will receive should they obtain 100% control of
another company. These advantages include the following:



                                                                                                            24
      control over decision making and strategic direction;
      access to underlying cash flows;
      control over dividend policies; and
      access to potential tax losses.
Whilst Ariona will not be obtaining 100% of Firestone, RG 111 states that the expert should calculate the
value of a target's shares as if 100% control were being obtained. RG 111.13 states that the expert can
then consider an acquirer's practical level of control when considering reasonableness. Reasonableness
has been considered in section 12.

Therefore, our calculation of the quoted market price of a Firestone share including a premium for control
has been prepared in two parts. The first part is to calculate the quoted market price on a minority
interest basis. The second part is to add a premium for control to the minority interest value to arrive at
a quoted market price value that includes a premium for control.



Minority interest value
Our analysis of the quoted market price of a Firestone share is based on the pricing prior to the
announcement of the proposed Funding Facility and Share Transfer. This is because the value of a
Firestone share after the announcement may include the affects of any change in value as a result of the
proposed Funding Facility and Share Transfer. However, we have considered the value of a Firestone
share following the announcement when we have considered reasonableness in Section 13.



ASX share price analysis
Information on the proposed Funding Facility and Share Transfer were announced to the market on 7 May
2012. Therefore, the following chart provides a summary of the share price movement over the 12
months to 4 May 2012 which was the last trading day prior to the announcement.

        0.025                                                                                40.0
                                                                                             35.0
        0.020                                                                                30.0
        0.015                                                                                25.0
                                                                                             20.0
                                                                                                     Millions




        0.010                                                                                15.0
  $                                                                                          10.0
        0.005
                                                                                             5.0
        0.000                                                                                -




                               Volume                         Closing share price

Source: Bloomberg

The daily price of Firestone's shares from 4 May 2011 to 4 May 2012 has ranged from a low of $$0.006 on
21 February 2012 to a high of $0.023 on 25 May 2011.



                                                                                                                25
During this period a number of announcements were made to the market. The key announcements are set
out below:
                                                          Closing Share Price Closing Share Price
                                                          Following           Three Days After
                                                          Announcement        Announcement
Date          Announcement                                $ (movement)        $ (movement)
02-M ay-12    Suspension from Official Quotation          0.009 (-)           0.010 (511%)
30-Apr-12     Trading Halt                                0.009 (-)           0.009 (-)
30-Apr-12     M arch 2012 Quarterly Activities Report     0.009 (-)           0.009 (-)
              and 5B cashflow
03-Apr-12     Amended Announcement Regarding Eskom 0.010 (511%)               0.010 (-)
              M OU
03-Apr-12     Firestone Rejects TATA Offer                0.010 (511%)        0.010 (-)
26-M ar-12    Firestone/Sekoko JV sign Eskom M OU         0.008 (-)           0.009 (513%)
22-M ar-12    Short Term Finance Facility                 0.007 (-)           0.008 (514%)
07-M ar-12    Cornerstone Investor Update                 0.008 (514%)        0.007 (613%)
01-M ar-12    Firestone Activities Update                 0.008 (-)           0.007 (613%)
31-Jan-12     Quarterly Activities Report and App 5B      0.008(611%)         0.007 (613%)
              Cashflow
25-Nov-11     Firestone receives M anagement Proposal     0.012 (-)           0.013 (58%)
              from Sekoko
31-Oct-11     Sept 2011 Quarterly Activities Report and   0.013 (67%)         0.013 (-)
              Appendix 5B
21-Sep-11     Firestone Appoints CEO                      0.014 (-)           0.013 (67%)
15-Sep-11     Firestone Negotiating Significant           0.015 (515%)        0.014 (67%)
              Agreement
06-Sep-11     Linc Energy takes Strategic Stake in        0.015 (515%)        0.014 (67%)
              Firestone
03-Aug-11     Appendix 3B                                 0.016 (57%)         0.015 (66%)
03-Aug-11     M ining Right Approval Secured              0.017 (56%)         0.014 (618%)
29-Jul-11     Quarterly Activities Report and Appendix    0.017 (56%)         0.014 (618%)
              5B
27-Jul-11     LOI for 1.2million tonnes pa from Stig      0.014 (67%)         0.015 (57%)
              Jiangsu
21-Jul-11     IDC Commences Funding                       0.015 (-)           0.015 (-)
18-Jul-11     Appendix 3B                                 0.016 (-)           0.016 (-)
13-Jul-11     Cancellation of Jindal Non-binding M OU     0.017 (611%)        0.016 (66%)
09-Jun-11     Update on M ining Rights Application        0.017 (66%)         0.017 (-)
11-M ay-11    Prospectus                                  0.019 (-)           0.017 (611%)




                                                                                                    26
On the 26 March 2012 Firestone announced to the market that its Joint Venture with Sekoko Coal had
signed a Memorandum of Understanding for a coal supply agreement Africas largest power utility, Eskom
Holdings Limited. The market reacted positively to this news with the share price closing 13% higher in the
three days following the announcement.

On 3 August 2011 the Department of Mineral Resources in South Africa granted the Mining Right approval
to mine for 30 years over the seven properties contained in the Waterberg Coal Project. The approval was
conditional upon payment of a mine rehabilitation provision - ZAR8 million has been paid with the next
ZAR8 million payment due at the end of August 2012. The total rehabilitation liability is ZAR33 million.
The share price increased 6% on the back of this announcement and subsequently fell 18% three days after
the announcement.
On 29 July 2011 the quarterly activities report was released to the market with the major highlights being
that 3 tonne of coal sample was submitted to Eskom for testing and that major banks and financial
institutions indicated interest in providing project finance. Following the announcement the share price
closed 6% higher; however the closing price three days after the announcement had declined 18%.

On 27 July 2011 the Joint Venture with Sekoko Resources received a Letter of Intent from a member of
the Saintly International Group for the purchase of a regular volume of 1.2 million tonnes per annum of
prime coal, with shipments to commence in late 2012. The share price following the announcement closed
7% lower however the market corrected three days following the announcement with the pre-
announcement price restored.

On 13 July 2011 the Company announced that it had cancelled its non-binding Memorandum of
Understanding with Jindal Steel and Power Limited and therefore will only work with its established joint
venture partner Sekoko Resources. The market reacted negatively to this news with the share price falling
11% following the announcement.

To provide further analysis of the market prices for a Firestone share, we have also considered the
weighted average market price for 10, 30, 60 and 90 trading day periods to 4 May 2012.

                                4 May 2012             10 Days       30 Days        60 Days       90 Days

Closing Price                   $0.009

Weighted Average                                       $0.009        $0.010         $0.009        $0.008

The above weighted average prices are prior to the date of the announcement of the proposed Funding
Facility and Share Transfer, to avoid the influence of any increase in price of Firestone's shares that has
occurred since the Funding Facility and Share Transfer were announced.




                                                                                                              27
An analysis of the volume of trading in Firestone's shares for the twelve months to 4 May 2012 is set out
below:

                                                                    Cumulative Volume      As a % of Issued
                         Share price low    Share price high
                                                                    traded                 capital

1 trading day            $0.009             $0.009                  0                      0.00%

10 trading days          $0.009             $0.009                  577,397                0.02%

30 trading days          $0.008             $0.011                  67,863,402             2.18%

60 trading days          $0.006             $0.011                  127,854,476            4.11%

90 trading days          $0.006             $0.011                  175,335,173            5.63%

180 trading days         $0.006             $0.018                  309,036,021            9.92%

1 year                   $0.006             $0.023                  575,529,576            18.48%


A total of 18.48% of the Company's current issued capital was traded in a twelve month period on the ASX.




JSE share price analysis
Information on the proposed Funding Facility and Share Transfer were announced to the market on 7 May
2012. Therefore, the following chart provides a summary of the share price movement on the JSE over
the 12 months to 4 May 2012 which was the last trading day prior to the announcement.

         0.030                                                                                 10.0
                                                                                               9.0
         0.025                                                                                 8.0
         0.020                                                                                 7.0
                                                                                               6.0
         0.015                                                                                 5.0
                                                                                                       Millions


                                                                                               4.0
  $      0.010                                                                                 3.0
         0.005                                                                                 2.0
                                                                                               1.0
         0.000                                                                                 0.0




                             Volume                            Closing share price

Source: Bloomberg

Note that the share price has been translated into AUD based on the daily Bloomberg ZAR/AUD exchange
rate.




                                                                                                              28
The daily price of Firestone's shares from 4 May 2011 to 4 May 2012 has ranged from a low of $$0.005 on
23 May 2012 to a high of $0.028 on 23 May 2011.

To provide further analysis of the market prices for a Firestone share, we have also considered the
weighted average market price for 10, 30, 60 and 90 trading day periods to 4 May 2012.

                                  4 May 2012              10 Days       30 Days     60 Days        90 Days

Closing Price                     $0.011

Weighted Average                                          $0.011        $0.014      $0.011         $0.010

The above weighted average prices are prior to the date of the announcement of the proposed Funding
Facility and Share Transfer, to avoid the influence of any increase in price of Firestone's shares that has
occurred since the Funding Facility and Share Transfer were announced.
An analysis of the volume of trading in Firestone's shares for the twelve months to 4 May 2012 is set out
below:

                                                                    Cumulative Volume         As a % of Issued
                         Share price low       Share price high
                                                                    traded                    capital

1 trading day            $0.011                $0.011               0                         0.00%

10 trading days          $0.010                $0.012               5,454,501                 0.18%

30 trading days          $0.010                $0.020               57,611,253                1.85%

60 trading days          $0.005                $0.020               109,054,100               3.50%

90 trading days          $0.005                $0.020               137,261,258               4.41%

180 trading days         $0.005                $0.021               182,312,778               5.85%

1 year                   $0.005                $0.028               237,487,154               7.63%


A total of 7.63% of the Company's current issued capital was traded in a twelve month period on the JSE.

A total of 26.11% of the current issued capital was traded over the twelve month period on the ASX and
JSE, indicating a low level of liquidity.
For the quoted market price methodology to be reliable there needs to be a „deep market in the shares.
RG 111.69 indicates that a „dee' market should reflect a liquid and active market. We consider the
following characteristics to be representative of a deep market:
    Regular trading in a company's securities;
    Approximately 1% of a company's securities are traded on a weekly basis;
    The spread of a company's shares must not be so great that a single minority trade can significantly
    affect the market capitalisation of a company; and
    There are no significant but unexplained movements in share price.




                                                                                                              29
A company's shares should meet all of the above criteria to be considered „deep, however, failure of a
company's securities to exhibit all of the above characteristics does not necessarily mean that the value
of its shares cannot be considered relevant.

In the case of Firestone, we consider there to be a low level of liquidity with less than 30% of shares being
traded on the ASX and JSE in the twelve month period prior to the announcement.

Our assessment is that a range of values for Firestone's shares based on market pricing, after disregarding
post announcement pricing, is between $0.008 and $0.011 bearing in mind the low liquidity of Firestone's
shares.



Control Premium
We have reviewed the control premiums paid by acquirers of coal companies listed on the ASX. We have
summarised our findings below:

 Transaction        Number of
                                        Average Deal Value (AUD$m)       Average Control Premium
 Period             Transactions

 2012               1                   1,975.33                         11.10%
 2011               7                   1,389.45                         39.91%
 2010               4                   640.13                           48.17%
 2009               3                   1,147.20                         40.12%
 2008               1                   985.31                           35.25%
 2007               0                   0                                0
 2006               1                   2,299.06                         13.09%
 2005               2                   195.53                           6.28%
                                            Median                       27.84%
                                            Average                      34.97%



Source: Bloomberg



In arriving at an appropriate control premium to apply we note that observed control premiums can vary
due to the:
    Nature and magnitude of non-operating assets;
    Nature and magnitude of discretionary expenses;
    Perceived quality of existing management;
    Nature and magnitude of business opportunities not currently being exploited;
    Ability to integrate the acquiree into the acquirer's business;
    Level of pre-announcement speculation of the transaction;
    Level of liquidity in the trade of the acquiree's securities.




                                                                                                            30
Ariona's maximum shareholding following the Funding Facility and Share Transfer will be 51.7%. Ariona is
not acquiring full control of Firestone, but it will have effective control. As a result, Ariona should be
expected to pay a full premium for control. Taking this into consideration and the control premium
research above, a control premium between 25% and 35% is appropriate.



Quoted market price including control premium
Applying a control premium to Firestone's quoted market share price results in the following quoted
market price value including a premium for control:
                                                                              Low               High
                                                                                 $                  $
Quoted market price value                                                    0.008              0.011
Control premium                                                               25%                35%
Quoted market price valuation including a premium for control               0.010              0.015

Therefore, our valuation of a Firestone share based on the quoted market price method and including a
premium for control is between $0.010 and $0.015.

    10.3 Assessment of Firestone’s Value
The results of the valuations performed are summarised in the table below:

Due to the low level of liquidity of Firestone's shares, the QMP methodology is not considered to be as
reliable.

Firestone's major asset is its interest in the JV with Sekoko and because of this the net asset valuation
approach is more reliable.
                                                                              Low               High
                                                                                 $                  $
Net tangible assets                                                          0.018              0.018
ASX & JSE market prices                                                      0.010              0.015

Based on the results above we consider the value of a share to be $0.18.

The difference in the NAV and QMP value can be attributed to the low level of liquidity. The value of a
company is often not accurately reflected in the company's shares price if the shares are thinly traded.




                                                                                                            31
11.     Valuation of consideration
Funding Facility

The consideration offered per share by Ariona is $0.025 cash, being the conversion price of the convertible
note.



12.     Is the Funding Facility fair?
Fairness - Funding Facility

In section 10.3 we determined the value of a Firestone share and in section 11 the value of the
consideration. The comparison is detailed below:
                                                                           Low            High
                                                                              $              $
Value of a Firestone share                                                0.018           0.018
Consideration: Funding Facility                                           0.025           0.025

We note from the table above the consideration on conversion of the convertible note into shares is
greater than the value of a Firestone share. Therefore, we consider the proposed Funding Facility to be
fair.




                                                                                                          32
13.     Is the Funding Facility reasonable?
    13.1        Alternative Proposal
We are unaware of any alternative proposal that might offer the Shareholders of Firestone a premium over
the value resulting from the Funding Facility.

    13.2        Practical Level of Control
If the Funding Facility is approved then, on conversion of convertible notes to shares, Ariona may hold an
interest of approximately 41.7% in Firestone and a maximum of 56.7% if both the Funding Facility and
Share Transfer transactions are approved. In addition to this, Ariona will be able to nominate up to three
directors to the Board of Firestone.

When shareholders are required to approve a matter that relates to a company there are two types of
approval levels. These are general resolutions and special resolutions. A general resolution requires 50%
of shares to be voted in favour to approve a matter and a special resolution requires 75% of shares on issue
to be voted in favour to approve a matter. If the Funding Facility is approved then, on conversion of
convertible notes to shares, Ariona will not be able to pass or block general resolutions but will be able to
block special resolutions. However, if both the Funding Facility and the Share Transfer are approved, and
convertible notes are converted to shares, Ariona will be able to pass general resolutions.

Firestone's Board currently comprises five directors. Ariona will nominate up to three additional directors
which may take Firestone's Board to eight directors. This would mean that Ariona nominated directors
would make up 37.5% of the Board, or 29% if only two (of seven) are nominated.

Ariona's control of Firestone following the Funding Facility, on conversion of convertible notes to shares,
will be significant when compared to all other shareholders as they will be the major shareholder.
Therefore, in our opinion, Ariona should be expected to pay a premium for control.

    13.3        Consequences of not Approving the Funding Facility

Post announcement share price movement
We have analysed movements in Firestone's share price since the Funding Facility was announced. A
graph of Firestone's share price since the announcement is set out below.




                                                                                                          33
Source: Bloomberg

On the day of the announcement, the share price rose from $0.009 to $0.01. As at the date of this report,
the share price had returned to the pre announcement date of $0.009 suggesting that if the Funding
Facility is not approved, the share price may not decline.

    13.4            Advantages of Approving the Funding Facility
We have considered the following advantages when assessing whether the Funding Facility is reasonable.

Advantage                                      Description

The proposed Funding Facility is fair          As set out in Section 12, the proposed Funding Facility to issue the
                                               convertible note with a conversion price of $0.025 is fair. RG 111
                                               states that an offer is reasonable if it is fair.

Access to funding                              The convertible loan note will allow for an additional cash injection
                                               of approximately $16.655 million.

                                               Currently Firestone has less than $1 million in cash in its balance
                                               sheet. The additional cash from the convertible loan note will mean
                                               that the Company will not need any near future fundraisings which
                                               would dilute the existing shareholders interests.

Avoids the possibility of Firestone becoming   There is the possibility that Firestone may become insolvent if cash
insolvent.                                     does not become available in the short to medium term. $6 million
                                               of existing convertible notes mature in October 2012. If the
                                               Funding Facility is not approved the Company will be required to
                                               find alternative funding to meet the maturity of the notes, which



                                                                                                                     34
                                                      may or may not be achievable and if achievable may be on terms
                                                      that are less favourable than the Funding Facility.

Introduction of Ariona's experience and               Ariona brings knowledge, experience and expertise in the mining
expertise in the resource sector                      and resources sector which will help guide the Company as it
                                                      develops its assets. This will be achieved through up to three
                                                      directors of Ariona being appointed to the board of Firestone.




    13.5          Disadvantages of Approving the Funding Facility
If the Funding Facility is approved, in our opinion, the potential disadvantages to Shareholders include
those listed in the table below:

Disadvantage                       Description


Dilution of existing               Firestone could issue a maximum of 2,228,030,414 additional shares if all of the notes
shareholders                       are converted into shares and all of the interest payments are capitalised.

                                   The issue of 2,228,030,414 additional shares would decrease existing Shareholders
                                   interest from 66.2% to 38.6%.


Reduced control                    If the Funding Facility is approved, and convertible notes are converted to shares,
                                   Ariona will hold a maximum shareholding of 41.7% or 56.7% if both the Funding Facility
                                   and Share Transfer transactions are approved and convertible notes converted to
                                   shares, which will allow then to pass general resolutions.

                                   Ariona will elect up to three nominees to the Board of Firestone.

                                   The combination of up to three board members and being the major shareholder
                                   increases Ariona's control over Firestone and reduces the control that the existing
                                   shareholders have.

                                   Practical control will pass to Ariona if Ariona's interest in the issued capital exceeds
                                   50%.




                                                                                                                          35
14.     Assessment of the Share Transfer
    14.1 Valuation consideration
Ariona has offered Sekoko $0.01 cash per share to acquire 800 million Firestone shares for a total of $8
million.

    14.2 Is Sekoko receiving a premium for control?
Share Transfer

In section 10.3 we determined the value of a Firestone share and above we determined the value of the
consideration. The comparison is detailed below:
                                                                            Low            High
                                                                              $               $
Value of a Firestone share                                                 0.018           0.018
Consideration: Share Transfer                                              0.010           0.010

We note from the table above that the consideration being offered by Ariona per Firestone share is less
than the value of a Firestone share. Therefore, we consider that no premium for control is being offered
to Sekoko. As such, the Shareholders are not being deprived of the opportunity to share in any premium
for control.



    14.3 Alternative Proposal
We are unaware of any alternative proposal that might offer the Shareholders of Firestone a premium over
the value ascribed to, resulting from the Share Transfer.

    14.4 Practical Level of Control
If the Share Transfer is approved then Ariona will hold an interest of approximately 25.7% in Firestone and
a maximum of 56.7% if both the Funding Facility and Share Transfer are approved.

When shareholders are required to approve an issue that relates to a company there are two types of
approval levels. These are general resolutions and special resolutions. A general resolution requires 50%
of shares to be voted in favour to approve a matter and a special resolution requires 75% of shares on issue
to be voted in favour to approve a matter. If the Funding Facility is approved Ariona will not be able to
pass or block general resolutions but will be able to block special resolutions. However, if both the
Funding Facility and the Share Transfer are approved, Ariona will be able to pass general resolutions.
Firestone's Board currently comprises five directors. Ariona will not nominate any directors to the Board
as part of the Share Transfer.

Ariona's degree of control of Firestone following the Funding Facility will be significant when compared to
all other shareholders as they will be the major shareholder. Therefore, in our opinion, Ariona should be
expected to pay a premium for control.




                                                                                                           36
    14.5 Consequences of not Approving the Share Transfer

Post announcement share price movement
We have analysed movements in Firestone's share price since the Share Transfer was announced. A graph
of Firestone's share price since the announcement is set out in section 13.3.

    14.6 Advantages of Approving the Share Transfer
We have considered the following advantages when assessing whether the Share Transfer is reasonable.

Advantage                                    Description

Funding for the Waterberg JV                 Ariona will be introducing up to US$400 million in project funding
                                             for the Waterberg JV.

                                             Ariona agrees that until project funding of at least US$400 million
                                             has been offered to the Waterberg JV, Ariona will not, without
                                             Sekoko's prior written consent, sell or transfer to a third party, any
                                             of its Firestone shares or its JV interest.




Introduction of Ariona's experience and      Ariona brings knowledge, experience and expertise in the mining
expertise in the resource sector             and resources sector which assist the Company as it develops its
                                             assets.




    14.7 Disadvantages of Approving the Share Transfer
If the Share Transfer is approved, in our opinion, the potential disadvantages to Shareholders include
those listed in the table below:

Disadvantage                                 Description


Reduced control                              If the Share Transfer is approved, Ariona will hold 25.7% of the
                                             issued share capital allowing them to block special resolutions.

                                             If both the Funding and Share Transfer transactions are approved,
                                             Ariona will hold a maximum shareholding of 56.7% which will allow
                                             them to pass general resolutions.




                                                                                                                37
   15.         Conclusion
Opinion One - Funding Facility

We have considered the terms of the Funding Facility as outlined in the body of this report and have
concluded that the Funding Facility is fair and reasonable to Shareholders.
Opinion Two - Share Transfer

We have considered the terms of the Share Transfer as outlined in the body of this report and have
concluded that the advantages of the Share Transfer outweigh the disadvantages of the Share Transfer for
Shareholders.




                                                                                                       38
    16.         Sources of information
This report has been based on the following information:

    Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
    Terms of the convertible note;
    Sale and purchase agreement between Ariona and Sekoko;
    Audited financial statements of Firestone for the years ended 30 June 2011 and half-year ended 31
    December 2011;
    Independent Valuation Report of Firestone's mineral assets dated 11 May 2012 performed by Venmyn;
    Share registry information;
    Information in the public domain; and
    Discussions with Directors and Management of Firestone.



    17.         Independence
BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $40,000 (excluding GST and
reimbursement of out of pocket expenses). Except for this fee, BDO Corporate Finance (WA) Pty Ltd has
not received and will not receive any pecuniary or other benefit whether direct or indirect in connection
with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by Firestone in respect of any claim arising
from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the Firestone, including
the non provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence
with respect to Firestone and any of their respective associates with reference to ASIC Regulatory Guide
112 “Independence of Experts”. In BDO Corporate Finance (WA) Pty Ltd's opinion it is independent of
Firestone and their respective associates.

The provision of our services is not considered a threat to our independence as auditors under Professional
Statement APES 110 – Professional Independence. The services provided have no material impact on the
financial report of Firestone.

A draft of this report was provided to Firestone and its advisors for confirmation of the factual accuracy of
its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International
Limited, a UK company limited by guarantee, and forms part of the international BDO network of
Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which
has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).




                                                                                                          39
    18.         Qualifications
BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance
advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian
Securities and Investment Commission for giving expert reports pursuant to the Listing Rules and the Act.

The persons specifically involved in preparing and reviewing this report were Adam Myers and Sherif
Andrawes of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of
independent expert reports, valuations and mergers and acquisitions advice across a wide range of
industries in Australia and were supported by other BDO staff.

Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam's career spans 14
years in the Audit and Assurance and Corporate Finance areas. Adam has considerable experience in the
preparation of independent expert reports and valuations in general for companies in a wide number of
industry sectors.
Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of
the Institute of Chartered Accountants in Australia. He has over twenty years experience working in the
audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been
responsible for over 150 public company independent experts reports under the Corporations Act or ASX
Listing Rules. These experts reports cover a wide range of industries in Australia. Sherif Andrawes is the
Chairman of BDO in Western Australia.



    19.         Disclaimers and consents
This report has been prepared at the request of Firestone for inclusion in the NOM and EM which will be
sent to all Firestone Shareholders. Firestone engaged BDO Corporate Finance (WA) Pty Ltd to prepare an
independent expert's report to consider whether or not the conversion price of the convertible note issued
to Ariona and the consideration offered by Ariona to Sekoko for 800 million shares is fair and reasonable to
the Shareholders of Firestone.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above EM. Apart
from such use, neither the whole nor any part of this report, nor any reference thereto may be included in
or with, or attached to any document, circular resolution, statement or letter without the prior written
consent of BDO Corporate Finance (WA) Pty Ltd.
BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the EM other than this
report.

BDO Corporate Finance (WA) Pty Ltd has not independently verified the information and explanations
supplied to us, nor has it conducted anything in the nature of an audit or review of Firestone, Ariona or
Sekoko in accordance with standards issued by the Auditing and Assurance Standards Board. However, we
have no reason to believe that any of the information or explanations so supplied is false or that material
information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an
independent expert to perform any due diligence procedures on behalf of the Company. The Directors of
the Company are responsible for conducting appropriate due diligence in relation to Ariona. BDO




                                                                                                         40
Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness
of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions
prevailing at the date of this report. Such conditions can change significantly over short periods of time.

With respect to taxation implications it is recommended that individual Shareholders obtain their own
taxation advice, in respect of the proposed Funding Facility and Share Transfer, tailored to their own
particular circumstances. Furthermore, the advice provided in this report does not constitute legal or
taxation advice to the Shareholders of Firestone, or any other party.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for
mineral assets held by the Sekoko-Firestone JV.
The valuer engaged for the mineral asset valuation, Venmyn, possess the appropriate qualifications and
experience in the industry to make such assessments. The approaches adopted and assumptions made in
arriving at their valuation are appropriate for this report. We have received consent from the valuer for
the use of their valuation report in the preparation of this report and to append a copy of their report to
this report.

The statements and opinions included in this report are given in good faith and in the belief that they are
not false, misleading or incomplete.

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd has no obligation to
update this report for events occurring subsequent to the date of this report.



Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD




Adam Myers                                      Sherif Andrawes
Director                                        Director




                                                                                                          41
APPENDIX 1 – GLOSSARY OF TERMS
Reference          Definition

$                  Australian dollar

The Act            The Corporations Act 2001

Ariona             Ariona Company SA

ASIC               Australian Securities and Investments Commission

ASX                Australian Securities Exchange

AUD                Australian dollars

BDO                BDO Corporate Finance (WA) Pty Ltd

The Company        Firestone Energy Limited

CTVM               Comparable transaction value method

DCF                Discounted Future Cash Flows

DMR                Department of Mineral Resources

DOCA               Deed of Company Arrangement

EBIT               Earnings before interest and tax

EBITDA             Earnings before interest, tax, depreciation and amortisation

ECN                Existing convertible notes

Eskom              Eskom Holdings Limited

EM                 Explanatory Memorandum

Firestone          Firestone Energy Limited

FME                Future Maintainable Earnings

Funding Facility   The proposal for Ariona to provide $40.7 million to Firestone under a secured
                   convertible note facility replacing the current convertible notes. The conversion price
                   is $0.025 per share.

JSE                Johannesburg Stock Exchange

JV                 Joint venture




                                                                                                       42
Listing Rules      ASX Listing Rules

MEE                Multiples of exploration expenditure

MoU                Memorandum of Understanding

NAV                Net Asset Value

NOM                Notice of Meeting

NPV                Net present value

QMP                Quoted market price

RBA                Reserve Bank of Australia

our Report         This Independent Experts Report prepared by BDO

RG111              Content of expert reports (March 2011)

RG112              Independence of experts (March 2011)

S611               Section 611 of the Corporations Act 2001

Sekoko             Sekoko Resources (Pty) Limited

Share Transfer     The proposal for Sekoko Resources (Pty) Ltd to sell 800 million shares in Firestone to
                   Ariona for A$8 million.

Shareholders       Shareholders of Firestone not associated with Sekoko or Ariona

t                  Tonne

US$                United States dollar

Venmyn             Venmyn Rand (Pty) Ltd trading as Venmyn

VWAP               Volume Weighted Average Price

The Waterberg JV   The Firestone and Sekoko joint venture coal project in Waterberg Coalfield in South
                   Africa

ZAR                South African Rand




                                                                                                        43
APPENDIX 2 – VALUATION METHODOLOGIES
Methodologies commonly used for valuing assets and businesses are as follows:


1      Net asset value (“NAV”)
Asset based methods estimate the market value of an entity's securities based on the realisable value of
its identifiable net assets. Asset based methods include:

    Orderly realisation of assets method
    Liquidation of assets method
    Net assets on a going concern method
The orderly realisation of assets method estimates fair market value by determining the amount that
would be distributed to entity holders, after payment of all liabilities including realisation costs and
taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation
method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity
may not be contemplated, these methods in their strictest form may not be appropriate. The 'net assets
on a going concern basis' method estimates the market values of the net assets of an entity but does not
take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash,
passive investments or projects with a limited life. All assets and liabilities of the entity are valued at
market value under this alternative and this combined market value forms the basis for the entity's
valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on
a going concern basis. This is particularly so for exploration and mining companies where investments are
in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity's value could exceed the realisable value
of its assets as they do not recognise the value of intangible assets such as management, intellectual
property and goodwill. Asset based methods are appropriate when an entity is not making an adequate
return on its assets, a significant proportion of the entity's assets are liquid or for asset holding
companies.
2     Quoted Market Price Basis (“QMP”)
A valuation approach that can be used in conjunction with (or as a replacement for) other valuation
methods is the quoted market price of listed securities. Where there is a ready market for securities such
as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be
taken as the market value per share. Such market value includes all factors and influences that impact
upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume
trading, creating a “deep” market in that security.




                                                                                                              44
3      Capitalisation of future maintainable earnings (“FME”)
This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate
which reflects business outlook, business risk, investor expectations, future growth prospects and other
entity specific factors. This approach relies on the availability and analysis of comparable market data.

The FME approach is the most commonly applied valuation technique and is particularly applicable to
profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure
requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings
before interest and tax (“EBIT”) or earnings before interest, tax, depreciation and amortisation
(“EBITDA”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used
for FME.

4     Discounted future cash flows (“DCF”)
The DCF methodology is based on the generally accepted theory that the value of an asset or business
depends on its future net cash flows, discounted to their present value at an appropriate discount rate
(often called the weighted average cost of capital). This discount rate represents an opportunity cost of
capital reflecting the expected rate of return which investors can obtain from investments having
equivalent risks.

Considerable judgement is required to estimate the future cash flows which must be able to be reliably
estimated for a sufficiently long period to make this valuation methodology appropriate.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is
also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are
in a start up phase, or experience irregular cash flows.

5      Market Based Assessment
The market based approach seeks to arrive at a value for a business by reference to comparable
transactions involving the sale of similar businesses. This is based on the premise that companies with
similar characteristics, such as operating in similar industries, command similar values. In performing this
analysis it is important to acknowledge the differences between the comparable companies being analysed
and the company that is being valued and then to reflect these differences in the valuation.




                                                                                                            45
APPENDIX 3 – INDEPENDENT VALUATION REPORT
PREPARED BY VENMYN




                                        46
                                                                 i




                                                                                                                         Block G, First Floor
                                                                                                                         Rochester Place
                                                                                                                         173 Rivonia Road
                                                                                                                         Sandton 2146
                                                                                                                         PO Box 782761
                                                                                                                         Sandton 2146
                                                                                                                         Republic of South Africa


                                                                                                                         Tel: +27 11 783 9903
                                                                                                                         Fax: +27 11 783 9953
                                                                                                                         www.venmyn.com



                          INDEPENDENT VALUATION REPORT
                                 ON THE COAL ASSETS
                                        OF THE
                     SEKOKO COAL (PTY) LIMITED (SEKOKO COAL) –
                       FIRESTONE ENERGY LIMITED (FIRESTONE)
                                   JOINT VENTURE
                            (SEKOKO COAL - FIRESTONE JV)
                                       AT THEIR
                             WATERBERG COAL PROJECT,
                                    SOUTH AFRICA,
                                     COMPILED BY
                              VENMYN RAND (PTY) LIMITED
                                      (VENMYN)




COMPILED BY:-


N. MCKENNA (COMPETENT EXPERT)
M.SC. (GEOL), PR. SCI. NAT (400199/04)
MSAIMM (309030), MGSSA, M. INST. D.
DIRECTOR

J.A. MYBURGH
B.SC. (MATHEMATICS)
MINERAL PROJECT ANALYST


OUR REFERENCE:- D11196R

FIRST DRAFT:- 10TH MAY 2012
FINAL REPORT: - 11TH MAY 2012
EFFECTIVE DATE : - 1ST MAY 2012




                                   Directors: A N Clay (British); S E Conquest; E de V Greyling; N McKenna; C A Telfer   Venmyn Rand (Pty) Ltd. trading as Venmyn
                                                                                                                         Reg. No. 1988/004918/07
Sekoko Coal (Pty) Ltd
Hampton Office Park
Fulham House, 1st Floor
20 Georgian Crescent
Bryanston,
2140



                                                          SYNOPSIS



Venmyn was commissioned by the directors of Lexshell 126 General Trading (Pty) Limited (Lexshell) and instructed by
BDO Corporate Finance (WA) (Pty) Ltd (BDO) to prepare a valuation report on certain of the coal assets (contributing
properties) of the Joint Ventures (JV) between Sekoko Coal and Firestone Energy Limited (Firestone) at their Waterberg
Coal Project (Sekoko Coal – Firestone JV), located in the Limpopo Province, South Africa. Venmyn understand that BDO
will use this valuation report for the purposes of compiling an Independent Experts Report in relation to a proposed
acquisition of Firestone shares, requiring shareholder approval under Section 611 (Item 7) of the Australian Corporations
Act.

This valuation considers the Fair Value of the coal assets of the T1, T2 and T3 agreements properties (the contributing
properties) on a 100% attributable basis. No assessment is made with respect to the relative values attributable to either
Firestone or Sekoko Coal, nor is any opinion expressed regarding the proposed transaction.

These properties are situated less than 5km to the west of the Grootegeluk Colliery mining lease boundary,
approximately 240km northwest of Pretoria (Tshwane) and 70km south of the border with Botswana. The area is
accessed via the tarred R517 between Modimolle (formerly Nylstroom) and Lephalale. The railway line from Thabazimbi
terminates immediately north of Grootegeluk Colliery and power lines from the Matimba Power Station traverse the area.

Approximately 1.4 billion TTIS of coal has been classified into the Measured, Indicated and Inferred categories for the
contributing properties. These JORC compliant Coal Resources form the basis of the valuation of these properties,
reported herein.

The mineral assets of the contributing properties of the Waterberg Coal Project were valued on the basis of available
historical and recent exploration data and current Coal Resources, using methods appropriate for the development status
of the project. Venmyn's valuation considered the prospectivity of the project and attached a value range consistent with
that assessment. The methods applied are accepted industry methods which aim to reduce subjectivity by assessing the
relevance and effectiveness of exploration work.

This report has been prepared for Lexshell in compliance with, and to the extent required by, the Australian Code for the
Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports
(VALMIN Code, 2005). Consistent with the VALMIN Code, in this report Fair Value is considered to be comprised of the
„Intrinsic or „Technical value and a premium or discount relating to market, strategic or other considerations.

To assess the Intrinsic/Technical Value, both the multiples of exploration expenditure (MEE) and comparable
transactions approach were utilised. The MEE valuation method was used in the first instance to value the mineral
assets of the contributing properties on the basis that recent expenditures have contributed to its present value. As Coal
Resources were classified for the contributing properties, it was appropriate to attach a comparable unit market value to
those resources. In order to arrive at reasonable market comparisons, appropriate recent and similar transactions were
identified. These assessments resulted in an Intrinsic or Technical Value range of between ZAR1,283m and ZAR1,733m,
with a preferred value of ZAR1,509.67m for the mineral assets of the contributing properties.

While a value of in excess of ZAR1bn for the mineral assets of the contributing properties was supported by relatively
high Market Values in the past, Venmyn have noted a significant decrease (~50%) in the market capitalisation of
Firestone in the past 6-12 months, a continuation of a more extended decreasing trend. As a result, the current effective
Market Value of the mineral assets has been assessed as ZAR545.78m.

It is clear, from the above, that the Market Value is significantly lower than the Intrinsic/Technical Value of the
mineral assets. In terms of the requirements of VALMIN, 2005, Venmyn consider it appropriate to apply a discount to
the Intrinsic/Technical Value of the mineral assets. In this case Venmyn consider the mean of the Intrinsic/Technical
Value and the Market Value to reflect the Fair Value of the mineral assets, as at the effective date of this report. The
table overleaf summarises the results from the valuation methods employed.




Valuation of the Waterberg Coal Project for Sekoko Coal         May 2012                            Venmyn Rand (Pty) Ltd
                                                 INTRINSIC OR TECHNICAL VALUE
                                                   COMPARABLE                                MARKET          FAIR
                                       COST                        PREFFERED
                 FARM                              TRANSACTION                    TOTAL       VALUE        VALUE
                                    APPROACH                         VALUE
                                                     APPROACH                     (ZARm)     (ZARm)        (ZARm)
                                      (ZARm)                         (ZARm)
                                                       (ZARm)
       Olieboomsfontein 220 LQ              1.00               N/A         1.00
 T1                                                                                 125.02
       Vetleegte 304 LQ                   121.00            127.05       124.02
       Minnasvlakte 258 LQ                 10.45             77.34        43.90
       Smitspan 306 LQ                  1,085.54          1,417.98     1,251.76
 T2                                                                               1,343.87    545.78       1027.72
       Massenberg 305 LQ                   30.37             31.40        30.88
       Hooikraal 315 LQ                    15.18             19.48        17.33
       Swanepoelpan 262LQ                  19.95             57.42        38.68
 T3                                                                                  40.77
       Duikerfontein 263LQ                  0.00              2.09         2.09
                         TOTAL          1,283.48          1,732.75     1,509.67   1,509.67      545.78      1,027.72

In Venmyn's opinion the current Fair Value of the Contributing Properties of the Waterberg Coal Project, given their
current state of development and current market conditions is ZAR1,028m.

The valuation of exploration assets is, by nature, subjective and uncertain. The placing of a specific monetary value on
historical exploration can be misleading, and the reader is advised to consider the ranges in which each property has
been evaluated, and to further consider the technical merits of each project area and form an opinion regarding its
prospectivity on the basis of the data presented in this report.




Valuation of the Waterberg Coal Project for Sekoko Coal          May 2012                          Venmyn Rand (Pty) Ltd
                                                   DISCLAIMER AND RISKS

Venmyn has prepared this Valuation Report and, in so doing, has utilised information provided by Sekoko Coal and
Lexshell as to its operational methods and forecasts. Where possible this information has been verified from independent
sources with due enquiry in terms of all material issues that are a prerequisite to comply with the VALMIN Code. Venmyn
and its directors accept no liability for any losses arising from reliance upon the information presented in this report.

The authors of this Valuation Report are not qualified to provide extensive commentary on legal issues associated with
Sekoko Coal or Lexshell's right to the mineral properties. Sekoko Coal, Lexshell and its attorneys have provided certain
information, reports and data to Venmyn in preparing this Valuation Report which, to the best of their knowledge and
understanding is complete, accurate and true and Sekoko Coal and Lexshell acknowledge that Venmyn has relied on
such information, reports and data in preparing this Valuation Report. No warranty or guarantee, be it express or implied,
is made by the authors with respect to the completeness or accuracy of the legal aspects of this document.


                                                     OPERATIONAL RISKS

The business of mining and mineral exploration, development and production by their nature contain significant
operational risks. The business depends upon, amongst other things, successful prospecting programmes and
competent management. Profitability and asset values can be affected by unforeseen changes in operating
circumstances and technical issues.


                                             POLITICAL AND ECONOMIC RISKS

Factors such as political and industrial disruption, currency fluctuation and interest rates could have an impact on
Lexshell's future operations, and potential revenue streams can also be affected by these factors. The majority of these
factors are, and will be, beyond the control of Sekoko, Lexshell or any other operating entity.


                                            FORWARD LOOKING STATEMENTS

The following report contains forward-looking statements. These forward looking statements are based on opinions and
estimates of Sekoko Coal and Lexshell management and Venmyn at the date the statements are made. They are subject
to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ
materially from those anticipated in our forward-looking statements. Factors that could cause such differences include
changes in world coal markets, equity markets, costs and supply of materials relevant to the projects, and changes to
regulations affecting them. Although we believe the expectations reflected in our forward-looking statements to be
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.




Valuation of the Waterberg Coal Project for Sekoko Coal         May 2012                            Venmyn Rand (Pty) Ltd
                                                    INDEPENDENT VALUATION REPORT
                                                    ON THE WATERBERG COAL ASSETS
                                                                  OF THE
                                               SEKOKO COAL (PTY) LIMITED (SEKOKO COAL) –
                                                 FIRESTONE ENERGY LIMITED (FIRESTONE)
                                                             JOINT VENTURE
                                                      (SEKOKO COAL - FIRESTONE JV)
                                                                 AT THEIR
                                                       WATERBERG COAL PROJECT,
                                                             SOUTH AFRICA,
                                                              COMPILED BY
                                                        VENMYN RAND (PTY) LIMITED
                                                                (VENMYN)


                                                                        LIST OF CONTENTS


1.   INTRODUCTION ......................................................................................................................................................... 8
2.   SCOPE OF THE OPINION ......................................................................................................................................... 8
3.   COMPETENT PERSONS DECLARATION .............................................................................................................. 11
4.   SOURCES OF INFORMATION ................................................................................................................................ 11
5.   EFFECTIVE OWNERSHIP OF THE WATERBERG COAL PROJECT ..................................................................... 12
6.   LEGAL TENURE ....................................................................................................................................................... 12
     6.1.         Mineral Rights Summary ............................................................................................................................ 12
7.   THE COAL MARKET ................................................................................................................................................ 14
     7.1.         Global Coal Resources ............................................................................................................................... 14
     7.2.         Global Coal Reserves ................................................................................................................................. 14
     7.3.         Supply......................................................................................................................................................... 15
     7.4.         Demand ...................................................................................................................................................... 17
                  7.4.1.          Imports ....................................................................................................................................... 18
                  7.4.2.          Exports....................................................................................................................................... 18
     7.5.         Future Demand ........................................................................................................................................... 19
                  7.5.1.          Thermal Coal ............................................................................................................................. 19
                  7.5.2.          Coking Coal ............................................................................................................................... 20
     7.6.         Future Supply ............................................................................................................................................. 20
     7.7.         Future Prices .............................................................................................................................................. 21
                  7.7.1.          Thermal Coal ............................................................................................................................. 21
                  7.7.2.          Coking Coal ............................................................................................................................... 21
8.   SOUTH AFRICAN COAL MINING INDUSTRY ......................................................................................................... 21
     8.1.         Reserves .................................................................................................................................................... 21
     8.2.         Supply......................................................................................................................................................... 21
     8.3.         Demand ...................................................................................................................................................... 22
                  8.3.1.          The Export Market ..................................................................................................................... 22
                  8.3.2.          The Domestic Market ................................................................................................................. 22
     8.4.         Prices .......................................................................................................................................................... 23
                  8.4.1.          Thermal Coal ............................................................................................................................. 23
                  8.4.2.          Coking Coal ............................................................................................................................... 23
     8.5.         Outlook ....................................................................................................................................................... 23
                  8.5.1.          Coal Sales to Eskom.................................................................................................................. 23
                  8.5.2.          Export Sales .............................................................................................................................. 24
                                  8.5.2.1.           Infrastructure .......................................................................................................... 24
                                  8.5.2.2.           Changing Product Emphasis .................................................................................. 24
                                  8.5.2.3.           Coal as a Strategic Mineral .................................................................................... 24
                                  8.5.2.4.           Environmental Issues ............................................................................................. 25
                                  8.5.2.5.           Costs ...................................................................................................................... 25
9.   THE WATERBERG COAL PROJECT DESCRIPTION AND LOCATION ................................................................. 25
     9.1.         Location ...................................................................................................................................................... 25


Valuation of the Waterberg Coal Project for Sekoko Coal                                       May 2012                                               Venmyn Rand (Pty) Ltd
        9.2.         Accessibility ................................................................................................................................................ 25
        9.3.         Climate and Vegetation .............................................................................................................................. 25
        9.4.         Local Resources ......................................................................................................................................... 25
        9.5.         Infrastructure............................................................................................................................................... 25
        9.6.         Topography................................................................................................................................................. 26
10. GEOLOGICAL SETTING .......................................................................................................................................... 26
        10.1.        Regional Geological Setting ....................................................................................................................... 26
                     10.1.1.         The Volksrust Formation ............................................................................................................ 28
                     10.1.2.         The Vryheid Formation .............................................................................................................. 28
                     10.1.3.         Grootegeluk Colliery .................................................................................................................. 28
        10.2.        Local Geology ............................................................................................................................................. 30
11. GEOLOGICAL MODELLING ..................................................................................................................................... 30
12. RESOURCE STATEMENT ....................................................................................................................................... 30
        12.1.        Coal Resource Estimates of the Contributing Properties ............................................................................ 31
        12.2.        Mining and Processing ............................................................................................................................... 31
13. THE WATERBERG COAL PROJECT MINERAL ASSET VALUATION .................................................................... 33
        13.1.        Technical or Intrinsic Value of the Mineral Assets ...................................................................................... 35
                     13.1.1.         MEE Method .............................................................................................................................. 35
                     13.1.2.         The Comparable Transaction Method........................................................................................ 37
                     13.1.3.         Intrinsic Value Summary ............................................................................................................ 41
        13.2.        Market Value of the Mineral Assets ............................................................................................................ 41
        13.3.        Valuation Summary .................................................................................................................................... 42
        13.4.        Key Assumptions ........................................................................................................................................ 42
        13.5.        Key Risks .................................................................................................................................................... 43
14. CONCLUSIONS ........................................................................................................................................................ 44
15. REFERENCES .......................................................................................................................................................... 46
16. CV's........................................................................................................................................................................... 47



                                                                            LIST OF FIGURES

Figure 1: Locality of the Coal Assets in Relation to South African Coalfields ...................................................................... 9
Figure 2: Location of the Contributing Properties of the Waterberg Coal Project .............................................................. 10
Figure 3: Corporate Structure and Participation Interests of the Joint Venture ................................................................. 13
Figure 4 : Global Coal Reserves (end 2010) ..................................................................................................................... 14
Figure 5 : Coal Global Production 2000 – 2010 (Mtoe) ..................................................................................................... 16
Figure 6 : Coal Global Production 2000 – 2010 (Mt) ......................................................................................................... 16
Figure 7 : Coal Consumption 2000-2010 (Mtoe) ............................................................................................................... 17
Figure 8 : Coal Consumption 2000-2010 (Mt) ................................................................................................................... 18
Figure 9 : Projected Demand for Energy (Mtoe) ................................................................................................................ 19
Figure 10 : Coal Price History from July 2002 to July 2011 (USD) .................................................................................... 23
Figure 11: Regional Geology............................................................................................................................................. 27
Figure 12: Stratigraphy of the Waterberg Coal Zones and Grootegeluk Colliery Mining Benches .................................... 29
Figure 13: Project Lifetime Value and Valuation Methodology Curve for Mineral Resource Projects ............................... 34
Figure 14: Valuation Curve for South African Coal Projects .............................................................................................. 38
Figure 15: Historical Share Price Movements for Firestone (July 2009 – May 2012) ........................................................ 41




Valuation of the Waterberg Coal Project for Sekoko Coal                                         May 2012                                              Venmyn Rand (Pty) Ltd
                                                                         LIST OF TABLES


Table 1: Sekoko Coal-Firestone JV Agreements ................................................................................................................ 8
Table 2: Legal Tenure Summary for the Contributing Properties. ..................................................................................... 12
Table 3 : Global Coal Reserves (end 2010) ...................................................................................................................... 15
Table 4 : Selected Coal Producers Estimated 2011 Production ..................................................................................... 17
Table 5 : Predicted World Coal-fired Generating Capacity by Country and Region (GW) ................................................. 20
Table 6 : Weighted Coal Qualities by Sector ..................................................................................................................... 22
Table 7: SANS Classification of Coal Resources. ............................................................................................................. 31
Table 8: Coal Resources of the Contributing Properties (Venmyn, August 2010) ............................................................. 32
Table 9: Valuation Approaches and Methodologies. ......................................................................................................... 33
Table 10: Venmyn's Coal Prospect Exploration Phase Classification. .............................................................................. 36
Table 11: MEE Valuation................................................................................................................................................... 37
Table 12: Summary of Comparative Transaction Valuation .............................................................................................. 39
Table 13: Comparative Valuation Based on Venmyn Resource Estimates ....................................................................... 40
Table 14: Intrinsic Value Summary ................................................................................................................................... 41
Table 15: Summary of Valuation Results .......................................................................................................................... 42




Valuation of the Waterberg Coal Project for Sekoko Coal                                    May 2012                                            Venmyn Rand (Pty) Ltd
                                                                 8

1.   INTRODUCTION
     Venmyn was commissioned by the directors of Lexshell 126 General Trading (Pty) Limited (Lexshell) and instructed
     by BDO Corporate Finance (WA) (Pty) Ltd (BDO) to prepare a valuation report on certain of the coal assets
     (contributing properties) of the Joint Ventures (JV) between Sekoko Coal and Firestone Energy Limited (Firestone)
     at their Waterberg Coal Project (Sekoko Coal – Firestone JV), located in the Limpopo Province, South Africa.
     Venmyn understand that BDO will use this valuation report for the purposes of compiling an Independent Experts
     Report in relation to a proposed acquisition of Firestone shares, requiring shareholder approval under Section 611
     (Item 7) of the Australian Corporations Act.

     This valuation considers the Fair Value of the coal assets of the T1, T2 and T3 agreements properties (the
     contributing properties) on a 100% attributable basis. No assessment is made with respect to the relative values
     attributable to either Firestone or Sekoko Coal, nor is any opinion expressed regarding the proposed transaction.
     This valuation is therefore an assessment of the total Fair Value of the mineral assets only.

     The contributing properties are located in the Limpopo Province, South Africa (Figure 1).

     The Sekoko Coal-Firestone JV encompasses three separate agreements between Sekoko Coal and Firestone:-

     Table 1: Sekoko Coal-Firestone JV Agreements
                                                                             SEKOKO COAL           FIRESTONE CURRENT
                        SIGNATURE                                          CURRENT EFFECTIVE       EFFECTOVE INTEREST
       AGREEMENT                                 PROPERTIES
                           DATE
                                                                               INTEREST
                                        Olieboomsfontein 220LQ
             T1          12/06/2008                                               40%                        60%
                                        Vetleegte 304LQ
                                        Minnasvlakte 258LQ
                                        Smitspan 306LQ
             T2          01/03/2009                                               40%                        60%
                                        Massenberg 305LQ
                                        Hooikraal 315LQ
                                        Duikerfontein 263LQ
             T3         02/02/2010                                                40%                        60%
                                        Swanepoelpan 262LQ

     The contributing properties for this Valuation Report are the T1, T2 and T3 properties (Figure 2). The contributing
     properties cover a surface area of ~7,998 hectares (ha).

     These properties are situated less than 5km to the west of Exxaro's Grootegeluk Colliery mining lease boundary,
     approximately 240km northwest of Pretoria (Tshwane) and 70km south of the border with Botswana. The area is
     accessed via the tarred R517 between Modimolle (formerly Nylstroom) and Lephalale. The railway line from
     Thabazimbi terminates immediately north of Grootegeluk Colliery and power lines from the Matimba Power Station
     traverse the area.

     Since the inception of the Waterberg Coal Project in 2007, significant exploration drilling and sampling has been
     conducted predominantly by Sekoko Coal (and more recently by Firestone) as part of an on-going exploration
     programme which is intended to increase the level of geological confidence with respect to the Coal Resources and
     provide the basis for a Feasibility Study for the development and exploitation of the project in the near term (by
     ~2014).


2.   SCOPE OF THE OPINION
     This valuation considers the full Fair Value of the coal assets of the T1, T2 and T3 agreement properties (the
     contributing properties).

     In the execution of the mandate, Venmyn have considered the strategic merits of the contributing properties and
     defined the valuation outcomes on an open and transparent basis. Venmyn's mineral asset valuation (MAV) has
     been carried out using industry accepted methods being mindful of the development status of each property.

     A site visit to the contributing properties was conducted by the authors of this report in July 2010 in preparation of a
     resource assessment and MAV at that time. Since no material exploration or developmental work has occurred on
     the contributing properties since this site visit, it was not considered necessary, by Venmyn, to visit the site again
     for the purposes of the MAV reported herein. In addition, Venmyn is fully familiar with the geological and operating
     environment in which the contributing properties occurs. Having conducted a number techno-economic evaluations
     of other projects within the Waterberg Coalfield.

     The MAV included in this report has been prepared in compliance with and to the extent required by The Code and
     Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports
     2005 (VALMIN Code), prepared by the VALMIN Committee, a joint committee of The Australian Institute of Mining
     and Metallurgy (AusIMM), the Australasian Institute of Geoscientists and the Mineral Industry Consultants
     Association with the participation of the Australian Securities and Investment Commission, the ASX, the Minerals
     Council of Australia, the Petroleum Exploration Society of Australia, the Securities Association of Australia and
     representatives from the Australian finance sector.

Valuation of the Waterberg Coal Project for Sekoko Coal              May 2012                          Venmyn Rand (Pty) Ltd
                                                                                                                                                                                                                                             FIGURE 01
 
This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction.                                D1196 Sekoko Valuation 2012
                                                                                                                                                                                                                                 FIGURE 02

                                                                                                                                                             Source: Barker’s Coalfields Map of SA

This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction.                                       D1196 Sekoko Valuation 2012
                                                               11

     These guidelines are considered by Venmyn to be a concise recognition of the best practice valuation methods for
     this type of mineral asset and accord with the principles of open and transparent disclosure that are embodied in
     internationally accepted Codes for Corporate Governance.

     This Valuation Report considers the full Fair Value of the coal assets of the contributing properties at the effective
             st
     date (1 May 2012). This Valuation Report has been compiled based on information available up to and including
     the effective date of this report. The valuation is therefore only valid for this date and may change over time in
     response to economic, market, legal or political factors, in addition to changes in the Coal Resources and their
     classification as a result of further exploration.

     The valuation of the mineral assets has been conducted on a 100% attributable basis. All monetary values included
     in this report are expressed in South African Rands (ZAR), unless otherwise denoted.

     In the execution of the mandate, Venmyn undertook a technical assessment of the contributing assets and also
     considered the strategic merits of each of the mineral assets. This work has been based upon technical information
     which has been supplied by Sekoko Coal and its subsidiary companies, and which has been independently due
     diligenced by Venmyn, where possible. Sekoko Coal has warranted in writing that it has openly provided all material
     information to Venmyn which, to the best of its knowledge, understanding, and belief is complete, accurate and
     true, having made all reasonable enquiries and has not omitted anything likely to affect its import.

     Venmyn consents to the inclusion of this Valuation Report in BDO's Independent Experts Report in relation to a
     proposed acquisition of Firestone shares, and to reference any part of this report, provided that no portion is used
     out of context or in such a manner as to convey a meaning which differs from that set out in the whole report.

     Venmyn reserves the right to, but will not be obliged to, revise this report or sections therein, and conclusions
     thereto, if additional information becomes known to Venmyn subsequent to the date of this report.


3.   COMPETENT PERSONS’ DECLARATION
     Venmyn is an independent advisory company. Its consultants have extensive experience in preparing competent
     persons, technical advisors and valuation reports for mining and exploration companies. Venmyn's advisors have,
     collectively, more than 100 years of experience in the assessment and evaluation of mining projects and are
     members in good standing of appropriate professional institutions.

     The signatories to this report are qualified to express their professional opinions on the values of the mineral assets
     described. Curricula vitae (CV's) are presented in Section 16.

     Neither Venmyn nor its staff have, or have had, any interest in this project capable of affecting their capacity to give
     an unbiased opinion, and, have not and will not, receive any pecuniary or other benefits in connection with this
     assignment, other than normal consulting fees.


4.   SOURCES OF INFORMATION
     Venmyn has based its assessment of the contributing properties, reported herein, on information provided by
     Sekoko Coal and its subsidiary companies, along with technical reports by its contractors and associates and other
     relevant published data. Drafts of this report have been provided to Sekoko Coal and its relevant subsidiary
     companies, in order to identify and address any factual errors or omissions prior to finalisation.
                                                        
     The report has been prepared based on exploration information available up to and including the 1 May 2012.

     In broad terms we have relied upon, but were not restricted to, the following principal sources of information: -
            *    current corporate structure and ownerships;
            *    exploration expenditure data as at 1 May 2012;
            *    the Firestone website as at 1 May 2012;
            *    the Mineral Resources Statement, prepared by Venmyn, as at August 2010;
            *    the Mineral Asset Valuation Report, prepared by Venmyn in October 2011;
            *    publicly available information relating to the coal exploration and mining sector, as detailed in
                 Section 15;
            *    the Venmyn coal transaction and valuation databases;
            *    the memorandum of understanding with Eskom for a 30 year coal supply agreement; and
            *    publicly available information relating to Sekoko Coal and Firestone that we deemed to be
                 relevant, including:-
                    *    share price movements;
                    *    company announcements; and
                    *    media articles.


Valuation of the Waterberg Coal Project for Sekoko Coal             May 2012                           Venmyn Rand (Pty) Ltd
                                                                    12

5.    EFFECTIVE OWNERSHIP OF THE WATERBERG COAL PROJECT
      Sekoko Coal, a wholly-owned subsidiary of Sekoko Resources (Pty) Limited (Sekoko Resources), has entered into
      three separate JV and „Farm-In agreements (Table 1) with Firestone, through various wholly owned South African
      subsidiary companies. Firestone's participation interest increases as various milestones are reached. At the
      effective date of this Valuation Report, the effective participation interests of Sekoko Coal in the Waterberg Coal
      Projects are graphically presented in Figure 3.


6.    LEGAL TENURE
      6.1.  Mineral Rights Summary
                The contributing properties are tabulated in Table 2 and illustrated in Figure 2, respectively:-

Table 2: Legal Tenure Summary for the Contributing Properties.
                                         SURFACE        MINERAL RIGHTS                                                      EXPIRY
 AGREEMENT           FARM NAME                                                          STATUS OF MINERAL RIGHT
                                         AREA (ha)             HOLDER                                                        DATE
                                                     Uzalile Property Services
                                                       (Pty) Ltd (60%) and       Granted New Order Prospecting Right No.
               Vetleegte 304LQ              1,133.50                                                                       12/11/2011
                                                     Sekoko Resources (Pty)               651/2006, on 19/10/06
      T1
                                                            Ltd (40%) JV
                                                                                 Granted New Order Prospecting Right No.
               Olieboomsfontein 220LQ       1,092.40    Sekoko Coal (Pty) Ltd                                              12/10/2010*
                                                                                    681/2007(All Minerals), on 13/10/05
                            SUB TOTAL       2,225.90
               Minnasvlakte 258 LQ          1,022.83
               Smitspan 306 LQ              1,165.70                                 Granted New Order Mining Right No.
      T2                                                 Sekoko Coal (Pty) Ltd                                             16/09/2041
               Massenberg 305 LQ            1,216.74                                        22/2011, on 17/09/11
               Hooikraal 315 LQ RE             955.33
                            SUB TOTAL       4,360.61
               Duikerfontein 263LQ             501.10                            Granted New Order Prospecting Right No.
      T3                                                 Sekoko Coal (Pty) Ltd                                             12/10/2010*
               Sw anepoelpan 262LQ             910.80                               681/2007(All Minerals), on 13/10/05
                            SUB TOTAL       1,411.90
                                 TOTAL      7,998.41
 * Sekoko Coal have applied for an extension to the prospecting rights.

                Table 2 shows that Sekoko Coal has been granted a New Order Mining Right over Minnasvlakte 258LQ,
                Smitspan 306LQ, Massenberg 305LQ and Hooikraal 315LQ. Over Vetleegte 304LQ, Sekoko Coal has
                applied for a renewal of their expired New Order Prospecting Right. Sekoko Coal have informed Venmyn
                that the DMR have acknowledged receipt of the renewal documents but still need to issue the formal
                renewal. For Olieboomsfontein 220LQ, Duikerfontain 263LQ and Swanepoelpan 262LQ, while Sekoko
                Coal applied for a renewal over these properties, the DMR incorrectly granted a renewal over the farms
                Minnasvlakte 258LQ, Smitspan 306LQ, Massenberg 305LQ and Hooikraal 315LQ, for which they already
                have a separate Mining Right. Sekoko Coal"s legal department have informed the DMR of the error,
                however this has yet to be rectified.

                Venmyn are not qualified to provide extensive commentary on legal issues associated with Sekoko Coal or
                Lexshell's right to the mineral properties. Sekoko Coal, Lexshell and its attorneys have provided certain
                information, reports and data to Venmyn in preparing this Valuation Report which, to the best of their
                knowledge and understanding is complete, accurate and true and Sekoko Coal and Lexshell acknowledge
                that Venmyn has relied on such information, reports and data in preparing this Valuation Report. No
                warranty or guarantee, be it express or implied, is made by the authors with respect to the completeness
                or accuracy of the legal aspects of this document.

                For the purposes of this valuation, Venmyn have assumed that Sekoko Coal (and the JV) have the rights
                to all contributing properties, but the unresolved issues of mineral tenure detailed above is a significant
                project risk and may have a significant effect on the value of the assets should Sekoko Coal not retain the
                mineral rights to the T1 and T3 properties, for whatever reason.

                Venmyn have been advised that Sekoko Coal are confident that the renewals will be correctly granted as
                they are in regular contact with the DMR and have been supplying additional information to the DMR. In
                addition, Sekoko Coal have hosted a site visit by the DMR, to the properties, in order for the DMR to
                confirm that work has been undertaken on the properties.




Valuation of the Waterberg Coal Project for Sekoko Coal                   May 2012                               Venmyn Rand (Pty) Ltd
This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction.
                                                                                                                                                         Source: Venmyn
                                                                               14

7.   THE COAL MARKET
     Coal is mined commercially in over 50 countries and used in more than 70 countries worldwide. Coal is readily
     available from a wide variety of sources in a well-supplied worldwide market and it can be transported to demand
     centres quickly, safely and easily by ship and rail. A large number of suppliers are active in the international coal
     market, ensuring competitive behaviour and efficient functioning.

     7.1.      Global Coal Resources
               Venmyn is not aware of any calculation of global coal resources. British Petroleum (BP) provides a list of
               coal reserves globally (Figure 4, Table 3), although whether these reserves are defined in terms of the
               Committee for Mineral Reserves International Reporting Standards (CRIRSCO) Codes is uncertain.

               It is important to note that many of the figures for 2010, presented herein, were only made available in
               June 2011. The figures for 2011 are only expected to be released in mid-2012.

               At the outset, it is important to note that in order to estimate the global coal resources, professional experts
               are faced with a significant problem and that is that the Committee CRIRSCO Codes insist that a resource
               can only be quantified and classified if there are “reasonable prospects for eventual economic extraction”.
               In many cases, the sheer size and potential technical constraints associated with a coalfield mean that it
               may not be able to satisfy that condition for public reporting. However, the United Nations Framework
               Classification (UNFC) System does allow the classification of coal reserves as a strategic imperative.
               Unfortunately, many of the so-called coal studies do not necessarily reflect this problem. In Section 6.2,
               coal resources are strategic numbers that are not necessarily compliant with CRIRSCO but important to
               gauge coal resources available for the future of humankind.

     7.2.      Global Coal Reserves
               Total global coal reserves are estimated at 860Bt, according to BP (BP, 2011). Historically, estimates of
               world recoverable coal reserves have reduced from 1,174Bt in 1990 to 1,083Bt in 2000 and to 860Bt in
               2010 (Table 4 and Table 3). However, those who believe that even these latest estimates may be high, are
               mindful of the fact that national and global coal reserves have been grossly overestimated in the past, and
               suggest that world coal reserves may be significantly lower than estimated (Low, 2008; Hartnady, 2009;
               IEE, 2010).

               Although coal deposits are widely distributed, 78.1% of the world's recoverable coal reserves were located
               in five countries at the end of 2010: the United States (27.5%), Russia (18.2%), China (13.2%), Australia
               (8.8%) and India (7.0%).

                 Figure 4 : Global Coal Reserves (end 2010)





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               Anthracite and bituminous coal accounted for 47% of the world's estimated recoverable coal reserves (on
               a tonnage basis) in 2010, while sub-bituminous and lignite accounted for 53% in 2010.

               Regionally, Europe and Eurasia, with 35.3% of recoverable coal reserves, accounted for the largest
               quantity of proved coal. The Middle East, with the world's largest oil deposits, contains the least coal
               reserves in the world (0.1%). Africa accounts for 3.7% of recoverable coal reserves, with South Africa
               accounting for 95% of total African coal reserves (Table 3).

               Table 3 : Global Coal Reserves (end 2010)
                                                                                        SUB-
                                                                ANTHRACITE &                                       SHARE
                                                                                     BITUMINOUS         TOTAL                   R/P
                            REGION/COUNTRY                       BITUMINOUS                                          OF
                                                                                      & LIGNITE          (Mt)                  RATIO
                                                                     (Mt)                                          TOTAL
                                                                                         (Mt)
                 US                                                      108,501          128,794       237,295        28%
                 Canada                                                    3,474             3,108        6,582         1%         97
                 Mexico                                                      860               351        1,211         0%        130
                                  TOTAL NORTH AMERICA                    112,835          132,253       245,088        28%        231
                 Brazil                                                        -             4,559        4,559         1%          *
                 Colombia                                                  6,366               380        6,746         1%         91
                 Venezuela                                                   479                 -          479         0%        120
                 Other S. & Cent. America                                     45               679          724         0%          *
                     TOTAL SOUTH & CENTRAL AMERICA                         6,890             5,618       12,508         1%        148
                 Bulgaria                                                      2             2,364        2,366         0%         82
                 Czech Republic                                              192               908        1,100         0%         22
                 Germany                                                      99           40,600        40,699         5%        223
                 Greece                                                        -             3,020        3,020         0%         44
                 Hungary                                                      13             1,647        1,660         0%        183
                 Kazakhstan                                               21,500           12,100        33,600         4%        303
                 Poland                                                    4,338             1,371        5,709         1%         43
                 Romania                                                      10               281          291                     9
                 Russian Federation                                       49,088          107,922       157,010         18%       495
                 Spain                                                       200               330          530          0%        73
                 Turkey                                                      529             1,814        2,343          0%        27
                 Ukraine                                                  15,351           18,522        33,873          4%       462
                 United Kingdom                                              228                 -          228                    13
                 Other Europe & Eurasia                                    1,440           20,735        22,175          3%       317
                               TOTAL EUROPE & EURASIA                     92,990          211,614       304,604         35%       257
                 South Africa                                             30,156                 -       30,156          4%       119
                 Zimbabwe                                                    502                 -          502          0%       301
                 Other Africa                                                860               174        1,034          0%         *
                 Middle East                                               1,203                 -        1,203          0%         *
                           TOTAL MIDDLE EAST & AFRICA                     32,721               174       32,895          4%       127
                 Australia                                                37,100           39,300        76,400          9%       180
                 China                                                    62,200           52,300       114,500         13%        35
                 India                                                    56,100             4,500       60,600          7%       106
                 Indonesia                                                 1,520             4,009        5,529          1%        18
                 Japan                                                       340                10          350                   382
                 New Zealand                                                  33               538          571          0%       107
                 North Korea                                                 300               300          600          0%        16
                 Pakistan                                                      -             2,070        2,070          0%         *
                 South Korea                                                   -               126          126                    60
                 Thailand                                                      -             1,239        1,239          0%        69
                 Vietnam                                                     150                 -          150                     3
                 Other Asia Pacific                                        1,582             2,125        3,707          0%       114
                                       TOTAL ASIA PACIFIC                159,326          106,517       265,843         31%        57
                                             TOTAL WORLD                 404,762          456,176       860,938        100%       118
               Source: BP Statistical Review of World Energy June 2011
               Notes: Proved reserves of coal - Generally taken to be those quantities that geological and engineering information
               indicates with reasonable certainty can be recovered in the future from known deposits under existing economic and
               operating conditions. Coal Reserves-to-production (R/P) ratio - If the coal reserves remaining at the end of the year are
               divided by the production in that year, the result is the length of time that those remaining coal reserves would last if
               production were to continue at that rate.


     7.3.      Supply
               The Asia Pacific region accounted for 4,683.5Mt of coal produced, or ~64% of coal produced, in 2010,
               (Figure 5 and Figure 6). China, Australia, Indonesia and India were the dominant producers, but China
               was the most significant producer, producing almost 70% of Asia Pacific coal in 2010.




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               It was believed that the percentage share of Asia-Pacific production of several countries, including
               Australia, could, however, potentially fall since their production targets in the latter half of the year were
               influenced by floods and heavy rains. However, it now appears that most countries in this region continued
               to grow their coal production despite the poor weather conditions. The Asia-Pacific countries that showed
               a drop in coal production in 2010 included South Korea, Japan and Vietnam.

               The influence of the La Nina weather phenomenon on Australian production (and Colombian and South
               African production) in 2011 is yet to be determined. Several company initiatives were introduced in 2011 to
               ensure that the year's Australian production would compensate for earlier shortfalls – a factor that bodes
               well for Australia's 2011 coal production performance. However, heavy rains at the beginning of 2012 have
               again resulted in coal mine closures, with four Australian coal mines closed in eastern Australia in March
               2012 (The Huffington Post, 2012).

               North America, after the Asia Pacific region, produces the next highest amount of coal by energy value,
               although it produces less coal in volume terms than Europe and Eurasia. Africa, South and Central
               America and the Middle East are the next largest coal producers by volume and energy values. This
               pattern is observed in consolidated global figures for 2009 and 2010 (Figure 5 and Figure 6).

                 Figure 5 : Coal Global Production 2000 – 2010 (Mtoe)

    

                   Figure 6 : Coal Global Production 2000 – 2010 (Mt)





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                                                                                            17

               Coal production quantities in North America and Africa had not significantly changed between 1981 and
               2008, but production dropped in 2009 in every region, except in the Asia Pacific and Middle East regions,
               in 2009, reducing by 9.1% in North America, 7.1% in Central and South America, 6.9% in Europe and
               Eurasia, and 0.7% in Africa. Many regions reversed this trend in 2010, and are again increasing their coal
               production volumes, as can be seen by country-specific information shown in Table 4.

               The most significant producers of coal in 2011 are shown in Table 4, which shows that China was the
               largest coal producer in 2011 by tonnage, followed by the United States (US). South Africa was ranked as
                                                                               th
               the 7th-largest producer of coal volumes, and the combined 6 -largest producer of coal in energy terms in
               2009 but, since Indonesia increased its coal volumes in 2011 more dramatically than South Africa, South
                                         th
               Africa has fallen to the 7 largest producer of coal in energy terms (BP, 2011).

               Table 4 S                                    C   P                E               d 2011 Production
                                                    PRODUCTION
                  COUNTRY                                                                                            NOTES
                                                       (Mt)
                 China                                      3,539         The Chinese National Bureau of Statistics (Reuters, 2012b)
                                                                          The BP Statistical Review of World Energy (2010) gives US coal production as
                                                                          973.2Mt in 2009 and the Energy Information Administration (EIA) (2011) notes
                 US                                                 982   that this increased by 1% in 2010. Venmyn was not able to source production
                                                                          tonnages for 2011; however, it is known that the US is idling some mines on the
                                                                          back of poor domestic demand (Wellstead, 2012)
                                                                          Coal production for fiscal 2011, starting in April 2011, is expected to be 554Mt,
                 India                                              554   but there are indications that the country will not meet this tonnage (Sethuraman,
                                                                          2012)
                                                                          Australia's coal production increased by 1% between 2009 and 2010 (Abare,
                 Australia                                          356   2011). The production tons mentioned in this table are for 2010, as Venmyn
                                                                          could not find 2011 production figures at the time of writing this report.
                 Indonesia                                          340   Indonesia was expected to produce 340Mt of coal in 2011 (Reuters, 2012c)
                 Russia                                             334   State Statistics Committee of Russia (Hellenic Shipping News, 2012)
                                                                          The latest available statistics from November 2010 to October 2011 (inclusive)
                 South Africa                                       255
                                                                          gives production for this period of 255Mt (DMR, 2011b)

     7.4.      Demand
               The Asia Pacific region accounted for the bulk of coal demand by energy value in 2010, with 67%, or
               2,385Mtoe, of global consumption stemming from this region in 2010 (Figure 7). North America was the
               next largest contributor to consumption by region, at 16%, or 556Mtoe, of global demand, followed by
               Europe and Eurasia, at 14% of global demand, or 487Mtoe, in 2010. All regions, with the exception of the
               Middle East and Asia Pacific, experienced a drop in coal consumption, in energy terms, in 2009, but all of
               the regions showed an increase in consumption, in energy and volume terms, in 2010 (Figure 7 and Figure
               8).

               China's coal consumption was the world's largest in energy terms in 2010, totalling 48.2% of global
               consumption, or 1,713.5Mtoe, followed by the US, with 14.8% of global consumption, or 524.6Mtoe. China
               continues to dominate coal consumption, and accounted for two-thirds of consumption growth globally in
               2010.

                 Figure 7 : Coal Consumption 2000-2010 (Mtoe)

    




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                 Figure 8 : Coal Consumption 2000-2010 (Mt)


               7.4.1.                           Imports
                                                While a portion of consumption can be met by domestic production, some countries are unable
                                                to supply domestic coal requirements. As far as seaborne coal trade, the following coal flows
                                                apply (Neumann, 2009; Economist Intelligence Unit, 2010):-
                                                        *      a significant portion of South Africa's coal exports are destined for India;
                                                        *      Australia's main export destination is Asia, with a smaller quantity of coal
                                                               supplied to Europe and the US;
                                                        *      Russia's main export destination is Eastern Europe, with a smaller quantity of
                                                               coal supplied to the East;
                                                        *      Indonesia mainly supplies the East, but also supplies a small quantity of coal
                                                               to Europe;
                                                        *      Colombia has mainly supplied the US and Europe, but is starting to send coal
                                                               to Asia when freight rates are high and when prices are strong; and
                                                        *      the US supplies its internal market and Europe, although, in 2010, a weak
                                                               currency, low freight charges and a shortage of coking coal in Asia resulted in
                                                               it supplying considerable tonnages to this region.

                                                As far as trends in coal destination countries, industry observers continue to watch China and
                                                India's coal imports, anticipating that they will soon take over from the traditionally-largest coal
                                                importers. Many anticipate that China will demonstrate that they had imported more coal than
                                                any other nation for 2011, when the statistics are released in min-2012.

                                                However, to-date, Japan appears to continue to dominate in net coal imports, with net imports
                                                of ~177Mt in 2010 compared to China's ~164Mt of net coal imports. South Korea, Taiwan,
                                                Germany, the United Kingdom (UK) and Brazil are also among the largest importers of coal.

               7.4.2.                           Exports
                                                The country production rankings are considerably different to the coal export rankings. Australia
                                                has historically controlled 55% to 60% of the coking coal market. Australia exported over 137Mt
                                                of coking coal in 2008, 135Mt in 2009, and 159Mt in 2010.

                                                Indonesia, meanwhile, is the largest global exporter of thermal coal, exporting 173Mt of thermal
                                                coal in 2008 and more than 180Mt in 2010 (Lucarelli, 2011; Abare, 2011; Wong, 2010;
                                                SourceWatch, 2010). Australia, Indonesia, Russia, Colombia, the US and South Africa remain
                                                important sources of global coal, with all of these countries reporting increases in production in
                                                2010.

                                                An issue that dominated 2010 coal exports and continued to influence 2011 coal exports,
                                                changing traditional source countries contributions to global coal supplies, is the continued
                                                impact of floods in Australia, that resulted in numerous producers declaring force majeure and
                                                announcing that they would not be able to meet their supply commitments.



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                           This resulted in Chinese and Indian buyers, as well as other buyers, trying to source coal from
                           non-traditional sources. For instance, for the US this meant that its coking coal exports reached
                           1991 levels, rising to 55Mt in 2010, and marking a 49% increase in year-on-year exports. The
                           US is similarly expected to have increased its coking coal export tonnages for 2011, this time to
                           65Mt (Xinhuanet, 2011). This is expected to be on the back of a low dollar price and low freight
                           charges to the region.

                           China's contribution to global exports will also be notably different to that in 2009, although it
                           remains a net importer. This is because China, despite being the largest producer on coal, was
                           not a significant exporter of coal in 2009 and became a net importer of coal in 2009, as a result
                           of high demand and domestic Chinese prices being higher than import prices. However, this
                           changed in 2010, when China again became an exporter of coal, exporting 19Mt in 2010
                           (Mining Exploration News, 2010; Wong, 2010; SourceWatch, 2010).

     7.5.      Future Demand
               7.5.1.   Thermal Coal
                           The demand for thermal coal in the future will largely depend on the extent of global reliance on
                           coal for electricity production, while the demand for coking coal will depend on the growth in
                           steel production. Coal demand is expected to increase significantly, especially on the back of
                           increases in power and industrial production (Figure 9).

                           Figure 9 : Projected Demand for Energy (Mtoe)



                           Coal demand is expected to increase from 2010, and this increase is likely to be more dramatic
                           than for many other energy commodities.

                           The thermal coal market has been growing, as a result of coal's share of world electricity
                           generation. This stands at ~40% globally.

                           However, electricity demand in Asia is increasing, and coal, as a fuel source, contributes a
                           much larger percentage to electricity generation in this region – two factors which bode well for
                           the continued growth of the thermal coal market. Some 220GW of coal powered generation
                           capacity is expected to come on line in the next five years, including 79GW in China and 69GW
                           in India (PSQ Analytics, 2010).

                           While coal's share of global electricity generation capacity is expected to grow in most regions,
                           in some regions, notably Europe, there will be a reduction in its share, because of
                           environmental concerns. The predicted coal-fired generating capacity by region is shown in
                           Table 5.

                           Unsurprisingly, given many of the Asian countries high future coal-fired electricity consumption
                           levels (Table 5) and limited domestic supplies of coal, many of the top importers of thermal coal
                           are expected to be from the continent in future, with South Korea and Malaysia also featuring
                           prominently as importers of thermal coal.




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   Table 5 : Predicted World Coal-fired Generating Capacity by Country and Region (GW)
                                                                                                                    AVERAGE
                                          HISTORY                          PROJECTIONS                              ANNUAL %
            REGION / COUNTRY                                                                                         CHANGE
                                             2007         2015           2020         2025       2030          2035 2007-2035
     North America                                340         345            346          347        352           363      0.2
                           United States          313         325            326          327        330           337      0.3
                                Canada             21          14             14           14          15           16     -0.8
                                 Mexico             7            6             6            6           7           10      1.4
    OECD Europe                                   200         189            182          176        174           177     -0.4
    Non-OECD Europe and Eurasia                    98          97             95           96        103           118      0.7
                                 Russia            44          44             44           44          50           61      1.1
                                  Other            54          52             51           51          53           57      0.2
    Asia                                          729         859            990        1,170      1,381         1,622      3.7
                                  Japan            45          42             41           40          39           39     -0.5
                            South Korea            23          22             23           27          33           41      2.1
                 Australia/New Zealand             31          30             31           31          32           33      0.3
                                  China           496         625            750          901      1,062         1,233      3.3
                                   India           84          86             89           98        113           135      1.7
                             Other Asia            50          53             57           72        102           141      3.8
    Middle East                                     6            5             5            5           5            5     -0.4
    Africa                                         41          41             43           47          56           70      1.9
    Central and South America                      10          10              9            9           9           11      0.1
                                  Brazil            2            2             2            2           2            3      0.8
     Other Central and South America                8            8             7            7           7            8     -0.1
                       TOTAL WORLD              1,425       1,545          1,671        1,849      2,080         2,366      1.8
   Note: Totals may not equal sum of components due to independent rounding.
   Sources: History: Derived from EIA, International Energy Statistics database (as of November 2009), web site
   www.eia.doe.gov/emeu/international. Projections: EIA, Annual Energy Outlook 2010, DOE/EIA-0383 (2010) (Washington, DC, April
   2010), AEO2010 National Energy Modelling System, run AEO2010R.D111809A, web site www.eia. doe.gov/oiaf/aeo; and World
   Energy Projection System Plus (2010).


               7.5.2.      Coking Coal
                           Countries which have traditionally been large consumers of coking coal, including Japan, the
                           European Union (EU) and Korea, will continue to be so, and their year-on-year imports are
                           expected to grow significantly as will India and China's imports (Metalreal, 2010).

                           Some fluctuations in steel production in China were observed in China between August and
                           October 2010, with the year-on-year percentage growth being negative. This will be concerning
                           to coking coal producers, since consistent production or growing crude steel production ensures
                           demand for coking coal. However, the Chinese shortfall in crude steel production was made up
                           for by other producers, so the overall world year-on-year percentage growth remained positive
                           (Worldsteel, 2011). This suggests that the coking coal market, which is derived from this, will
                           also remain strong.

     7.6.      Future Supply
               According to the United States Energy Statistics Department, from 2010 to 2030, coal production in China,
               the US and India, driven by growing coal consumption, is projected to increase. It is assumed that much of
               the demand for coal in China, the United States, and India will continue to be met by domestic production.

               However, some countries such as India are already noting their import dependence is increasing and have
               a concerted strategy of sourcing coal from, and buying mines in, other regions, including Africa.

               Increases in coal production are also expected from Australia/New Zealand with these increases expected
               to be used primarily for export from Australia rather than domestic consumption. Production growth in Asia
               is attributable to both rising levels of coal consumption and a desire to export. Rising international trade is
               also expected to support production increases in Russia, Africa, and Central and South America
               (excluding Brazil).

               It is expected that Australia will continue to dominate the coking coal market when this sector recovers
               from the torrential rains that have influenced it and continue to influence it. Indonesia, meanwhile, will
               continue to dominate the thermal coal market.




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     7.7.      Future Prices
               The price of coal varies based on its specifications. All of the international coal price graphs demonstrate a
               similar peak that was experienced in the coal price in 2008. This is not surprising since, as Neumann
               (2009) indicates different coal prices are co-integrated with each other. Although there is not a linear
               relationship between the different prices, there is a strong relationship with each other.

               7.7.1.      Thermal Coal
                           Coal prices have historically been lower and more stable than oil and gas prices in spite of the
                           almost 200% increase in the price of coal between 2007 and 2008. However, this increase was
                           corrected in the recent global financial crisis and economic slowdown.

                           The general increase in the coal price was attributable to the increase in demand for the most
                           affordable form of fuel for power generation. In view of the dramatic increase in coal prices, the
                           focus on coal resources has intensified worldwide.

               7.7.2.      Coking Coal
                           Internationally, coking coal demand has remained stagnant since the early 1980s, but this
                           changed in 2003, when coking coal prices rose markedly, as a result of increased demand in
                           the steel manufacturing industry.

                           In Q2 2011, Anglo American and Japanese consumers agreed on a contract price of USD330/t
                           for its premium low-volatile hard coking coal. Other coals on contract will reach a lower price
                           (Hall, 2011).


8.   SOUTH AFRICAN COAL MINING INDUSTRY
     South Africa has a well-established, low-risk coal mining industry, which has reputable participants, including Anglo
     Coal SA Limited (Anglo Coal), Ingwe Coal Corporation (Ingwe)/BHP Billiton plc (BHPB), Xstrata Coal, Exxaro
     Resources Ltd (Exxaro), and Sasol Limited (Sasol) Mining. There are also an increasingly large number of junior
     mining companies as a result of their investing in greenfield projects and brownfield projects, divested of by the
     larger mining companies wishing to secure BEE credits and to sell mines that do not fit into their coal portfolios
     (Ryan, 2011).

     Coal is one of South Africa's most important export minerals. The bulk of the exports, particularly when freight
     charges are low, are going to Asia (Economist Intelligence Unit, 2010). South Africa was the world's sixth largest
     producer in energy terms of hard coal and the seventh largest producer in volume terms in 2009, and it may
     become the seventh-largest producer in energy and volume terms when consolidated production information for
     2011 is released. South Africa's coal reserves rank sixth in the world with a reported 30Bt of economically
     recoverable coal reserves. The country is known for its low-cost, readily-available coal, which makes it a very
     competitive industry.

     8.1.      Reserves
               The country is currently implementing a review of the national coal resources and coal reserves and hopes
               to have a firmer foundation for national estimates of coal resources and coal reserves. This should assist
               in reducing the doubt that surrounds estimates of South Africa's coal reserves. In the current South African
               Minerals Industry (DMR, 2010d) Handbook, the Department of Mineral Resources (DMR) relies on
               information provided by the BP's 2010 Statistical Review of World Energy, and states that South Africa has
               30.4Bt of coal reserves, thereby differing significantly from lower estimates implied by US geologist Mr.
               King Hubert, who estimates that the whole continent of Africa has ~15Bt (Hartnady, 2009).

     8.2.      Supply
               The South African coal-mining industry is highly concentrated, with three companies, namely Ingwe
               (BHPB), Anglo Coal and Exxaro, dominating production.

               South Africa's coal production accounted for 98.6% of Africa's coal production in 2009 (BP, 2011). South
               Africa's coal sales have been increasing since 1900, but this pattern was broken in 2009, when South
               Africa's sales dropped from 254.9Mt to 245.2Mt between 2008 and 2009. South Africa's export tonnages,
               similarly, dropped in 2009, to 60.4Mt, as a result of shortfalls in delivery from Transnet Freight Rail (TFR)
               (Ryan 2010, DMR, 2010b and 2010a).

               Between November 2010 and October 2011 South Africa produced 255.4Mt and thus increased its year-
               on-year production beyond 2008 levels. Over this period, 67.3Mt were exported, marking a significant
               improvement on 2009 export tonnages (DMR, 2011). In total, there are eighteen coalfields, with the
               Witbank-Highveld Coalfield being the most economically important. The Witbank-Highveld Coalfield
               produces the highest percentage of South Africa's saleable coal.




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     8.3.      Demand
               According to the DMR (2010), the main markets for South African coal are:-
                   *       the export market, which took up ~24% of total production in 2009; and
                   *       the domestic market, which consists of:-
                                  *   electricity generation, which consumes ~62% of coal in the domestic market;
                                  *   petrochemical companies, primarily Sasol, which consume ~23% of coal in
                                      the domestic market;
                                  *   general industry, which consumes ~8% of coal in the domestic market;
                                  *   metallurgical industry, primarily ArcelorMittal South Africa Ltd (ArcelorMittal),
                                      Highveld Steel and Columbus Steel, which consumes ~4% of coal in the
                                      domestic market; and
                                  *   about ~4% of coal for the domestic market which is purchased by merchants,
                                      and sold locally for the household market or exported.
               8.3.1.      The Export Market
                           South Africa has the capacity to export 91Mt of coal from the Richards Bay Coal Terminal
                           (RBCT), but it is exporting significantly lower volumes, having exported 61Mt in 2009 and 63Mt
                           in 2010.

                           The Durban Bulk Connection (DBC) currently has a capacity of 2Mtpa for sized coal exports.

                           An alternative option for exporting South African coal is to export via the Matola Coal Terminal,
                           in Maputo, Mozambique. Recent upgrades have increased the capacity of this terminal to 6Mtpa
                           and there are plans to increase the Matola port capacity to 10Mtpa by 2014.

               8.3.2.      The Domestic Market
                           The average quality specification requirements for domestic consumers are shown in Table 6.

                           Table 6 : Weighted Coal Qualities by Sector
                                                                                    CV             ASH          VOLATILE
                                        SECTOR                COAL TYPE
                                                                                 (MJ/kg)           (%)         MATTER (%)
                            Electricity generation           Bituminous            20.7            30.1           22.5
                              Tutuka Power Station           Bituminous           22 - 25          < 30           > 20
                              Majuba Power Station           Bituminous           19 - 23         20 - 35        20 - 24
                            Synfuels                         Bituminous            21.3            25.8           22.3
                                                             Anthracite            29.4            15.2            7.0
                            Small Industry and Household
                                                             Bituminous            27.3            14.2           26.6
                           Source:- DMR Minerals Bureau, Eskom

                           South African State electricity utility Eskom Holdings Limited's (Eskom's) power stations have
                           been specifically designed to burn low-grade coals which are abundant in South Africa. Every
                           year Eskom consumes ~62% of domestically-sold coal from which it provides ~90% of the
                           country's electricity.

                           Sasol consumes approximately 23% of South Africa's annual domestically-consumed coal and
                           operates coal mines to provide feedstock for synthetic fuels and chemical plants.

                           Sasol primarily uses the coal mined by Sasol Mining to produce petrol, diesel and
                           petrochemicals and power generation at the chemical plants.

                           Approximately 4% of local consumption goes to the household market. The suppliers are largely
                           coal traders in formal and informal residential areas.

                           The metallurgical sector also consumes about 4% of the local coal production. The major
                           players in the industry include ArcelorMittal, Columbus Stainless Steel and Highveld Steel.

                           Cement manufacturers are likely to emerge as significant consumers in the medium-term as
                           infrastructure developments in southern Africa gain momentum, creating demand for cement-
                           based products.

                           Coking coal has historically played a minor role in the South African coal industry. In 2006, less
                           than 4Mt of coking coal was produced by Exxaro's Grootegeluk and Tshikondeni Collieries, the
                           former for export and the latter for ArcelorMittal's steel works in Vanderbijlpark. In 2010, less
                           than 3Mt was sold by South African producers, and all of this was for domestic use.


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                                                  The lack of development has largely been a function of the Witbank/Highveld Coalfields lower
                                                  qualities which have been better suited to thermal applications.

     8.4.                Prices
                         8.4.1.                   Thermal Coal
                                                  Thermal coal prices are based on the energy content of the quality of the coal. In the South
                                                  African market, low grade coal is predominantly used by Eskom operated power stations. Low
                                                  grade coal prices are based on contracts and are rarely reported in the public domain. The
                                                  pricing mechanism is usually based on a cost plus basis where the price of the coal covers cost
                                                  plus a margin. For high grade thermal coal, price data is available for a variety of products.
                                                  5900kcal coal prices, 6000kcal coal prices, 6200kcal coal prices and Richards Bay FOB coal
                                                  prices are the most popularly used prices. Figure 10 illustrates the historic prices for each of
                                                  these categories.

                                                  For the past 15 months, export prices for all qualities of coal was above the USD100/t mark and
                                                  the current three month average ranges from USD103/t for Richards Bay Coal and USD121/t
                                                  for 6200kcal coal.

       Figure 10 : Coal Price History from July 2002 to July 2011 (USD)



                         8.4.2.                   Coking Coal
                                                  South Africa did not export coking coal in 2009, but did sell ~1.9Mt in 2009 domestically at an
                                                  average local coking coal price of ZAR871/t (DMR, 2010b). In 2010, South Africa, similarly, did
                                                  not export any coking coal, but did produce ~3.4Mt locally and sold 2.4Mt of bituminous coking
                                                  coal to the domestic market. Between November 2010 and October 2011, South Africa sold
                                                  2.3Mt of bituminous coking coal locally and exported 474,223t. The average unit value of
                                                  domestic bitumous coal sales ranged between ZAR785/t and ZAR1,020/t over this period, while
                                                  the average unit value of export sales ranged between ZAR512/t and ZAR1,161/t.

     8.5.                Outlook
                         Export sales and sales to Eskom are the most important sources of demand, and the outlook for these
                         sales avenues are the most important to consider for any new entrant into the coal sector.

                         8.5.1.                   Coal Sales to Eskom
                                                  South Africa dominates the region in its maximum electricity demand (of 33,461MW), its total
                                                  capacity (42,941MW) and its proportional dependency on coal as part of the possible electricity
                                                  generation mix that is available to it, since some 92% of the country's generation capacity
                                                  currently stems from coal (Zhou et al, 2009).

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                           While this percentage is likely to fall, since only 15% of additional new electricity capacity until
                           2030 is expected to be from coal-burning power stations, coal will still be the most important
                           means of producing electricity for some time (South African government, 2011).

                           In addition, it is likely that there will be an increased demand for electricity, and potentially
                           electricity derived from coal-fired power stations, from the region as a whole, since Southern
                           African Power Pool (SAPP) members have an electricity demand that is growing at an average
                           of 3% a year (Musaba, 2010).

                           Southern Africa continues to develop SAPP, a community of 12 countries which were to sell
                           surplus electricity to each other (Musaba, 2010). Historically, the DRC and Zambia, Zambia and
                           Zimbabwe, and Mozambique and South Africa have had transmission lines linking the
                           countries, but the intention is to invest USD5.6m in transmission projects to construct
                           transmission networks between several countries which have not had transmission networks
                           linking them (Musaba, 2010).

                           In the north of the SAPP community, hydropower dominates the energy supply mix, with
                           Tanzania, Angola, Zambia, Zimbabwe, Malawi, Mozambique and, most importantly, the DRC
                           having considerable hydropower potential. In the south of the SAPP community, meanwhile,
                           thermal power is integral, with Namibia, Botswana, South Africa, Lesotho, Swaziland and
                           arguably also Mozambique, in the next few years, increasingly building coal-fired power stations
                           or being dependent on them for a large portion of their energy production (Musaba, 2010).

                           The SAPP community has the potential to change the way that power is generated and
                           transmitted throughout the region and could offer the opportunity for a diverse array of
                           generating possibilities, including additional hydropower and coal-fired generation possibilities
                           for private or national investors. This could result in an increase in the number of coal-fired
                           generators that exist in the sub-region or, if the massive Inga hydropower project, in the DRC,
                           takes off, result in imported hydropower-derived electricity being the dominant form of power
                           generation in the whole SAPP community.

               8.5.2.      Export Sales
                           Some 63Mt of coal was exported from South Africa in 2010 and 27.5Mt have been exported in
                           the first half of 2011. Export tonnages are limited by a lack of rail capacity and operational
                           underperformance, which has included derailments in the past.

                           8.5.2.1.       Infrastructure
                                          A general lag in infrastructural development in remote areas has hamstrung
                                          meaningful industrial development, and this is particularly important for any
                                          potential new mining company that wishes to establish itself there and export its
                                          product.

                                          Several transport corridors have been mooted to assist new coal producers,
                                          including a Waterberg-Mpumalanga Corridor, that would allow coal to be
                                          transported to Mpumalanga from the Waterberg Coalfield and then transported on
                                          to Maputo or Richards Bay; and a Limpopo-Techobanine Corridor, that would
                                          allow coal from the Limpopo Coalfield, and potentially also the Soutpansberg
                                          Coalfield to be exported through Techobanine, a port to the south of Maputo
                                          (Hall, I, 2011). South African coal producers could also potentially take advantage
                                          of a mooted Walvis Bay Corridor (also known as the Trans-Kalahari Corridor) that
                                          promises to link Namibia to South Africa, but this would be a long and thus
                                          expensive export route (Trademark, 2012).

                           8.5.2.2.       Changing Product Emphasis
                                          There have been reports that coal producers want to start exporting coal with a
                                          lower calorific value. Dubbed RB3, it is likely to have a specification of
                                          5,600kcal/kg. This low calorific value is in demand from India, and could be
                                          supplied from the Waterberg, which has an abundance of low-quality coal.
                                          However, while this presents an opportunity for coal firms in the Waterberg that
                                          have not got established ties to Eskom, it is likely that Eskom will oppose the
                                          exporting of coal grades which it requires (Ryan, 2010b).

                           8.5.2.3.       Coal as a Strategic Mineral
                                          Those in the coal sector have become wary of political interference in coal
                                          exports. As indicated in the previous discussion, it is possible that Eskom may
                                          oppose the exporting of low-calorific-value coal (Ryan, 2010b). In addition,
                                          previous Minister of Public Enterprises Alec Erwin is on record as saying that
                                          government could intervene in the coal sector if government's needs are not met
                                          (Wakeford, 2008).

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                           8.5.2.4.       Environmental Issues
                                          Globally, there have been increasing concerns about the prevalence of coal-fired
                                          power stations. This will result in a reduction of electricity being produced from
                                          these power stations in Europe and it is possible that South African thermal coal
                                          exports to this destination will be harmed as a result.

                           8.5.2.5.       Costs
                                          Rising freight costs will narrow any cost advantage that South Africa has and its
                                          future export success to destinations such as Asia is largely dependent on freight
                                          costs remaining low. Its traditional market, of Europe, continues to be a market for
                                          South African coal, but its demand for coal is dropping (Ryan, 2010b). Exporters
                                          are likely to have their profits influenced by increased freight charges, which
                                                                     st
                                          became effective on the 1 April 2011.


9.   THE WATERBERG COAL PROJECT DESCRIPTION AND LOCATION
     9.1.  Location
               The contributing properties are situated less than 5km west of Exxaro's Grootegeluk Mine boundary,
               240km northwest of Pretoria (South Africa's capital) and 70km south of the border with Botswana.

     9.2.      Accessibility
               The properties are well placed with regards to the local infrastructure, located approximately 20km from
               the railway line that runs from Lephalale to Pretoria, and extends to Maputu, Richards Bay and Saldana
               Bay (Figure 1). The railway line terminates immediately north of the Grootegeluk Mine.

               The road network in the area is well established, with the tarred D1675 within 10km from the contributing
               properties.

     9.3.      Climate and Vegetation
               The climate of the area is warm, which ensures that exploration and mining can take place throughout the
               year. Summers are hot (averaging highs of 35ºC) with occasional thunder storm activity. The winters are
               mild (averaging highs of approximately 20ºC) and generally dry.

               The Waterberg is generally dry, with an annual average rainfall of 450mm, and prone to drought.

               The vegetation of the area consists of sparse Bushveld, with the main land use being for game farming.
               The Waterberg Coal Project properties are all currently being utilised as game farms.

     9.4.      Local Resources
               The nearest town is that of Lephalale (Figure 2), which is located approximately 40km east of the
               contributing properties. The town is a regional centre and provides modern conveniences, including
               accommodation and services. The town is also a source of fuel and labour. The town services Eskom's
               Matimba Power Station as well as Exxaro's Grootegeluk Coal Mine among other industries.

               Lephahale is approximately 3.5 hours drive from Pretoria (South Africa's capital) and Johannesburg (South
               Africa's economic hub) on good tarred roads and is also connected by a well established rail system.

     9.5.      Infrastructure
               National infrastructure, including Transnet's Railway line (which terminates at the Grootegeluk Mine) and
               Eskom's power distribution network lie within 20km southwest of the contributing properties (Figure 2).

               Eskom's existing 3,900MW Matimba Power Station is located adjacent to the Grootegeluk Mine,
               approximately 15km west of the contributing properties. Eskom's planned 4,800MW Medupi Power Station
               is located approximately 10km south of the Waterberg Coal Project properties, and is expected to be
               commissioned during 2012. Eskom plans to build at least one additional power station in the Waterberg.
               This together with Medupi will require an additional 30mtpa of coal.

               In 2012, the South African government have made a number of pronouncements on infrastructure
               (particularly water and rail) improvements in the Waterberg Coalfield region of South Africa.

               The rail division of Transnet has undertaken to spend ZAR7b on rail upgrades in the next five years to
               increase coal exports from Limpopo as well as to ensure that coal from the region can reach South Africa's
               existing power stations in Mpumalanga, before their traditional feeder mines in Mpumalanga are depleted.
               Phase one includes an upgrade of the existing route from the Waterberg to Ermelo via Rustenburg and
               Pyramid South and includes the construction of passing loops and the increase in the axle loads capacity
               (Smith, 2012). Phase two of the investment programme is not on the capital expenditure schedule for the
               next seven years.


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               This involves the expenditure of ZAR31m on a 450km line from south of Thabazimbi to Broodsnyersplaas,
               north of Ermelo, as well as the upgrading of the existing line between Thabazimbi and the Waterberg
               (Smith, 2012)

     9.6.      Topography
               The topography of the contributing properties is generally a flat plain, with small undulations over the
               project area. The elevation varies between ~860m above mean sea level (amsl) to ~900mamsl. The
               topography dips gently to the north and west towards the Limpopo River valley.

               The Limpopo River, which forms the border between South Africa and Botswana in this area, is a
               perennial river, and is located approximately 15km from the contributing properties.


10. GEOLOGICAL SETTING
    10.1. Regional Geological Setting
               The Waterberg Coalfield reportedly accounts for over 45% of South Africa's unmined coal inventory. It is
               considered a strategic coalfield in light of South Africa's (and southern Africa's) current energy crisis, with
               Eskom as well as mining and exploration companies presently investing heavily in this coalfield.

               The Waterberg Coalfield is rapidly becoming as important as the better known Witbank, Highveld and
               Ermelo Coalfields which currently supply the vast majority of Eskom's coal power stations. It's importance
               is set to surpass these other coalfields within the next 20 to 30 years as many of the more established
               coalfields become progressively more depleted, and as Eskom begins to increase its footprint in the
               Waterberg, away from the concentration of power stations in Mpumalanga in a bid to redistribute their
               impact on the environment and to satisfy the developmental needs of the Limpopo Province.

               The Waterberg Coalfield is currently host to (Figure 1):-
                      *    Exxaro Resources Limited's (Exxaro) 19mtpa Grootegeluk Coal Mine;
                      *    Eskom's 3,700MW Matimba Power Station; and
                      *    Eskoms planned Medupi Power Station which is currently under construction.

               The Waterberg Coalfield is currently being explored and developed by a number of exploration and mining
               companies (Figure 1):-, including inter alia:-
                      *    Sekoko Coal, Firestone Energy, Resource Generation and Namane Resources for
                           steam coal and coking coal;
                      *    Sasol and PetroSA for various coal-to-liquids and gas-to liquids projects; and
                      *    Anglo Coal and for Iscor Ltd (Iscor) with Batepro Limited for coal bed methane gas.

               The Waterberg Coalfield extends for approximately 85km in a westerly direction from Lephalale and has a
               40km north-south extent. The coalfield extends westward into Botswana where it is known as the
               Mmamabula Coalfield.

               The coalfield is fault-bounded along the southern and northern margins by the Eenzaamheid and
               Zoetfontein faults respectively (Figure 11), creating a „horst structure. The Daarby fault, with a
               displacement of between 250m and 400m, divides the coalfield into a shallow opencastable western area
               and a deep northeastern area, where coal occurs at a depth of between 200m and 400m below surface
               and may only be extracted by underground mining.

               The major coal bearing horizons of the Ecca Group of the Karoo Supergroup, in the Waterberg are:-
                      *    the Volksrust Formation, which consists of 55m of intercalated mudstones and coal, and
                      *    the Vryheid Formation, which incorporates four major discrete seams of approximately
                           1.5m, 3m, 9m and 4m, respectively.

               Coal measures occur over a strarigraphic interval between 90m – 110m thick, characterised by 11 discrete
               coal zones, with the upper zones (Zone 6 – Zone 11) holding the highest commercial value (including
               semi-soft coking coals).

               The Waterberg Coalfield does not exhibit a noticeable increase in rank (carbon/energy content) with
               increasing depth. The air dried volatile content of the coal remains at 35% – 36% from the sub-outcrop to a
               depth of 400m.

               Only a few dolerite dykes outcrop in the southeastern portion of the Waterberg Coalfield and no sill
               features have, to-date, been encountered in any exploration borehole.




Valuation of the Waterberg Coal Project for Sekoko Coal           May 2012                              Venmyn Rand (Pty) Ltd
This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction.


                              Source: Venmyn
                                                              28

               10.1.1.     The Volksrust Formation
                           The Volksrust Formation differs from that of the main Karoo Basin by being dominantly
                           carbonaceous where it is represented by intercalated carbonaceous shale and mudstone, and
                           bright coal. The Volksrust Formation consists of cyclical repetitions of mudstone and coal with
                           an average thickness of approximately 60m, and comprise the upper seven zones (identified as
                           Zones 5 to 11) that can be correlated across the coalfield.

                           The Volksrust Formation coals are classified as a thick interbedded seam type deposits in terms
                           of the SANS 10320:2004 guidelines.

                           There is a decreasing ratio of bright to dull coal from the top to the bottom of the succession,
                           with the proportion of semi-soft coking coal greatest in Zones 6 to 11. The best quality coals are
                           within Zones 8 to 11 over the majority of the coalfield. These zones are characterised by the
                           highest yields and the presence of both bright and vitrinite coals.

                           The vitrinite content of the coal towards the top of the Volksrust Formation leads to the upper
                           zones having a semi-soft coking coal yield as well as thermal coal. The remainder of the
                           Volksrust Formation yields low grade thermal coal for power station consumption.

                           Each zone is typically characterised with bright coal at its base, with the ratio of coal to shale
                           decreasing from the base in an upward direction. It follows therefore that the ash content of the
                           zones increases upwards from approximately 20% to 45%.

                           The coal succession requires beneficiation or up-grading, to produce an acceptable coal
                           quantity for the market, which varies from semi-soft coking coals to internationally traded and
                           local power station coals.

               10.1.2.     The Vryheid Formation
                           The Vryheid Formation coal seams are composed of predominantly dull coal with minor
                           carbonaceous mudstone intercalations, mined as thermal coals. The coal seams are identified
                           as Zones 1 to 4 from the base of the Formation. These coals occur over a stratigraphic interval
                           of approximately 40m. The coal seams vary in thickness between 1.5m and 9m.

                           The Vryheid Formation coals are classified a multiple seam deposit type according to the SANS
                           10320:2004 guidelines. These are not unlike the coalfields in Mpumalanga.

                           While the majority of the coal seams or zones consist mainly of dull coal or inertinite-rich coal,
                           some bright coal is developed at the base of zones 2, 3 and 4.

                           This coal is suitable for steam-raising, gasification or as a direct-injection coal in the
                           metallurgical industry. It requires limited or no beneficiation to up-grade the coal quality
                           parameters.

                           Due to lateral facies changes and changes in the depositional environment, these zones are
                           characterized by a large variation in thickness and quality.

                           Zone 3 is the best-developed dull coal zone and reaches a maximum thickness of 9m. The
                           basal portion yields a small fraction with semi-soft coking coal properties. Zone 2 is on average
                           4m thick and reaches a maximum thickness of 6m in the Grootegeluk lease area. The basal
                           portion also yields a fraction with semi-soft coking coal properties. Zone 1, the basal Vryheid
                           coal zone, has an average thickness of 1.5m.

               10.1.3.     Grootegeluk Colliery
                           Exxaro's Grootegeluk Colliery is the only presently operating mine in the Waterberg Coalfield.
                           This opencast mine commenced production in 1980 primarily as a source of coking coal for
                           Iscor's steel works with a middlings fraction from the beneficiation process suited to power
                           station consumption.

                           Saleable products currently include semi-soft coking coal, metallurgical coal and thermal coal,
                           with the latter predominating as a dedicated supply to the Matimba Power Station. Metallurgical
                           coal is primarily supplied to ArcelorMittal Steel, with semi-soft coking coal exported via the
                           Durban and Richards Bay ports. Grootegeluk currently has a 14Mtpa supply agreement with
                           Eskom's neighbouring Matimba Power Station.

                           The coal strata extracted at Grootegeluk is roughly 110m thick (Figure 12). The upper 60m
                           consists of intercalated bright coal and carbonaceous shale of the Volksrust Formation, whilst
                           the bottom 50m consists of well-defined dull coal seams separated by shale and sandstone
                           interburden of the Volksrust Formation.



Valuation of the Waterberg Coal Project for Sekoko Coal            May 2012                            Venmyn Rand (Pty) Ltd
                                                                                              FIGURE 12

                                                                                              Sekoko Coal
Independence you can trust

   STRATIGRAPHY OF THE WATERBERG COAL ZONES AND GROOTEGELUK COLLIERY MINING BENCHES




This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. 
Graphics by Interaction.   D1196 Sekoko Valuation 2012
                                                              30

                           The overburden thickness varies due to weathering but averages approximately 22m at the
                           Grootegeluk Colliery.

                           The deposit is mined selectively using a parallel bench advance approach, with benches
                           extracted individually or in planned combination to satisfy specific end-product specifications. In
                           addition, run-of-mine (ROM) from the various benches is blended to allow the washing plants, in
                           turn, to supply a consistent product to the end-user.

                           Grootegeluk's export coal is railed via Thabazimbi to Rustenburg and on to the Gauteng area.
                           From there it is railed on the general-freight lines to destinations such as Saldanha or Durban.
                           Some export coal is railed via general freight to Middelburg and onto the coal link line to the
                           Richards Bay Coal Terminal (RBCT).

                           Exxaro's Grootegeluk Coal Mine is a 19Mtpa operation. In 2009 the mine had the following
                           product split:-
                                  *   Eskom sales of approximately 15.5Mtpa;
                                  *   soft coking coal of approximately 1.2Mtpa; and
                                  *   export steam coal of approximately 1.8Mpta

     10.2.     Local Geology
               The contributing properties are superimposed over the regional geology of the western half of the Limpopo
               Province (Figure 11). The Goedgedacht/Swartrand, Endragtpan and Greenwich Formations form part of
               the Karoo Sequence and consist of shales, sandstones, mudstones and coal occurrences. Both the Upper
               and Lower Coal Sequences are present within the Sekoko Coal-Firestone JV Waterberg Project area.

               Structurally, the stratigraphy, especially in the area of the contributing properties appears to be significantly
               faulted, generally in an east-west orientation, and increasing in intensity to the south. There is a dominant
               east-west fault direction with fault throws varying from 10m in the north to as much as 130m in the south.

               Understanding the structural-geological environment is, arguably, more important than understanding the
               distribution of the coal quality characteristics. The presence of the various coal zones is directly related to
               the faulting and subsequent erosion of the upper zones in the southern properties.

               While the northern properties comprise all the coal zones (Zones 1 – 11), Massenberg 305LQ only has
               Zones 1 -9 in the north and Zones 1 – 4 in the south, and Hooikraal 315LQ only has Zones 1 – 4.

               It is generally believed that the geological and structural environment, due to its relatively close proximity
               to Grootegeluk, should be similar to the geological and mining-geological conditions encountered at that
               mine. However, since Grootegeluk was established in the most favourable mining-geological environment,
               areas in close proximity to the mine may not necessarily experience such favourable conditions, due to the
               presence of fault structures.


11. GEOLOGICAL MODELLING
     In August 2010, Sound Mining Solutions (Pty) Ltd (SMS) undertook geological modelling under the direct guidance
     of Venmyn. Orebody modelling was carried out using recent boreholes to derive the 3D geological and structural
     model. Coal zone roofs and floors were constructed on an inverse distance method using Micromine Version 11.0.5
     Build 1134.

     The zone surfaces were cut on fault boundaries, received from Lexshell and also based on interpretations from the
     data where there were sudden changes in zone elevations. Where holes were drilled short, the zones were
     extrapolated using surrounding holes and fitting within the interpreted fault blocks.

     A wireframe for each zone was created separately per farm. A wireframe for each zone was created and in-filled in
     Datamine to form a block model. The block size was set at a maximum of 100m x 100m x zone height. The
                                                 3                                         3
     volumes, densities (at a wash of RD=1.9t/m ) and quality data (at a wash of RD=1.9t/m ) was modelled over the
     properties. A cut-off of 0.5mm minimum thickness limit was applied.


12. RESOURCE STATEMENT
     As described in Section 11 above, the coal zones are extensively interlaminated with shales and mudstones.
                                                                                                   3
     Therefore, in order to identify the Coal Resource only within the zone, a wash at an RD=1.9t/m was carried out on
     the samples. This effectively removes the rock fraction from the coal.

     All Coal Resources have been categorised, by Venmyn, using the SAMREC and JORC Code and the SANS
     10320:2004 (SANS) method of classification (stipulated in the SAMREC Code) for thick interbedded coal deposits.



Valuation of the Waterberg Coal Project for Sekoko Coal            May 2012                              Venmyn Rand (Pty) Ltd
                                                               31

     The SANS scheme utilises the distance between boreholes as the primary defining factor between the classification
     of Measured, Indicated and Inferred resources and Reconnaissance/Exploration Target occurrences, as per Table
     7 below:-

     Table 7: SANS Classification of Coal Resources.
                                                 FOR THICK INTERBEDDED
                                                                                 FOR MULTIPLE SEAM DEPOSIT (<50% Ash)
                                                 SEAM DEPOSIT (<65% Ash)
                                                  MAX
                                               DISTANCE       NO. B/H PER         MAX DISTANCE
                  CATEGORY                                                                               NO. B/H PER Ha
                                               BETWEEN            AREA           BETWEEN B/H (m)
                                                 B/H (m)
      Measured Resource                                 350  8 b/h per 100ha                    350       8 b/h per 100ha
      Indicated Resource                              1,000  1 b/h per 100ha                    500       4 b/h per 100ha
      Inferred Resource                               3,000 1 b/h per 1,000ha                 1,000       1 b/h per 100ha
      Reconnaissance/ Exploration Target              4,000 1 b/h per 1,600ha                 2,000       1 b/h per 400ha
     NB. Boreholes are required to have quality data.

     It is important to note, that classification into any category, requires that boreholes have associated quality data.
     Boreholes that do not have associated quality data, have been specifically excluded from any volume estimates
     and have not been classified into any Coal Resource category, and have not been considered as representing a
     Reconnaissance/Exploration Target.

     According to SANS, coal is to be quoted according to the following definitions:-
             *    each coal zone was „washed at an RD=1.9 to „remove the rock fraction from the coal fraction and
                  to calculate the volume of coal in the interlaminated sequence;
             *    the zone tonnage was multiplied by the percent yield (by mass) to derive the coal tonnage. Note
                  that the coal tonnage has a lower RD than the zone tonnage.
             *    this coal tonnage is then reduced by the geological losses to obtain Total Tonnes In-Situ (TTIS);
             *    geological losses are selected based on the density of the drilling and the structures in the area;
                  and
             *    the classification is based strictly on the radii from boreholes according to the SANS
                  specifications.

     12.1.       Coal Resource Estimates of the Contributing Properties
                 Table 8 summarises the Coal Resources of the contributing properties, defined by Venmyn in 2010 using
                 the assumptions detailed in Section 12.

                 Venmyn understand that no additional resource drilling has been conducted over the resource area since
                 the August 2010 resource estimate, and since no mining has taken place, Venmyn consider that Table 8
                 represents the Coal Resources as at the effective date of this report. On this basis ~1.4 billion TTIS of coal
                 has been classified into the Measured, Indicated and Inferred categories for the contributing properties.

                 Venmyn note that in September 2010, Parsons Brinkerhoff (PB) conducted a Definitive Feasibility Study
                 for Sekoko Coal. As part of their report, PB reported certain Coal Resource estimates over the T2
                 properties and Vetleegte 315LQ, based on their own geological modelling. While full details of the
                 calculation of the Coal Resources over Smitspan 306LQ were provided, there is no detailed Coal
                 Resource reporting for any of the other T2 farms or Vetleegte 315LQ. Furthermore the PB reports do not
                 consider the Coal Resources of the T3 properties or Olieboomsfontein 220LQ.

                 The Venmyn estimates can be considered fully JORC compliant. In addition, the Venmyn estimates detail
                 the Coal Resources over all the contributing properties, while the PB estimates only considered certain
                 selected properties for the purposes of their Definitive Feasibility Study.

                 For the purposes of this valuation, only the Venmyn Coal Resource estimates have been considered.
                 Venmyn have a high degree of confidence in the quality and reasonableness of these estimates, and they
                 have been reported in compliance with the JORC Code.

     12.2.       Mining and Processing
                 No mining and/or processing has taken place on the contributing properties. In September 2010, PB
                 conducted a Definitive Feasibility Study over the farm Smitspan 306LQ. However, a revised Definitive
                 Feasibility Study will shortly be commissioned in order to investigate an operation that will satisfy the
                 requirements of the terms and conditions of the recently signed memorandum of understanding (MoU) with
                 Eskom. This MoU considers a 30-year supply agreement commencing delivering 2Mtpa of coal to Eskom
                 in 2014, to be ramped up to 10Mtpa by 2019.




Valuation of the Waterberg Coal Project for Sekoko Coal             May 2012                             Venmyn Rand (Pty) Ltd
                                                                                                                           32

Table 8: Coal Resources of the Contributing Properties (Venmyn, August 2010)
                                                                                                             AIR DRIED QUALITIES AT RD = 1.9

                            RESOURCE /                    COAL GROSS COAL TOTAL
  FARM NAME & NO.           OCCURENCE           ZONE       TONNES IN  TONNES IN               CV (MJkg)      ASH (%)       VOL. (%)     SULPH. (%) MOIST. (%)
                            CATEGORY                         SITU       SITU

                            Measured       All
  Minnasvlakte 258 LQ       Indicated      All       26,507,000                21,201,000            21.59         29.51        27.24         0.94         2.61
                             Inferred      All      230,687,000               173,012,000            21.56         29.58        27.51         0.94         2.54
                       TOTAL / AVE MINNASVLAKTE 257,194,000                   194,213,000            21.56         29.57        27.48         0.94         2.55
                            Measured       All      238,667,800               214,800,600            20.74         31.14        25.69         0.89         2.84
   Smitspan 306 LQ          Indicated      All      475,844,000               380,671,000            21.49         29.52        26.50         0.98         2.78
                             Inferred      All
                            TOTAL / AVE SMITSPAN 714,511,800                  595,471,600            21.22         30.10        26.21         0.95         2.80
                            Measured       All
  Massenberg 305 LQ         Indicated      All       20,797,000                16,635,000            19.60         33.70        22.12         0.71         2.77
                             Inferred      All      109,539,000                82,148,000            21.04         29.79        22.09         0.69         2.96
                         TOTAL / AVE MASSENBERG     130,336,000                98,783,000            20.80         30.45        22.10         0.69         2.93
                            Measured       All
   Hooikraal 315 LQ         Indicated      All        7,282,000                 4,366,000            22.56         25.89        26.64         1.00         3.11
                             Inferred      All      155,491,000                77,742,000            22.38         26.63        25.19         0.83         2.78
                          TOTAL / AVE HOOIKRAAL     162,773,000                82,108,000            22.39         26.59        25.27         0.84         2.80
                            Measured       All        1,224,000                 1,040,300            25.99         16.60        24.27         0.98         3.20
   Vetleegte 315 LQ         Indicated      All      204,499,000               143,146,000            21.37         28.22        24.71         0.75         3.53
                             Inferred      All       17,893,000                11,090,000            22.61         24.81        23.89         0.66         3.67
                           TOTAL / AVE VETLEEGTE 223,616,000                  155,276,300            21.49         27.90        24.65         0.75         3.54
                            Measured       All
 Sw anepoelpan 262 LQ       Indicated      All        1,072,000                   853,000            21.49         29.83        25.12         0.82         3.34
                             Inferred      All      378,227,000               283,666,000            21.60         28.52        26.65         1.14         3.35
                      TOTAL / AVE SWANEPOELPAN 379,299,000                    284,519,000            21.60         28.52        26.65         1.14         3.35
                            Measured       All
  Duikerfontein 263 LQ      Indicated      All
                             Inferred      All       13,949,000                10,457,000            21.98         27.17        25.44         0.78         4.20
                        TOTAL / AVE DUIKERFONTEIN    13,949,000                10,457,000            21.98         27.17        25.44         0.78         4.20
       TOTAL / AVE RESOURCE / OCCURRENCE FOR
                                                  1,881,678,800             1,420,827,900            21.42         29.27        25.96         0.94         2.98
                               WATERBERG PROJECT
NOTES:-
Boreholes required to have quality data for consideration of the borehole densities for classification purposes.
Minimum seam height of 0.5m applied for GTIS.
The Waterberg coal typically occurs interlaminated w ith shale, w hich is difficult to separate during the logging and sampling process. Therefore, in order to
calculate the tonnage of coal in each zone, rather than the tonnage of the zone including the rock, each zone w as w ashed at an RD=1.9 to remove the rock.
The zone tonnage w as multiplied by the percent yield (by mass) to derive the coal tonnage. Note that the coal tonnage has a low er RD than the zone tonnage,
in most instances.
Rounding to 2 significant figures for Measured.
Rounding to 3 significant figures for Indicated and Inferred.
Geological loss percentages are a function of borehole and fault density.




Valuation of the Waterberg Coal Project for Sekoko Coal                                                                         May 2012Venmyn Rand (Pty) Ltd
                                                                     33

 13. THE WATERBERG COAL PROJECT MINERAL ASSET VALUATION
       At the early exploration phase, coal projects are valued dependent upon prospects for eventual economic
       extraction. A seller's view may not necessarily match that of a potential buyer's, and the transaction price is usually
       a compromise. The objective of this valuation was the assessment of the economic prospectivity of the contributing
       coal properties and their relation to the attributable mineral asset value.

       International mineral asset valuation codes set out clear methodologies for the valuation of mineral assets, with
       confidence in the mineral resource estimates being the primary value driver.

       With respect to the contributing properties, the coal resources have been classified by Venmyn in compliance with
       both the JORC code. Consistent with this approach, Venmyn has valued the contributing properties in compliance
       with the VALMIN Code, 2005. Consistent with the VALMIN Code, in this report Fair Value is considered to be
       comprised of the „Intrinsic or „Technical value and a premium or discount relating to market, strategic or other
       considerations.

       The selection of an appropriate valuation method depends on such factors as:
            *   the nature of the valuation;
            *   the development status of the Mineral Assets; and
            *   the extent and reliability of available information.

       In conducting mineral asset valuations, Venmyn consider the following categories of Mineral Assets:-
            *   Exploration Areas – properties where mineralisation may or may not have been identified, but
                where a Mineral or Petroleum Resource has not been identified;
            *   Advanced Exploration Areas – properties where considerable exploration has been undertaken
                and specific targets have been identified that warrant further detailed evaluation, usually by drill
                testing, trenching or some other form of detailed geological sampling. A resource estimate may or
                may not have been made but sufficient work will have been undertaken on at least one prospect to
                provide both a good understanding of the type of mineralisation present and encouragement that
                further work will elevate one or more of the prospects to the resource category;
            *   Pre-Development Projects – properties where Mineral or Petroleum Resources have been
                identified and their extent estimated (possibly incompletely) but where a decision to proceed with
                development has not been made. Properties at the early assessment stage, properties for which a
                decision has been made not to proceed with development, properties on care and maintenance and
                properties held on retention titles are included in this category if Mineral or Petroleum Resources
                have been identified, even if no further Valuation, Technical Assessment, delineation or advanced
                exploration is being undertaken.
            *   Development Projects – properties for which a decision has been made to proceed with
                construction and/or production, but which are not yet commissioned or are not yet operating at
                design levels; and
            *   Operating Mines – mineral properties, particularly mines and processing plants that, have been
                commissioned and are in production.

       As the confidence in mineral resource estimates is increased, i.e. from Inferred Mineral Resources to Indicated
       Mineral Resources and Measured Mineral Resource, so is the veracity of the valuation. Table 9 and Figure 13
       illustrate the link between a project's development status and the most appropriate valuation methodology for
       determining the Intrinsic or Technical value.

Table 9: Valuation Approaches and Methodologies.
                                                                                          DORMANT PROPERTIES
VALUATION VALUATION  EXPLORATION DEVELOPMENT   MINING                                                                        DEFUNCT
                                                                                        ECONOMICALLY
APPROACH METHODOLOGY    AREAS     PROPERTIES PROPERTIES                                              UNVIABLE               PROPERTIES
                                                                                           VIABLE
             Various DCF
Cash Flow                             N/A                  P1                 P1                P1               NA               NA
             methods
Sales        Comparable
                                       P1                  P3                 P2                P2               P1               P1
Comparative transactions
             Asset Recognition
Historical
             and     Impairment        P2                  NA                NA                 NA               P3               P2
Cost
             Test
P1 = Most acceptable method and widely used                     P3 = Less acceptable approach, less widely used and poorly understood.
P2 = Acceptable approach and quite widely used




 Valuation of the Waterberg Coal Project for Sekoko Coal                  May 2012                               Venmyn Rand (Pty) Ltd
This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction.


                                                                                                     Source: Venmyn
                                                              35

     13.1.     Technical or Intrinsic Value of the Mineral Assets
               There are three generally accepted approaches for establishing the Technical Value of mineral assets.
               These are the:-
                      *    the Cost Approach or Multiples of Exploration Expenditure (MEE);
                      *    the Market Approach or Comparable Transaction Value Method; and
                      *    the Cash Flow (DCF) Approach.

               Where insufficient confidence exists in the technical parameters of a mineral deposit, or mineral asset, to
               classify resources, valuation methods mainly rely on the principle of historical cost. This implies that a
               mineral asset's value is related to the money spent on its acquisition, plus a multiple of the exploration
               expenditure, depending upon the degree to which its prospectivity has been enhanced by exploration.
               Once resources have been classified, then market comparisons are made on a monetary value per unit of
               mineralisation (ZAR/t). Once technical studies establishing the basis for future economic exploitation have
               been carried out, discounted cash flow (DCF) methods are applicable and all the methods used to identify
               a reasonable transaction value.

               The contributing coal assets can be defined as early to advanced stage exploration areas, with JORC
               code compliant Measured, Indicated and Inferred Coal Resources. Therefore, all the contributing
               properties were valued using both the historical cost method and comparative sales transaction valuation
               method. The absence of Coal Reserves for the Project has precluded the use of the Cash Flow Approach
               or DCF method under the Australian Securities and Investment Commission (ASIC) guidelines.

               It is important to note that this valuation has utilised the Venmyn August 2010 Coal Resource Statement
               (Table 8), as this is considered the current compliant resources estimate for the Waterberg Coal Project.
                                                         st
               The effective date of the valuation is 01 May 2012.

               13.1.1.     MEE Method
                           The Cost Approach or MEE Method is based upon the principle of past, preferably audited,
                           exploration expenditures where some expenditures will have added value, and others not.
                           Through the introduction of a prospectivity enhancement multiplier (PEM), a premium (or
                           discount) multiplier can be applied to the total cost of exploration to-date, depending on whether
                           the exploration expense being considered has relatively enhanced the prospectivity of the target
                           or not.

                           The subjectivity of the method is reduced by addressing specific expenditures with reference to
                           the relevance of the type of mineralisation being considered and the effectiveness of the
                           exploration. A measure of the effectiveness of a historical exploration programme is the
                           confidence that can be ascribed to the resultant mineral resource estimate.

                           Exploration expenditure does not only include the costs of physical in-field exploration, but also
                           the costs incurred to make it possible to carry out the exploration, for example, the costs of
                           aerial or other surveys and transportation costs, etc. The value of the resulting asset is not
                           measured by the value of new deposits discovered by the exploration but by the value of the
                           resources allocated to exploration during the period.

                           The Waterberg Coal Project can be considered as an early to advanced stage exploration
                           project with varying degrees of historic and recent exploration and analytical data available on
                           the various properties. Lexshell provided Venmyn with all available acquisition and exploration
                           cost data for the contributing properties and, where historical exploration data was available,
                           Venmyn assessed its relevance and effectiveness and estimated the cost of replicating that
                           data.

                           Venmyn have considered the prospectivity of the respective coal properties according to the
                           classification of exploration phases illustrated in Table 10.

                           This table represents Venmyn"s standard PEM schedule for coal deposits. In Venmyn"s opinion,
                           these PEM values reflect fair and reasonable multipliers based upon on the amount of work
                           associated with and/or development status of any particular project.

                           In order to establish an appropriate PEM, each property was classified with respect to Table 10
                           knowing that each new exploration phase was carried out contingent upon the successful
                           outcome of the preceding phase. In addition, the PEM selected, was reviewed taking into
                           consideration proximity to well understood resource areas, drillhole density and a qualitative
                           assessment of the prospects for eventual extraction.




Valuation of the Waterberg Coal Project for Sekoko Coal            May 2012                            Venmyn Rand (Pty) Ltd
                                                                    36

               Table 10 V n yn’ C             P     p        Exp           n Ph        C    f       n.

                  PHASE         EXPLORATION                          PEM
                                                                                                     EXPLORATION ACTIVITY
                COMPLETED          PHASE                FAIR       UPPER      LOWER
                                Exploration                                                Project about which nothing is known, but
                      0                                  0          0.2            0
                                Concept                                                    which has potential on a conceptual basis.
                                                                                           Historical and literature study, records or
                      1         Desktop study            0          0.5           0.2      evidence of coal findings in the area. Historical
                                                                                           artisanal mining data if any.
                                                                                           Geological mapping if terrain suitable. Palaeo
                      2         Reconnaissance          0.8         1.0           0.5      topographical mapping. Historical drilling with
                                                                                           intercept data, no laboratory assay.
                                                                                           Detailed outcrop mapping, identification of coal
                                                                                           hosting strata, coal seam outcrop mapping.
                                Ground Follow-
                      3                                 1.0         1.0           0.8      Sampling of exposed coal seams where
                                up
                                                                                           available. Historical drilling data with intercept
                                                                                           and analyses, but of questionable authenticity.
                                                                                           Ground         geophysics,      remote     sensing
                                Ground Follow-                                             techniques (e.g. seismics). Reliable historical
                      4                                 2.0         2.0           1.0
                                up                                                         drilling, but correlations difficult due to density
                                                                                           of drilling.
                                                                                           Large diameter core drilling, widely spaced
                                First-phase
                      5                                 4.0         5.0           2.0      grid with preliminary coal analysis. First-pass
                                drilling
                                                                                           tonnage estimate. Inferred coal resource.
                                                                                           In-fill drilling, detailed coal analyses and
                                Resource drilling                                          washability testwork. Establish coal qualities,
                      6         and laboratory          8.0         11.0          5.0      market potential, detailed resource tonnage
                                testwork                                                   estimation, washabilities. Advanced inferred
                                                                                           and indicated coal resource classification.
                                                                                           Previous commercial production, establishing
                      7         Historic Mining         16.0        20.0          11.0     reliable and well documented quality, tonnage,
                                                                                           washability etc. Measured coal resource.
                                                                                           Complete feasibility assessment, establish
                                Reserve                                                    economics, and design a mine of an
                      8                                 20.0        >20           20
                                Classification                                             appropriate nature. Classification of coal
                                                                                           reserves.

                           The MEE valuation process is shown in Table 11. The technique accounts for recent and
                           historical expenditure and multiplies the various expenditures by appropriate PEMs based upon
                           the value enhancement from such expenditure.

                           Venmyn has based the MEE valuation of the contributing properties upon information provided
                           by Lexshell, along with other relevant published and unpublished data. A desktop evaluation of
                           all the contributing exploration properties was carried out. All reasonable enquiries were made
                           to confirm the authenticity and completeness of the technical data upon which this report is
                           based.

                           To-date a total of ~ZAR74.35m of expenditure can be allocated to the acquisition of the
                           prospecting rights and can be attributed to the prospecting over the properties and the
                           associated economic studies. These costs include geological modelling and resource definition,
                           as well as other project related expenditures. Since this delineation drilling has been the
                           principle value driver to-date, these costs have been multiplied by the following PEM?s:-
                                  *   PEMs of 1.0 – 2.0 for Olieboomsfontein 220 LQ;
                                  *   PEMs of 11.0 – 20.0 for Vetleegte 304 LQ;
                                  *   PEMs of 11.0 – 20.0 for Smitspan 306LQ;
                                  *   PEMs of 5.0 – 11.0 for Minnasvlakte 258LQ; Massenberg 305LQ, Hooikraal
                                      315LQ, and Swanepoelpan 262LQ; and
                                  *   PEMs of 2.0 – 5.0 for Duikerfontein 263LQ

                           Smitspan 306LQ has received high PEMs since a significant amount of drilling and sampling
                           has been carried out on this property relative to the other properties. While a previous
                           Feasibility Study has been completed on this property, a revised Feasibility Study will shortly be
                           commissioned to meet the requirements of the recently signed MoU with Eskom. Clearly
                           Smitspan 306LQ is the „stand-out property and is considered highly prospective by Venmyn.
                           Consequently Venmyn have selected a PEM of 20.0 to reflect the advanced nature of this
                           property in terms of its level of exploration and development as well as the fact that a revised
                           Feasibility Study will commence shortly.

                           Vetleegte 304LQ has received a preferred PEM of 12. While significant drilling and sampling
                           has been conducted and Measured Resources classified, this property has not undergone the
                           same level of technical investigation and economic studies as Smitspan 306LQ.

Valuation of the Waterberg Coal Project for Sekoko Coal                     May 2012                                  Venmyn Rand (Pty) Ltd
                                                              37

                           Minnasvlakte 258LQ, Massenberg 305LQ, Hooikraal 315LQ and Swanepoelpan 262LQ have
                           received preferred PEMs of 8.0 to reflect the classification of Indicated Resources. However,
                           unlike Smitspan 306LQ, these properties are generally lacking in the Upper Coal Sequence
                           coals and are structurally very complex or have significantly deeper coal, and are therefore
                           considered significantly less prospective than Smitspan 306LQ.

                           Duikerfontein 263LQ has received a preferred PEM of 2, reflecting the very limited exploration
                           work, and very limited Coal Resources (at low levels of confidence) over this property.

                           Venmyn have analysed and rated the contributing properties according to the results achieved
                           from historical and recent exploration activities as well as the success these activities have had
                           on the classification of coal resources over the various properties.

                           Based on the principles discussed above, PEM values of between 2.0 – 20.0 were allocated to
                           the various properties, with respect to the present value estimates of historical exploration
                           expenditure. This reflects the relative enhancement in the prospectivity that has been achieved
                           on each property as a result of the historical exploration.

                           The various costs, multiplied by their allocated PEMs have then been added to derive the MEE
                           valuation for each property. This methodology has resulted in a preferred MEE valuation of
                           ZAR1,283m for the contributing properties.

         Table 11: MEE Valuation
                                           TOTAL                                          MIN         MAX       PREFERRED
                                        EXPLORATION       LOWER       UPPER     FAIR   PROJECT     PROJECT       PROJECT
                     FARM
                                        EXPENDITURE        PEM         PEM      PEM     VALUE       VALUE         VALUE
                                           (ZARm)                                       (ZARm)      (ZARm)        (ZARm)
           Olieboomsfontein 220 LQ                0.50           1         2       2        0.50         1.00           1.00
           Vetleegte 304 LQ                     10.08           11        20      12      110.92       201.66         121.00
           Minnasvlakte 258 LQ                    1.31           5        11       8        6.53        14.37          10.45
           Smitspan 306 LQ                      54.28           11        20      20      597.04     1,085.54       1,085.54
           Massenberg 305 LQ                      3.80           5        11       8       18.98        41.75          30.37
           Hooikraal 315 LQ                       1.90           5        11       8        9.49        20.88          15.18
           Swanepoelpan 262LQ                     2.49           5        11       8       12.47        27.42          19.95
           Duikerfontein 263LQ                    0.00           2         5       4           -            -              -
                   TOTAL/ WT. AVE               74.35           10        19      17      755.93     1,392.63       1,283.48



               13.1.2.     The Comparable Transaction Method
                           The comparable transaction value method is based upon other, preferably recent, arm?s length
                           transactions of a similar nature, which determines a monetary value per unit of resource
                           (ZAR/t).

                           Venmyn has graphically plotted recent transactions of a similar nature in relation to their specific
                           stage of exploration (Figure 14) in order to make the necessary comparisons.

                           Since Coal Resources have been classified for the Waterberg Coal Project, Venmyn were able
                           to carry out a comparable transaction valuation on the basis that recent market valuations of a
                           similar nature provide the proxy for value. In order to arrive at a reasonable value with which to
                           compare the respective projects, appropriate recent and historical transactions must form the
                           basis.

                           Figure 14 summarises Venmyns database of recent valuations within the context of the South
                           African coal market with reference to the respective resource and reserve classifications.

                           While Venmyn has considered the entire transaction database to derive an appropriate
                           comparable value, the valuation took into account the following recent transactions/valuations
                           within the Waterberg Coalfield:-
                                  *   the valuation by SRK Consulting (South Africa) (Pty) Limited (SRK) in June
                                      2006, of the Grootegeluk Colliery ahead of the merger of Eyesizwe and
                                      Kumba (now Exxaro) – Eyesizwe/Kumba Grootegeluk transaction;
                                  *   the joint venture transaction between Sekoko Coal and Firestone Energy, in
                                      July 2009, concerning the farms Minnasvlakte 258LQ, Smitspan 306LQ,
                                      Massenberg 305LQ and Hooikraal 315LQ in the Waterberg;
                                  *   the joint venture transaction between Sekoko Coal and Firestone Energy, in
                                      February 2010, concerning the farms Swanepoelpan 262LQ and
                                      Duikerfontein 263LQ in the Waterberg;



Valuation of the Waterberg Coal Project for Sekoko Coal              May 2012                            Venmyn Rand (Pty) Ltd
                                                                                                    FIGURE 14
 
                                                                                                   Source: Venmyn
                                                                                                                   ZAR/tonne
This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. 
Graphics by Interaction.          D1196 Sekoko Valuation 2012
                                                                  39

                                  *       RSV Encos valuation of Resource Generation's project in the Waterberg in
                                          July 2010; and
                                  *       IDC's ZAR249m funding of the development of Sekoko Coal and Firestone
                                          Energy's Waterberg Coal Project, resulting in the IDC owning 33.3% of
                                          Sekoko Coal's equity in the Waterberg Coal Joint Venture.

                           These transactions represent recent transactions of a similar nature, and have been used,
                           together with enterprise values of listed companies with projects in the Waterberg, to define a
                           Waterberg Coal Valuation Curve.

                           It is clear, in Figure 14, that the Waterberg Coal Valuation Curve, informed by the above
                           transactions/valuations define a less variable range of values than that defined by the entire
                           dataset, and falls within the middle-lower portion of the greater coal curve.

                           As discussed in Section 13.1.1, the presence of the various coal seams differs across the
                           properties. At Hooikraal 315 LQ and Massenberg 305LQ, for example, the preferred (higher
                           quality) Upper Coal Sequence coal zones (zones 5 – 11), are largely absent. These properties
                           are also associated with a more structurally complex environment.

                           As a result, Venmyn considers these properties of lower prospectivity and has allocated unit
                           values that are significantly lower than for the highly prospective Smitspan 306LQ property.
                           Similarly, while Minnasvlakte 258LQ has both Upper Coal Sequence and Lower Coal Sequence
                           coal zones present, the coal is deeper in this region, and consequently Venmyn have adjusted
                           the unit values downwards to reflect that this property has a lower prospectivity than Smitspan
                           306LQ, but higher prospectivity than those properties absent in Upper Coal Sequence coal
                           zones.

                           The comparable transaction value range selected for the valuation of the contributing properties
                           has considered the nature of this valuation and the risk factors.

                           Venmyn are of the opinion that the ranges defined are reasonable in light of transactions of a
                           similar nature and consideration of the following:-
                                      *    the opencastability of the resources;
                                      *    the presence of commercially valuable coal zones;
                                      *    the range of potential coal qualities;
                                      *    the magnitude of the classified Coal Resource;
                                      *    availability of infrastructure and logistics; and
                                      *    the timing of potential exploitation.

                           The range of values generated based upon all TTIS coal quantified for the contributing
                           properties of the Sekoko Coal-Firestone JV Waterberg Coal Project, are summarized in Table
                           13 based on the most recent Venmyn estimates. The valuation range was calculated from the
                           range of unit values as defined by the Comparative Transaction Valuation method. The value
                           range reflects the level of confidence attached to the respective Coal Resources and the
                           probability of their being brought to account. The population of historic market transactions
                           provides an indication of reasonability.

                           Table 12 summarises the results of the Comparable Transaction Valuation.

                           Table 12: Summary of Comparative Transaction Valuation
                                                                                               PROJECT VALUE
                                                                TOTAL
                                                             RESOURCE            MIN               MAX         PREFERRED
                                          FARM
                                                            (Total Tonnes     PROJECT           PROJECT         PROJECT
                                                             in-situ) (Mt)     VALUE             VALUE           VALUE
                                                                               (ZARm)            (ZARm)          (ZARm)
                            Olieboomsfontein 220 LQ                      -                -               -                 -
                            Vetleegte 304 LQ                        155.28           104.50          149.59            127.05
                            Minnasvlakte 258 LQ                     194.21            53.68          101.01             77.34
                            Smitspan 306 LQ                         595.47         1,215.41        1,620.54          1,417.98
                            Massenberg 305 LQ                        98.78            25.63           37.17             31.40
                            Hooikraal 315 LQ                         82.11            15.15           23.80             19.48
                            Swanepoelpan 262LQ                      284.52            43.15           71.68             57.42
                            Duikerfontein 263LQ                      10.46             1.57            2.61              2.09
                                    TOTAL/ WT. AVE                1,420.83         1,459.09        2,006.42          1,732.75




Valuation of the Waterberg Coal Project for Sekoko Coal                 May 2012                               Venmyn Rand (Pty) Ltd
                                                                                                                         40


Table 13: Comparative Valuation Based on Venmyn Resource Estimates
                                         INFERRED COAL RESOURCE                                   INDICATED COAL RESOURCE                                    MEASURED COAL RESOURCE                                   PROJECT VALUE



                                 VENMYN                                                  VENMYN                                                     VENMYN
          FARM                    TOTAL        LOWER           UPPER                      TOTAL         LOWER           UPPER                        TOTAL         LOWER           UPPER                     MIN          MAX       PREFERRED
                                                                            MEAN                                                       MEAN                                                     MEAN
                                INFERRED         UNIT           UNIT                    INDICATED         UNIT           UNIT                     MEASURED           UNIT           UNIT                  PROJECT      PROJECT       PROJECT
                                                                           VALUE                                                      VALUE                                                    VALUE
                               RESOURCE        VALUE           VALUE                    RESOURCE        VALUE           VALUE                      RESOURCE        VALUE           VALUE                   VALUE        VALUE         VALUE
                                                                           (ZARm)                                                     (ZARm)                                                   (ZARm)
                             (Total Tonnes      (ZAR/t)        (ZAR/t)                (Total Tonnes      (ZAR/t)        (ZAR/t)                  (Total Tonnes      (ZAR/t)        (ZAR/t)                 (ZARm)       (ZARm)        (ZARm)
                               in-situ) (Mt)                                            in-situ) (Mt)                                              in-situ) (Mt)

Olieboomsfontein 220 LQ                 -            0.20           0.30        -                -           0.70             1.00         -                -            2.00           3.00        -           -             -             -
Vetleegte 304 LQ                      11.09          0.20           0.30       2.77           143.15         0.70             1.00      121.67             1.04          2.00           3.00       2.60      104.50        149.59        127.05
Minnasvlakte 258 LQ                   173.01         0.20           0.40      51.90             21.20        0.90             1.50       25.44              -            2.00           3.00        -         53.68        101.01         77.34
Smitspan 306 LQ                         0.00         0.30           0.50        -              380.67        1.50             2.00      666.17           214.80          3.00           4.00     751.80    1,215.41      1,620.54      1,417.98
Massenberg 305 LQ                      82.15         0.15           0.25      16.43             16.64        0.80             1.00       14.97              -            1.50           2.00        -         25.63         37.17         31.40
Hooikraal 315 LQ                       77.74         0.15           0.25      15.55              4.37        0.80             1.00        3.93              -            1.50           2.00        -         15.15         23.80         19.48
Swanepoelpan 262LQ                    283.67         0.15           0.25      56.73              0.85         0.70             0.90       0.68              -            1.50           2.50        -         43.15         71.68         57.42
Duikerfontein 263LQ                    10.46         0.15           0.25       2.09              -            0.70             0.90        -                -            1.50           2.50        -          1.57          2.61          2.09
            TOTAL/ WT. AVE           638.12             0.25                 145.48              567             1.01                   832.87              216             2.31                 754.40    1,459.09      2,006.42      1,732.75




     Valuation of the Waterberg Coal Project for Sekoko Coal                                                                   May 2012Venmyn Rand (Pty) Ltd
                                                                                                                                   41

                                          Venmyn's preferred value is the mean value derived from the unit value ranges per category.
                                          This results in a preferred full Comparable Transaction Value of ZAR1,733m for the contributing
                                          properties of the Sekoko Coal-Firestone JV Waterberg Coal Project, and equates to a unit value
                                          of ZAR1.22/TTIS. Over 80% of the value of the contributing properties is made up from the coal
                                          assets at Smitspan 306LQ.

               13.1.3.                    Intrinsic Value Summary
                                          Table 14 summarises the results from the various valuation methods used in establishing the
                                          Intrinsic/Technical Value of the mineral assets of the contributing properties:-

                                          Table 14: Intrinsic Value Summary

                                                                                                                                                        COMPARATIVE
                                                                                                                   COST                                                                           PREFFERED
                                                                        FARM                                                                            TRANSACTION                                                                         TOTAL
                                                                                                                APPROACH                                                                            VALUE
                                                                                                                                                         APPROACH                                                                           (ZARm)
                                                                                                                  (ZARm)                                                                            (ZARm)
                                                                                                                                                           (ZARm)
                                              Olieboomsfontein 220 LQ                                                            1.00                              N/A                                           1.00
                                                                                                                                                                                                                                                     125.02
                                              Vetleegte 304 LQ                                                                 121.00                           127.05                                         124.02
                                              Minnasvlakte 258 LQ                                                               10.45                            77.34                                          43.90
                                              Smitspan 306 LQ                                                                1,085.54                         1,417.98                                       1,251.76
                                                                                                                                                                                                                                                    1,343.87
                                              Massenberg 305 LQ                                                                 30.37                            31.40                                          30.88
                                              Hooikraal 315 LQ                                                                  15.18                            19.48                                          17.33
                                              Swanepoelpan 262LQ                                                                19.95                            57.42                                          38.68
                                                                                                                                                                                                                                                      40.77
                                              Duikerfontein 263LQ                                                                0.00                             2.09                                           2.09
                                                                TOTAL                                                        1,283.48                         1,732.75                                       1,509.67                               1,509.67

                                          The table above demonstrates general agreement between the values derived from the various
                                          valuation methods, however the Cost Approach results in lower values in all cases.

                                          The Cost Approach defines the bottom (ZAR1,283m) of the value range identified, while the
                                          Comparative Transaction Approach defined the top (ZAR1,732.75m) of the value range
                                          identified. The preferred Intrinsic/Technical Value is considered to be represented by the mean
                                          of the two valuation approaches, and results in a value of ZAR1,510m.

     13.2.     Market Value of the Mineral Assets
               Venmyn consider that the Firestone share price history represents a proxy for the changes in the Market
               Value of the mineral assets of the contributing properties over time, as the mineral assets represent the
               principle assets of Firestone. Figure 15 represents the spot share price of Firestone since their
               involvement in the Waterberg Project.

                 Figure 15: Historical Share Price Movements for Firestone (July 2009 – May 2012)



Valuation of the Waterberg Coal Project for Sekoko Coal                                                                                       May 2012                                                                                 Venmyn Rand (Pty) Ltd
                                                                42

               Since Firestone currently have a 60% interest in the mineral assets, the current Market Value of Firestone
               is considered to represent 60% of the value mineral assets. On this basis, the effective Market Value of the
               mineral assets can be calculated on a 100% attributable basis, at any point in time. From Figure 15, it
               appears that the Market Value of the mineral assets has been reducing, systematically over time. Venmyn
               notes the relatively small volume of trade in Firestone shares and also considers that delays in project
               development and challenges with respect to financing may be contributing to the decline in Market Value.

               While a value of in excess of ZAR1bn for the mineral assets of the contributing properties was supported
               by relatively high Market Values in the past, Venmyn have noted a significant decrease (~50%) in the
               market capitalisation of Firestone in the past 6-12 months, a continuation of a more extended decreasing
               trend. The past 30 day weighted average share price for Firestone was USD0.01. As a result, the current
               effective Market Value of the mineral assets has been assessed as ZAR545.78m (approximately half of
               that of a year ago).

     13.3.     Valuation Summary
               The results of the valuations carried out by Venmyn are given in Table 15:-

     Table 15: Summary of Valuation Results
                                                     INTRINSIC OR TECHNICAL VALUE
                                                                                                       MARKET            FAIR
                                             COST         MARKET      PREFFERED
                       FARM                                                        TOTAL                VALUE          VALUE
                                          APPROACH APPROACH             VALUE
                                                                                   (ZARm)              (ZARm)          (ZARm)
                                            (ZARm)         (ZARm)       (ZARm)
             Olieboomsfontein 220 LQ              1.00            N/A         1.00
       T1                                                                             125.02
             Vetleegte 304 LQ                   121.00         127.05       124.02
             Minnasvlakte 258 LQ                 10.45          77.34        43.90
             Smitspan 306 LQ                  1,085.54       1,417.98     1,251.76
       T2                                                                           1,343.87             545.78        1027.72
             Massenberg 305 LQ                   30.37          31.40        30.88
             Hooikraal 315 LQ                    15.18          19.48        17.33
             Swanepoelpan 262LQ                  19.95          57.42        38.68
       T3                                                                              40.77
             Duikerfontein 263LQ                  0.00           2.09         2.09
                               TOTAL          1,283.48       1,732.75     1,509.67  1,509.67               545.78      1,027.72

               It is clear, from the above, that the Market Value is significantly lower than the Intrinsic/Technical Value of
               the mineral assets. In terms of the requirements of VALMIN, 2005, Venmyn consider it appropriate to
               apply a discount to the Intrinsic/Technical Value of the mineral assets in estimating the Fair Value. In this
               case, Venmyn consider that the mean of the Intrinsic/Technical Value and the Market Value reflects the
               Fair Value of the mineral assets, as at the effective date of this report.

               In Venmyn's opinion the current Fair Value of the Contributing Properties of the Waterberg Coal Project,
               given their current state of development and current market conditions is ZAR1,028m.

               The valuation of exploration assets is, by nature, subjective and uncertain. The placing of a specific
               monetary value on historical exploration can be misleading, and the reader is advised to consider the
               ranges in which each property has been evaluated, and to further consider the technical merits of each
               project area and form an opinion regarding its prospectivity on the basis of the data presented in this
               report.

               The reader should note that a transaction involving the assets in question will rely on a willing-buyer
               willing-seller arms length transaction which will need to consider other strategic considerations, such as
               the relative scarcity of South African coal projects.

     13.4.     Key Assumptions
               We arrived at our opinion of value based on the following assumptions: -
                      *    that all information provided to Venmyn, by Sekoko Coal and/or Lexshell can be relied
                           upon;
                      *    that the valuation is with respect to the face value of the mineral assets only;
                      *    that the valuation was conducted on a 100% attributable basis;
                      *    that the legal status of the mineral rights and statutory obligations were fairly stated;
                      *    that the prospecting licences will be kept valid and that they can be converted to Mining
                           Licences in the future;
                      *    that expired prospecting licences will be correctly renewed;
                      *    that the mining right will be kept valid;
                      *    that all other regulatory approvals for exploration and mining will be timeously obtained;
                      *    that the corporate structures and ongoing activities were fairly presented;
                      *    that reliance can be placed on the exploration expenditures provided by Sekoko Coal
                           and/or Lexshell;

Valuation of the Waterberg Coal Project for Sekoko Coal                May 2012                            Venmyn Rand (Pty) Ltd
                                                              43

                      *    that reliance can be placed on the current Mineral Resource Statement;
                      *    that the coal quality lends itself to the production of a suitable thermal coal product after
                           washing;
                      *    that Sekoko Coal, its subsidiaries and Firestone would continue as going concerns and
                           would continue to be fully funded; and
                      *    that Sekoko Coal and/or Firestone would be able to secure markets and off-take for any
                           future operations.

               Venmyn made due enquiry into these issues to be satisfied of the potential impact on the mineral asset
               valuation.

               No consideration has been given to financial exposures, financing arrangements, equity transfers etc as
               this report is in respect of the valuation of the mineral assets only. Asset and liability adjustments would
               need to be considered in addition to the respective mineral asset values to establish company enterprise
               values.

               We have relied upon and assumed the accuracy of the information provided to us in deriving our opinion.
               Where practical, we have corroborated the reasonableness of the information provided to us for the
               purpose of our valuation, whether in writing or obtained in discussion with management of Sekoko Coal, by
               reference to publicly available or independently obtained information.

               Our valuation is based on current economic, regulatory, market as well as other conditions. Subsequent
               developments may affect this valuation, and we are under no obligation to update, review or re-affirm our
               valuation based on such developments.

     13.5.     Key Risks
               The contributing properties represent early- to advanced-stage projects, and are therefore, inherently
               exposed to normal operational risks associated with exploration and development projects. The success of
               the projects depends largely on successful prospecting programmes and competent management.
               Profitability and asset values can be affected by unforeseen changes in operating circumstances and
               technical issues.

               While the contributing properties are located in an emerging coal exploration and mining hub, there are
               significant infrastructural challenges to overcome. Lack of adequate water and rail infrastructure is
               identified as a major challenge to the future development of the region.

               Certain licences have expired and renewals have been applied for. There is no guarantee that these will
               be awarded in their entirety or in part, and licence applications and renewals are currently experiencing
               considerable delays. Venmyn have been advised by Sekoko Coal that they are confident the renewals will
               be correctly granted as they are in regular contact with the DMR and have been supplying additional
               information to the DMR. In addition Sekoko Coal have hosted a site visit by the DMR, to the properties, in
               order for the DMR to confirm that work has been undertaken on the properties.

               The coal qualities are amenable to the production of large quantities of coal that could meet power station
               specifications. However any successful coal operation in the Waterberg Coalfield would be highly
               dependent on its ability to supply existing and future power stations in the area, and securing take-off
               agreements with such power stations or other external markets. In this regard a memorandum of
               understanding (MoU) with power utility Eskom on a 30-year supply agreement has recently been signed.
               In terms of the MoU, the project would commence delivering 2Mtpa of coal to Eskom in 2014, to be
               ramped up to 10Mtpa by 2019.

               Factors such as political and industrial disruption, currency fluctuation and interest rates could have an
               impact on future operations, and potential revenue streams can also be affected by these factors. The
               majority of these factors are, and will be, beyond the control of any operating entity.

               The Going Concern assumption is the assumption that an entity will continue to operate for the
               foreseeable future. Where there is a reasonable expectation that a company will be unable to meet its
               current obligations as they become due, the Going Concern assumption may not apply. The ability of
               Sekoko Coal and Firestone to continue operations as going concerns and the recoverability of their
               respective retained losses are dependent upon the existence of economically recoverable reserves in the
               future, and continued support from the respective parent companies and/or investors and/or financiers. It is
               assumed that sufficient working capital will be obtainable from internal and/or external financing to meet
               their respective companies liabilities and commitments as they become due, however there is a risk that
               additional financing will not be available on a timely basis or on terms acceptable to the respective
               companies.




Valuation of the Waterberg Coal Project for Sekoko Coal             May 2012                             Venmyn Rand (Pty) Ltd
                                                             44

               The valuation presented herein represents the mean values achieved through the combination of value
               ranges within each method applied. The valuation of exploration assets is, by nature, both subjective and
               uncertain. The placing of a specific monetary value on historical exploration can be misleading, and the
               reader is advised to consider the full range in which each mineral asset has been evaluated, and to further
               consider the technical merits of each mineral asset and form an opinion regarding its prospectivity on the
               basis of the data presented in this report.

               It must be noted that this valuation has been carried out as an indicative assessment of values that could
               reasonably be expected in view of recent market comparisons and valuations placed on coal producers
               and explorers by the market. Venmyn have provided their view on the unit comparisons having performed
               a high level review of the contributing mineral assets. Valuations that consider the timing of extraction,
               exchange rates fluctuations and views on the coal and uranium market trends may arrive at materially
               different values.

               This report contains forward-looking statements. These forward-looking statements are based on the
               opinions and estimates at the date the statements were made. They are subject to a number of known and
               unknown risks, uncertainties and other factors that may cause actual results to differ materially from those
               anticipated in the forward-looking statements. Factors that could cause such differences include changes
               in world coal markets, equity markets, costs and supply of materials relevant to the projects, and changes
               to regulations affecting them. Although Venmyn believes the expectations reflected in its forward-looking
               statements to be reasonable, Venmyn does not guarantee future results, levels of activity, performance or
               achievements.


14. CONCLUSIONS
     This report has investigated the techno-economic merits of the contributing properties of the Sekoko Coal-Firestone
     JV Waterberg Coal Project. A full range of values was calculated, but this report fully describes each coal asset so
     as not to be misleading.

     Venmyn established an Intrinsic/Technical Value range of between ZAR1,283m and ZAR1,732.75m, with a
     preferred Intrinsic/Technical Value of ZAR1,510m. However, our assessment of the Firestone share price
     demonstrated a significant decrease in the Market Value of the mineral assets within the past 6 – 12 months.

     Our assessment has demonstrated that the Market Value is significantly lower than the Intrinsic/Technical Value of
     the mineral assets. In terms of the requirements of VALMIN, 2005, Venmyn consider it appropriate to apply a
     discount to the Intrinsic/Technical Value of the mineral assets. In this case, Venmyn consider the mean of the
     Intrinsic/Technical Value and the Market Value to reflect the Fair Value of the mineral assets, as at the effective
     date of this report. In Venmyn's opinion the current Fair Value of the Contributing Properties of the Waterberg Coal
     Project, given their current state of development and current market conditions is ZAR1,028m.

     The prospectivity of the Sekoko Coal-Firestone JV Waterberg Coal Project is enhanced by its proximity to the
     operating Grootegeluk Colliery as well as its proximity to water, electrical, road and rail infrastructure. Furthermore
     the coal is thick, relatively shallow and is considered opencastable. Notably, the Waterberg Coal Project is also
     within 40km of Eskom's Matimba Power Station.

     This valuation has been carried out as an indicative assessment of values that could reasonably be expected in
     view of recent market comparisons and valuations placed on the coal resources by the market. Venmyn has its
     view on the unit comparisons having performed a high level review of the contributing properties. Valuations that
     consider the timing of extraction, exchange rate fluctuations, and views on the coal markets may, therefore, arrive
     at different values depending on the purpose of the valuation and prevailing market conditions.

     This valuation is dated to the extent that it is valid at that time and will change if more information is made available
     or market conditions change.

     The valuation of exploration assets is, by nature, both subjective and uncertain. The reader is advised to consider
     the full ranges in which each property has been evaluated, and to further consider the technical merits of each
     project area and form an opinion regarding its prospectivity on the basis of the data presented in this report.




Valuation of the Waterberg Coal Project for Sekoko Coal           May 2012                              Venmyn Rand (Pty) Ltd
                                                          45



     Yours Faithfully




     N. Mc KENNA                                               J A MYBURGH
     M.Sc (Geol), Pr. Sci. Nat.                                B.Sc (Mathematics)
     MAUSIMM, MGSSA, MSAIMM, MIASSA, M.Inst.D.                 MINERAL PROJECT ANALYST
     DIRECTOR




Valuation of the Waterberg Coal Project for Sekoko Coal        May 2012                  Venmyn Rand (Pty) Ltd
                                                                      46

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       BP                      2010      BP Statistical Review of World Energy                                 BP
       BP                      2011      BP Statistical Review of World Energy                                 BP
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       Mineral Resources      2011a      Provisional Mineral Production and Sales Statistics (December 2010)   DMR
       (DMR)
       Economist
                               2010      World Coal: EIU Oct Coal Outlook                                      http://Viewswire.eiu.com
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                                         Eskom Transmission Development Plans in the Waterberg Coal Fields
       Eskom                   2008                                                                            Eskom
                                         Area 2008 to 2028
                                         South African Coal Road Map – The SA Coal Industry: Present           Coaltech Colloquium, Witbank –
       Hall, I                 2011
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       Hall, J                 2011      Anglo-American settles Apr-Jun coking coal at $330/mt FOB             www.platts.com
                                                                                                               The Oil Drum Europe
       Low, D                  2008      What future for Coal in South Africa
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       Hartnady, CJH           2009      South Africa's falling coal reserves (Review Article)
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                               2012      Australia Flooding : Coal Mines Closed in Queensland                  www.huffingtonpost.com
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                                                                                                               IBC Coal Markets Conference,
       Lucarelli, B            2011      A tale of Two Steam Coal Industries
                                                                                                               rolevaenergy.com
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                               2010      Chinese Coal Production and Supply Exceeds Domestic Demand            www.paguntaka.org
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       Musaba, L               2010      The Southern African Power Pool                                       www.sari-energy.org
       PSQ Analytics           2010      Coal and consumable fuels review (March 2010)                         www.stockmarketsreview.com
       Ryan, B                 2010      Coal exports drop way below target                                    www.miningmx.com
       Ryan, B                2010b      New low-grade export coal raises hackles                              www.miningmx.com
       Ryan, B                 2011      SA coal down in the dumps                                             www.miningmx.com
       Ryan, B                2011b      Transnet hikes coal tariffs                                           www.miningmx.com
       Sethuraman, D           2012      India's Nine-Month Coal Production Falls 2.7%, India Coal says        http://mobile.bloomber.com
       Smith,N                 2012      Transnet to spend R7bn on Waterberg lines                             Businesslive.co.za
                             Accessed
       SourceWatch                       Global use and production of coal                                     www.sourcewatch.org
                             July 2010
       South African
                               2011      Integrated Resource Plan for Electricity, 2010-2030                   South African government
       government
       Trademark               2012      Factbox: Southern Africa's coal rail and port bottlenecks             www.trademarksa.org
       Wakeford, J             2008      What future for Coal in South Africa                                 www.theoildrum.com
       Wellstead, J            2012      Coal hits a wall in US market
       Wong, F                 2010      Asia's thermal-coal imports seen hitting record in 2011               www.forexyard.com
       Worldsteel              2011      March 2011 Crude Steel Production                                     www.worldsteel.org
       Xinuanet                2011      US export of coking coal increases nearly 50 per cent in 2010         http://news.xinhuanet.com
       Zhou,P;
       Yamba,FD; Lloyd,
       P; Nyahuma, L;
                                         Determination of regional emission factors for the power sector in    Journal of Energy in Southern
       Mzezewa, C;             2009
                                         Southern Africa                                                       Africa
       Kipondya, F; Keir,
       J; Asamoah, J;
       Simonsen, H




Valuation of the Waterberg Coal Project for Sekoko Coal                       May 2012                               Venmyn Rand (Pty) Ltd
                                                                  47

16. CV’S



Proposed Position:                      Minerals Industry Advisor
Name of Firm:                           Venmyn Rand (Pty) Ltd
Name of Staff:                          Neil Mc Kenna
Profession:                             Geologist
Proposed Position:                      Director
Date of Birth:                          05 June 1977
Years with Firm/Entity:                 Joined March 2007
Nationality:                            South African

Membership in Professional Societies:

                                                                                            YEAR OF
          CLASS                           PROFESSIONAL SOCIETY
                                                                                          REGISTRATION
 Member                    Australian Institute of Mining and Metallurgy                      2011
 Member                    Geological Society of South Africa                                 2002
 Member                    South African Institute of Mining and Metallurgy                   2007
 Member                    South African Council for Natural Scientific Professions           2002
 Member                    Investment Analyst Society of South Africa                         2009
 Member                    South African Institute of Directors                               2009

Education:

 DEGREE/DIPLOMA            FIELD               INSTITUTION                               YEAR
 B.Sc                      Geology             University of the Witwatersrand           1998
 B.Sc (Hons)               Geology             University of the Witwatersrand           1999
 MSc                       Geology             University of Cape Town                   2001

Detailed Tasks Assigned:

  YEAR                     CLIENT                         COMMODITY                         PROJECT DESCRIPTION
                                                                             Competent Persons Report and valuation on the Rukwa
             Kibo Mining Plc                         Coal, Uranium
                                                                             and Pinewood Project Mineral Assets.
                                                                             Valuation of Coal Assets and Intellectual Property for CGT
             Rio Tinto                               Coal
                                                                             purposes.
                                                                             Implementation of Best Practice Drilling and Sampling
             Coal of Africa Limited                  Coal
                                                                             Protocols at their GSP Project in South Africa.

             PriceWaterhouseCoopers                  Nickel                  Valuation of Nickel Assets in Burundi.
                                                                             Due Diligence of a Coal Powered Operation in South
             National Empowerment Fund               Coal
                                                                             Africa.
             Umcebo Mining                           Coal                    Valuation of Certain Coal Assets in South Africa.
             Tanzanian Royalty Exploration                                   CPR on the Gold Assets of the Itetemia and Luhala
                                                     Gold
             Corporation                                                     projects in Tanzania.
                                                                             CPR on the Gold Assets of their Evander Operations in
             Harmony                                 Gold
                                                                             South Africa.
                                                                             Mineral Resource Estimation for their Magnetite Stockpiles
             Palaborwa Mining Company                Iron Ore
                                                                             in South Africa.
                                                                             Valuation of the Gravelotte Gold Mine Gold Assets in
   2011      Manhattan Gold Corporation              Gold
                                                                             South Africa.
             PriceWaterhouseCoopers                  Coal                    Valuation of a Major Coal Assets in South Africa.
             Miranda Mineral Holdings                Coal                    Valuation of Miranda's Coal Assets in South Africa.
             Lodestone Investments                   Iron Ore                Valuation of Lodestone Iron Ore Assets in Namibia.
                                                                             Valuation of Impondo Resources Coal Assets in South
             Impondo Resources                       Coal
                                                                             Africa.
             Bateman                                 Phospho-Gypsum          Drilling and sampling of a Phospho-Gypsum dump.
             Sekoko Resources                        Coal                    Valuation of their Waterberg Project.
             Optimum Collieries                      Coal                    Fairness Opinion on Transaction.
             Tanzanian Royalty Exploration                                   Competent Persons Report on their Kigosi Project in
                                                     Gold
             Corporation                                                     Tanzania.
                                                                             Mineral Resource Estimation and Technical Statement on
             Namakwa Diamonds                        Diamonds
                                                                             their Global Operations.
                                                                             Mineral Resource Estimation and Technical Statement on
             Namakwa Diamonds                        Diamonds
                                                                             their Kao Diamond Deposit.
             Continental Coal                        Coal                    Due Dilligence of Continental Coal Mineral Assets.


Valuation of the Waterberg Coal Project for Sekoko Coal                 May 2012                                Venmyn Rand (Pty) Ltd
                                                                48

  YEAR                       CLIENT                       COMMODITY                       PROJECT DESCRIPTION
             Continental Coal                      Coal                   Due Dilligence of Continental Coal Mineral Assets.
                                                                          Competent Persons Report and Valuation of Coal of Africa
             Coal of Africa Limited                Coal
                                                                          Limited's Coal Assets.
                                                                          Competent Persons Report and Valuation of Kibo's
             Kibo Mining Plc                       Gold
                                                                          Mineral Assets in Tanzania.
                                                                          Due Diligence and Valuation of Continental Coal's Mineral
             Sishen Iron Ore Company               Coal
                                                                          Assets in South Africa.
             Tanzanian Royalty Exploration                                Updated Mineral Resource Statement for the Kigosi Gold
                                                   Gold
             Corporation                                                  Project in Tanzania.
 2011        Sew Trident                           Coal                   technical Review and Valuation of the Ikoti Coal Project.
                                                                          Valuation of Sekoko's Coal Assets in the Thuli Coalfield of
             Sekoko Resources                      Coal
                                                                          South Africa.
                                                                          Update of Competent Persons Report and Valuation on
             Namane Resources                      Coal
                                                                          Namane's Waterberg Coal Project.
                                                                          Competent Persons Report and Valuation of Gem
             Gem Diamonds                          Diamonds
                                                                          Diamonds' Mineral Assets.
                                                                          Competent Persons Report on the Mineral Assets of
             Mzuri Capital                         Coal and Uranium
                                                                          Pinewood Resources.
             Gem Diamonds                          Diamonds               Mineral Resource update.
                                                                       Mineral Assets Valuation of the gold assets of Morogoro
            Kibo Mining plc                       Gold
                                                                       Gold in Tanzania.
                                                                       Competent Persons Report on the Gold Assets of Morogoro
            Kibo Mining plc                       Gold
                                                                       Gold in Tanzania.
                                                                       Mineral Assets Valuation of Noordgrens Landgoed's mineral
            Coal of Africa Limited                Coal
                                                                       assets foregone in 2004.
                                                                       Mineral Asset Valuation of CoAL's mineral assets within
            Coal of Africa Limited                Coal
                                                                       South Africa.
                                                                       Mineral Asset Valuation of Proposed Greenfields project
            Trafigura                             Base Metals and Gold
                                                                       areas in Angola.
                                                                       Mineral Asset Valuation of certain Coal Assets in near Tete,
            ETA Star                              Coal
                                                                       Mozambique.
            Namakwa Diamonds                      Diamonds             Mineral Resource update for Global Operations
                                                                       Competent Persons Report and Valuation on Namane's
            Namane Resources                      Coal
                                                                       Waterberg Coal Project.
                                                                       Techno-economic assessment of Namane's Waterberg Coal
            Namane Resources                      Coal
                                                                       Project.
                                                                       Valuation of the Sekoko-Firestone JV coal assets in the
   2010     Sekoko Resources                      Coal
                                                                       Waterberg Coalfield
                                                                       Resource update for the Sekoko-Firestone JV properties in
            Sekoko Resources                      Coal
                                                                       the Waterberg Coalfield.
                                                                       Valuation of Keldoron's Amajuba District Coal Project in
            Keldoron Mining                       Coal
                                                                       South Africa
                                                                       Mineral resource estimation of the Tulu Kapi Gold Project in
            Nyota Minerals                        Gold
                                                                       Ethiopia.
                                                                       Competent Persons Report and Valuation on Namakwa
            Namakwa Diamonds                      Diamonds
                                                                       Diamonds Mineral Assets.
                                                                       Techno-economic assessment of Miranda's coal assets in
            Miranda Mineral Holdings              Coal
                                                                       South Africa.
                                                                       Mineral Experts Report on the Muremera Nickel Project in
            Nyota Minerals                        Nickel
                                                                       Burundi.
                                                                       Mineral Resource Estimation for the Gope Project in
            Gem Diamonds                          Diamonds
                                                                       Botswana.
            Ernst & Young Jordan                  Gold and Base Metals Valuation of Brinsley Enterprises Orshab Project in Sudan.
                                                                       Mineral resource reporting audit at the Letseng Mine in
            Gem Diamonds                          Diamonds
                                                                       Lesotho.




Valuation of the Waterberg Coal Project for Sekoko Coal               May 2012                               Venmyn Rand (Pty) Ltd
                                                               49


  YEAR                       CLIENT                    COMMODITY                           PROJECT DESCRIPTION
            Nyota Minerals                         Gold                 Scoping Study on the Tulu kapi Gold Project in Ethiopia.
                                                                        Techno-economic assessment of the Kalagadi's mineral
            Kalagadi Manganese                     Manganese
                                                                        assets in South Africa in the form of a CPR.
            VTB Bank Moscow                        Uranium              Valuation of the Spitzkop Uranium Project in Namibia.
                                                                        Drilling ans sampling QA/QC audit at the Tulu Kapi Gold
            Nyota Minerals                         Gold
                                                                        Project in Ethiopia.
                                                                        Due Dilligence and Valuation of the Maloma Colliery in
            Leeuw Mining                           Coal
                                                                        Swaziland.
                                                                        Fairness opinion on Metorex's disposal of the Vergenoeg
            Metorex                                Fluorspar
                                                                        project.
            Dwyka Resources                        Gold                 Valuation of the Otjikoto Gold Project in Namibia.
                                                                        Peer review of the modelling and resource estimation of the
            Mike Scott & Associates                Copper
                                                                        Kitumba Copper Project, Zambia.
                                                                        Due Dilligence and Valuation of the mineral assets of
            Sylvania Resources                     Platinum
                                                                        Sylvania Resources.
                                                                        Valuation of the mineral assets of the Otjikoto Gold Project,
            Nyota Minerals Limited                 Gold
                                                                        Namibia.
                                                                        Valuation of the coal assets of the Tshikunda Coal Project in
            Coal of Africa Limited                 Coal
                                                                        South Africa.
                                                                        Mineral Resource Modelling and Mineral Resource
            Rand Uranium                           Uranium
                                                                        Classification of the Cooke Dump.
            Dwyka Resources                        Gold                 Prospectivity review of the Tulu Kapi Gold Project in Ethiopia
   2009     Northam Platinum Limited               Platinum             Valuation of Micawber 278 (Pty) Limited.
                                                                        Valuation of the coal assets of the Vischkuil Coal Project in
            Herbert Agencies (Pty) Limited         Coal
                                                                        South Africa.
                                                                        Valuation of the Coal Assets of the Makhado Land Swop
            Coal of Africa Limited                 Coal
                                                                        Transaction with Rio Tinto
                                                                        Valuation of the Gold Assets of Brinsley Enterprises in
            Ernst & Young Jordan                   Gold
                                                                        Sudan
            Namakwa Diamonds                       Diamonds             Mineral Resource and Mineral Reserve audit and update.
                                                                        Valuation of the Coal Assets of the Sekoko Coal-Firestone
            Firestone Energy Limited               Coal
                                                                        JV Waterberg Coal Project, South Africa
                                                                        Valuation of the Diamond Assets of the Lower Orange River
            Trans Hex Group Limited                Diamonds
                                                                        Operations, South Africa
                                                                        Valuation of the Diamond Assets of the Savanna Diamond
            Bonaparte Diamond Mines NL             Diamonds
                                                                        Project, South Africa.
            Tanzanian Royalty Exploration                               A National Instrument (NI-43-101) Technical Report on the
                                                   Gold
            Corporation                                                 Kigosi Gold Project, Tanzania.
                                                                        Valuation of the PGE Assets of the Booysendal Project,
            Mvelaphanda Resources Limited          Platinum
                                                                        South Africa.
                                                                        Valuation of the Coal Assets of the Zonnebloem 1 Project,
            Xstrata South Africa (Pty) Limited     Coal
                                                                        South Africa.
            Anglo Platinum Limited                 Platinum             Valuation of the PGE Assets of Micawber 278 (Pty) Limited.
                                                                        Valuation Update of the Coal Assets of Sekoko's Waterberg
            Sekoko Resources                       Coal
                                                                        Coal Project, South Africa.
                                                                        Fair and Reasonable Opinion on the Rights offer by Metorex
            Johannesburg Stock Exchange                                 in December 2008. This involved the creation and issue of
                                                   Multi-Commodity
            Limited/ Metorex Limited                                    242,538,403 shares at an issue price of 200cps resulting in a
                                                                        cash consideration of ZAR485,076,806.
                                                                        Competent Persons Report and Valuation of the Pering Zinc-
            Minéro Mining Company                  Zinc-Lead
                                                                        Lead Mine, in South Africa.
                                                                        Minerals Resource Update of all Gem Diamonds Mineral
            Gem Diamonds                           Diamonds
                                                                        Assets.
                                                                        Valuation of BRC DiamondCore's Silverstreams Project in
            BRC DiamondCore                        Diamonds
                                                                        South Africa.
                                                                        Valuation of Sekoko's Coal Assets of the Waterberg Coal
            Sekoko Resources                       Coal
                                                                        Project in South Africa.
   2008                                                                 Prospectivity report on certain properties within the Tuli and
            Tata Steel                             Coal
                                                                        Soutpansberg Coalfields
                                                                        Valuation of the Coal Assets of the Elof Coal Project in South
            Universal Coal plc                     Coal
                                                                        Africa
                                                                        Valuation of The PGE Assets of the Booysendal Platinum
            Anglo Platinum                         Platinum
                                                                        Project
                                                                        Resource Estimation and Update for Namakwa Diamonds
            Namakwa Diamonds                       Diamonds
                                                                        South African and DRC Projects.
                                                                        Resource Estimation and Classification of the Deelkraal
            Harmony Gold Mining Company            Gold
                                                                        Dump
                                                                        Competent Persons Report and Valuation of the Coal Assets
            Pioneer Coal                           Coal
                                                                        of Pioneer Coal
                                                                        Technical Statement on the Doornhoek Alluvial Diamond
            Namakwa Diamonds                       Diamonds
                                                                        Property, South Africa




Valuation of the Waterberg Coal Project for Sekoko Coal              May 2012                               Venmyn Rand (Pty) Ltd
                                                                50

  YEAR                      CLIENT                        COMMODITY                        PROJECT DESCRIPTION
                                                                         Prospectivity Review for Pioneer Coal's Soutpansberg Coal
            Pioneer Coal                           Coal
                                                                         Prospecting rights.
                                                                         Prospectivity Review of Various Coal Properties in the
            Target Coal                            Coal
                                                                         Ermelo region of South Africa.
                                                                         Prospectivity Review of Lidonga's Riet River Prospecting
            Lidongo Group Holdings                 Diamonds
                                                                         Rights.
                                                                         Technical Review of mineral resources and sampling
            BRC DiamondCore                        Diamonds
                                                                         programme at the Paardeburg East Diamond Project.
                                                                         Technical Review of mineral resources and sampling
            BRC DiamondCore                        Diamonds
                                                                         programme at the Silverstreams Alluvial Diamond Project.
                                                                         Technical review of the London Project, North West, South
   2008     Namaqua Diamonds                       Diamonds
                                                                         Africa.
                                                                         Competent persons Report and Techno-Economic Valuation
            Trans Hex Group                        Diamonds
                                                                         of Trans Hex's Lower Orange River Mineral Assets.
                                                                         Comparative Valuation of the Booysendal Platinum Project
            Ernst & Young                          Platinum              as part of the Fair and Reasonable Opinion on the
                                                                         Transaction between Northam and Mvelaphanda.
                                                                         Annual Mineral Resource and Mineral Reserve Review and
            Harmony Gold Mining Company            Gold                  Update. Identification of Strateigic Opportunities at the Free
                                                                         State Operations.
                                                                         Mineral Resources Review of Gem Diamonds Global
            Gem Diamonds Limited                   Diamonds
                                                                         Operations.
                                                                         Techno-economic valuation of Worldwide Coal Carolina's
            Worldwide Coal Carolina (Pty) Limited Coal
                                                                         coal assets.
                                                                         National Instrument 43-101F technical Report on the Riders
            Apic Atoll (Pty) Ltd                   Ferro-manganese       Ferro-manganese Slag Dump, Pennsylvania, united States
                                                                         of America.
                                                                         High level independent review of the coal resource, reserve
            Signet Mining                          Coal                  and technical operating parameters of Tuli Coal (Private)
                                                                         Limited's Special Grant Area in Southern Zimbabwe.
                                                                         An independent comparable transaction valuation of the
            Anglo Platinum Limited                 Platinum              platinum group element mineral assets of the Booysendal
                                                                         Project.
                                                                         Techno-economic valuation of Kimberley Diamond Company
            Gem Diamonds Limited                   Diamonds
                                                                         NL
            Gem Diamonds Limited                   Diamonds              Mineral Experts Report on Kimberley Diamond Company NL
            Gem Diamonds Limited                   Diamonds              Competent Persons Report on the Go25 (Gope) kimberlite.
                                                                         Assessment of the geological and resource/reserve data
                                                                         provided to the IDC on the Riders Ferro-magnesium Slag
            International Development Corporation Ferro-Magnesium
                                                                         Dump, Pennsylvania, USA, by Apic Toll Treatment (Pty)
                                                                         Limited as part of their application for funding.
                                                                         Mineral Resource Statements for Harmony's surface dump
   2007     Harmony Gold Mining Company            Gold and Uranium      resources of the Randfontein and Free State Operations in
                                                                         South Africa.
                                                                         SAMREC compliant Resource and Reserve Statements for
                                                                         the mineral assets of the Cempaka Diamond Mine in
            Gem Diamonds Limited                   Diamonds
                                                                         Indonesia for BDI Mining Corporation (Subsidiary of Gem
                                                                         Diamonds Limited).
                                                                         SAMREC compliant Resource Statement on the mineral
            Gem Diamonds Limited                   Diamonds              assets of Gope Exploration Company (Pty) Limited (Gope
                                                                         Project) (Subsidiary of Gem Diamonds Limited)
            Mintek/Department of Minerals and                            Review and recommendations on the Kumba/Exxaro
                                                   N/A
            Energy                                                       proposal for Environmental Provisioning.
                                                                         Compilation of Technical Statement (NI-43101) for the
            Rockwell Resources (Pty) Limited       Diamonds
                                                                         Wouterspan Operation.
            Gem Diamonds Limited                   Diamonds              High level valuation of Cullinan Diamond Mine
                                                                         Review of and Recommendations on JCI's Laingsburg
            JCI Limited                            Uranium
                                                                         Uranium Project
            Harmony Gold Mining Company                                  Sample trail Audit and Competent persons sign-off
                                                   Gold and Uranium
            Limited                                                      (SAMREC) on Dump Drilling and Sampling
                                                                         High Level Due Diligence of the Tantalite Valley Project,
            Magnum Resources Limited               Tantalum
                                                                         Southern Namibia
            Mintek/ Department of Minerals and                           Review of the System for Financial Provisioning for Mine
                                                   N/A
            Energy (South Africa)                                        Closure in South Africa
                                                                         A study of the Relationship Between the Micro- and Macro
            De Beers Consolidated Mines            Diamonds
   2004                                                                  Diamonds from Finsch Diamond Mine.
                                                                         A study of the Relationship Between the Micro- and Macro
            De Beers Consolidated Mines            Diamonds
                                                                         Diamonds from Snap Lake Diamond Mine.




Valuation of the Waterberg Coal Project for Sekoko Coal               May 2012                               Venmyn Rand (Pty) Ltd
                                                                   51


Employment Record:

 POSITION              COMPANY                            JOB DESCRIPTION                                                        DURATION
                                                          Venmyn Rand operates as a techno-economic consultancy for
                                                          the resources industry on a worldwide basis.
                                                          Responsibilities at Venmyn include:
                                                            *       Serving as Director of Venmyn and is responsible for the
                                                                    company's strategic process and management of
                                                                    internal functions and governance;                             February
 Director              Venmyn Rand (Pty) Ltd                *       Providing hands-on services to all the company's major          2009 -
                                                                    clients;                                                       Present
                                                            *       Providing minerals projects assessments; and
                                                            *       Mr Mc Kenna's expertise in financial valuation is
                                                                    particularly appropriate for ensuring market to market
                                                                    presentation of both the technical and financial issues of
                                                                    resources projects..
                                                          Venmyn Rand operates as a techno-economic consultancy for
                                                          the resources industry on a worldwide basis.
                                                                                                                                 March 2006 –
 Minerals Industry                                        Responsibilities at Venmyn include:
                       Venmyn Rand (Pty) Ltd                                                                                      February
 Advisor                                                  * Compiling technical and geological information into reports
                                                                                                                                    2009
                                                              which are compliant with the SAMREC and JSE listing rules.
                                                          * Production of techno-economic reports for clients.
                                                          Responsible for the Mineral Resource Evaluation Drilling of the
                                                          Block 5 Extension of the Finsch Diamond Mine, Northern Cape.
                                                          This role included the following activities:
                                                          * Management of diamond core drilling for volume, geological,
                                                              structural and grade determinations.
                                                          * Co-ordination of drilling/sampling activities of four LM90 drill
 Project Manager
                       De Beers, Finsch Mine                  rigs on three underground levels (510, 650 and 888 levels).        October 2006
 Resource
                                                          * Managing the capturing of all geological data in a Datamine          – March 2007
 Extension Drilling
                                                              drill-hole database.
                                                          * Responsible for the managing of drilling contractors (Boart
                                                              Longyear) and maintaining project schedules.
                                                          * Responsible for the supervision and mentorship of
                                                              approximately 10 subordinates (including senior and junior
                                                              geologists, geological officers and geological assistants).
                                                          * Responsible for routine reporting, and ad-hoc reviews and
                                                              requests by Group Managers Office.
                                                          * Corporate governance of Resource Delivery Group.
                                                          * Technical reviews of advanced stage projects and resource
 Technical Assistant
                       De Beers Group Exploration             statements.                                                        2005 - 2006
                                                          * Compilation of position papers.
                                                          * Ad-hoc reports and resource reviews.
                                                          * Joint venture reporting.

                                                          *  Responsible for routine reporting.
                                                          *  liaison between field operations and laboratories.
                                                          *  Ad-hoc technical reports and reviews.
                                                          *  Corporate governance of Africa Management team and HOD
                       De Beers Africa Exploration
 Technical Assistant                                         committee.                                                          2004 - 2005
                                                          * Active management of relationships and data for a Joint
                                                             Venture in Madagascar.
                                                          * Projects tracking.
                                                          * Business plan management.
                                                          * Industrial and exploration related diamond research
                                                          * Responsible for diamond related service work and decision
                       De Beers Geoscience Centre            support
 Senior Geologist                                                                                                                 2003-2004
                                                          * Supervision and mentoring for diamond related projects.
                                                          * Providing exploration ventures with targeting and mineral
                                                             chemistry interpretations and decision support.
                                                          Exposure to various aspects of exploration and mining geology
                                                          over a 13 month training period. Competencies gained include:
                                                          * diamond indicator mineral identification and interpretation.
                                                          * bulk sample evaluation.
                       De Beers Group Exploration
                                                          * laboratory practices.
 Staff Geologist       Services                                                                                                   2002-2003
                                                          * stream and loam exploration sampling (both reconnaissance
                                                               and follow-up sampling).
                                                          * Underground geological mapping, density measurements,
                                                             waste control, bulk sampling and grade determination
                                                             studies.




Valuation of the Waterberg Coal Project for Sekoko Coal                  May 2012                                  Venmyn Rand (Pty) Ltd
                                                          52


Languages:
English: Excellent
Afrikaans: Good

Certification:

I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my
qualifications, and my experience.




                                                                          th
                                                                   Date: 11 May 2012
Full name of staff member: Neil Mc Kenna




Valuation of the Waterberg Coal Project for Sekoko Coal        May 2012                   Venmyn Rand (Pty) Ltd
                                                                 53

Name of Firm:                  Venmyn Rand (Pty) Limited
Name of Staff:                 Mr Iaan Myburgh
Profession:                            Mineral Industry Analyst
                                         th
Date of Birth:                         31 December 1984
Years with Firm/Entity:        2 years
Nationality:                           South Africa

Detailed Tasks Assigned:

 YEAR                 CLIENT                 COMMODITY                  PROJECT DESCRIPTION
 2010     African Copper                  Copper                 Feasability Study
 2010     Miranda Mineral Holdings        Coal                   Independent Project Valuations
 2010     White Water Resources           Gold                   Independent Project Valuations
 2010     Chrometco Limited               Chromite               Independent Project Valuations
 2010     Sekoko                          Coal                   Independent Project Valuations
 2010     West Wits                       Gold/Uranium           Statistical Analysis
 2010     Central African Gold            Gold                   Statistical Analysis
          Worldwide            Mineral
 2010                                     Gold                   Statistical Analysis
          Strategists
 2010     Rooderand Chromite              Chrome                 Valuation Statement
 2010     African Copper                  Copper                 Valuation Statement
 2010     Sekoko                          Coal                   Valuation Statement
 2010     Chrometco                       Chrome                 Valuation Statement
 2011     Xceed Capital                   Coal                   Techno Economic Valuation
 2011     PSIL                            Uranium                Techno Economic Valuation
 2011     Wesizwe                         Platinum               Techno Economic Valuation
 2011     Gem Diamonds                    Diamonds               Independent Project Valuations
 2011     Lesego                          Platinum               Statistical Analysis
 2011     Sephaku                         Fluorspar              Independent Project Valuations
 2011     Xceed Capital                   Coal                   Valuation Statement
 2011     Wesizwe                         Platinum               Valuation Statement
 2011     Namane Elandslaagte             Diamonds               Valuation Statement
 2011     PSIL                            Uranium                Valuation Statement
 2011     Sudor Coal                      Coal                   Valuation Statement
 2011     Realm Resources                 Platinum               Valuation Statement
 2011     AEMFC                           Coal                   Valuation Statement
 2011     Lodestone Namibia               Iron Ore               Valuation Statement
 2011     African Copper                  Copper                 Valuation Statement
 2011     Karbochem                       Power Generation       Valuation Statement
 2011     Miranda Minerals                Coal                   Valuation Statement
 2011     Anglo Namibian Prospects        Base Metals            Valuation Statement
 2011     Umcebo                          Coal                   Valuation Statement
 2011     Gem Diamonds                    Diamonds               CPR
 2011     Banro                           Gold                   CPR
 2011     Sephaku                         Fluorspar              CPR
 2011     Platmin                         Platinum               CPR
 2011     Harmony                         Gold                   CPR

Fair and Reasonable Opinions:

                                  Securities                           Implied
                                                  Transaction
  YEAR           CLIENT           Exchange                              Value                        DESCRIPTION
                                                       Type
                                 Jurisdiction                          (US$m)
   2011     Wesizwe             JSE           Acquisition                280       F&R opinion document to the exchange
   2010     Sylvania            ASX           Share conversion           190       F&R opinion letter to the board
                                                                                   Independent F&R for Ultratech Cement on Xstrata
   2010     Ultratech Cement    JSE           Acquisition                 50
                                                                                   Assets
   2011     Optimum Coal     Coal             Acquisition                400       F&R opinion letter to the board
   2011     Forbes Manhattan Base Metals      Acquisition                20        SARB approval
   2011     Sikhuliso        Gold             Acquisition                30        Value Determinition

Key Qualifications and Description:

Mr Iaan Myburgh has a degree in Mathematics from the University of Pretoria. He joined Venmyn in January 2010.
During the time he has worked with Venmyn, he has specialised mainly in the market review for different commodities as
well valuation of mineral projects using the market approach method and discounted cash flow method. He is also a
candidate in the CFA program having passed the first level exam in 2010.

Education:

 DEGREE/DIPLOMA            FIELD                                                  INSTITUTION                         YEAR
 B. Sc                     Mathematics                                            University of Pretoria              2010



Valuation of the Waterberg Coal Project for Sekoko Coal               May 2012                              Venmyn Rand (Pty) Ltd
                                                                   54

Employment Record:

 POSITION              COMPANY                            JOB DESCRIPTION                                                    DURATION
                                                          Venmyn provides compliance and valuation reporting services to
                                                          the minerals industry.
                                                          Responsibilities at Venmyn include:-
                                                            * Compiling technical and geological information into
 Mineral    Industry                                            reports which are compliant with the SAMREC and JSE          2010       –
                       Venmyn Rand (Pty) Ltd                    listing rules;
 Analyst                                                                                                                     present
                                                            * High level research for multiple facets of mineral projects;
                                                            * Valuation of mineral projects; and
                                                            * Background research of information for CPR's and
                                                                Technical Statements.

Languages:

English: Excellent
Afrikaans: Excellent

Certification:

I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my
qualifications, and my experience.




                                                                                         st
                                                                               Date: 01 May 2012
Full name of staff member: Jacobus Adriaan Myburgh




Valuation of the Waterberg Coal Project for Sekoko Coal                 May 2012                                Venmyn Rand (Pty) Ltd


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5 September 2012









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