Financial Restructure Update FIRESTONE ENERGY LIMITED (Incorporated in Australia) (Registration number ABN 058 436 794) Share code on the JSE Limited: FSE Share code on the ASX: FSE ISIN: AU000000FSE6 (SA company registration number 2008/023973/10) ("FSE" or "the Company") About Firestone Energy Firestone Energy Limited is an independent, Australian exploration and development company listed on the 18 December 2012 Australian Stock Exchange Ltd (ASX) and the Johannesburg Stock Exchange (JSE). Firestone Energy has entered into a Joint Financial Restructure – revised Venture with Sekoko Resources (Pty) Ltd through which Firestone Energy has Investment Agreement acquired the right to 60% participation interests in the Waterberg Coal Project located in Lephalale area, Limpopo Province, South Africa. The Board of Firestone Energy Limited (ASX/JSE: FSE) (the “Company” or The first stage of the project is to develop the “Firestone”) is pleased to update shareholders with the progress of the financial Smitspan mine which has a substantial restructuring and the Investment Agreement that it has executed with Ariona measured thermal coal resource and to Company SA (“Ariona”). develop the Vetleegte mine which is a substantial metallurgical coal deposit. As previously announced to the market on 19 November 2012, Firestone entered into a termsheet to effect a variation to the Investment Agreement to reflect Firestone Energy is committed to becoming a changed settlement terms. The changes agreed in the termsheet were subject to profitable independent coal and energy a number of conditions the principal ones being: producer at its projects in South Africa, thereby making a substantial contribution to the social and economic development of the • a review to ensure that it is compliant with the shareholder approvals Lephalale area and South Africa. received at a General Meeting of the Firestone held on 5 October 2012; and Corporate Details • execution of a formal deed of variation. ASX: FSE JSE: FSE The Directors are pleased to announce that the above conditions have now been Issued Capital: 3,114 million ordinary shares satisfied with a formal deed of variation having been executed by the parties. Major Shareholders: During the course of preparation of the formal deed of variation, further changes Sekoko Resources (Pty) Ltd Linc Energy Ltd to those referred to in the Company's announcement of 19 November 2012 were BBY Nominees Pty Ltd made to the Investment Agreement, which can be summarised as follows; Bell Potter Nominees Ltd Directors and Officers • First Stage of settlement is now to occur on 21 December 2012 provided that if Ariona is unable to provide the A$4 million of additional cash on Non Executive Directors: Mr Tim Tebeila (Chairman) that day then First Stage will be postponed until at the latest 31 January David Perkins (Deputy Chairman) 2013. If the First Stage settlement does not occur by 5 January 2013 then Dr Pius Kasolo Ariona is to lend Firestone a further $600,000 of interim funding. Ben Mphahlele Kobus Terblanche • The additional $600,000 in interim funding is part of the total $39.645 Officers: Mr David Knox CEO million in funding to be provided by Ariona. If settlement does not occur Ms Amanda Matthee CFO then the $600,000 will be dealt with in the same way as the $1 million Mr Jerry Monzu Company Secretary working capital facility currently made available by Ariona, further details of which are set out below. Contact: Suite B9, 431 Roberts Road • Second Stage settlement is to occur within 5 business days of First Stage Subiaco, Western Australia 6008 Tel: +61 (08) 9287 4600 settlement but in any event by no later than 28 February 2013. Web: www.firestoneenergy.com.au The $1 million working capital facility provided by Ariona is a loan to Firestone on an interest free and unsecured basis until the First Stage settlement occurs. In the event that the First Stage settlement does not occur then the amount of working capital loaned will convert into equity at the prevailing market price on the date of conversion. Upon completion of the First Stage settlement process the full amount of working capital that has been drawn down will roll into the new Convertible Notes. The postponement of First Stage and or Second Stage settlement until after 5 January 2013 is subject to the ASX granting a modification to a waiver of Listing Rule 7.3.2, previously granted to the Company to allow for the issue of Convertible Notes after 5 January 2013. Either party can terminate the Investment Agreement if First Stage settlement does not occur by 31 January 2013 or Second Stage settlement by 28 February 2013. Yours sincerely, David Knox Chief Executive Officer www.firestoneenergy.com.au Tel: Australia (+61 08 9287 4600) South Africa (+27 11 706 3548) JOHANNESBURG 18 DECEMBER 2012 SPONSOR RIVER GROUP 2 Date: 18/12/2012 08:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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