FIRESTONE ENERGY LIMITED - Annual Report for the year ended 30 June 2013

Release Date: 27/09/2013 11:00
Code(s): FSE
 
Wrap Text
Annual Report for the year ended 30 June 2013

        
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")

ABN 71 058 436 794

ANNUAL REPORT

For the year ended 30 June 2013



                                FIRESTONE ENERGY LIMITED
                                    Annual Report 30 June 2013



CORPORATE DIRECTORY


DIRECTORS                                              SHARE REGISTRY

Mr Tim Tebeila                                         Computershare Investor Services
Chairman                                               Level 2, Reserve Bank Building
                                                       45 St Georges Terrace
Mr Stephen Miller                                      PERTH WA 6000
Executive Director                                     Ph 08 9323 2000
                                                       Fax 08 9323 2033
Dr Pius Kasolo
Non-Executive Director
                                                       AUDITORS
Mr David Knox
Non-Executive Director                                 BDO Audit (WA) Pty Ltd
                                                       38 Station Street
Mr Brian McMaster                                      SUBIACO WA 6008
Non-Executive Director

Mr Morore Benjamin Mphahlele
Non-Executive Director


COMPANY SECRETARY

Mr David McEntaggart


REGISTERED OFFICE

Level 1, 330 Churchill Avenue
SUBIACO WA 6008

Telephone: (08) 9200 4465
Facsimile: (08) 9200 4469


STOCK EXCHANGE LISTING                                     ASX & JSE CODE

Securities of Firestone Energy Limited are dual            FSE
listed on the Australian Securities Exchange and
the Johannesburg Securities Exchange.




                                                   1
                               FIRESTONE ENERGY LIMITED
                                     Annual Report 30 June 2013


CONTENTS


Management Disclosure Report                                               3

Directors’ Report                                                          5

Auditor’s Independence Declaration                                        15

Corporate Governance Statement                                            16

Consolidated Statement of Profit or Loss and Other Comprehensive Income   24

Consolidated Balance Sheet                                                25

Consolidated Statement of Cash Flows                                      26

Consolidated Statement of Changes in Equity                               27

Notes to the Consolidated Financial Statements                            29

Directors’ Declaration                                                    57

Independent Audit Report                                                  58

ASX Additional Information                                                60




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                                    FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

MANAGEMENT DISCLOSURE REPORT

Overview

       On 5 October 2012, at a General Meeting, shareholders approved various resolutions relating to the
         acquisition of a 25.7% interest in Firestone Energy Limited (“Firestone” or “the Company”) by Ariona
         Company SA from Sekoko Resources (Pty) Ltd.
        At the same meeting, shareholders approved the restructure of the Convertible Notes facilitating the
         issue of new Convertible Notes to Ariona in the amount of $40.7m.
        On 17 December 2012 The Waterberg Coal Company Ltd (“WCC”) announced to the ASX an unsolicited
         conditional offer to acquire all of the ordinary shares in Firestone by way of an off-market takeover offer.
         WCC had previously announced to the ASX that it had signed an agreement to acquire all of the share
         capital in Ariona Company SA (“Ariona”).
        In January 2013 WCC lodged its Bidders Statement for FSE. In summary, Firestone shareholders were
         offered (1) WCC share for every (2) Firestone shares.
        On 5 February 2013, Firestone announced the First Stage Settlement between the Company, Ariona,
         BBY Nominees and Jaguar Funds Management Limited. Pursuant to the terms of the Restated
         Investment Agreement (“RIA”), the Company issued $27.145 million of new Secured Convertible Notes.
         The Company received $5 million in cash (less costs) for interim funding. New Convertible Notes were
         issued together with the redemption and replacement of $21.3 million of Existing Convertible Notes and
         accrued interest of $845k. Successful completion of the first closing of the RIA greatly assisted the
         Company in continuing to finance its obligations with respect to the Waterberg Joint Venture.
        On 21 February 2013, the Company announced the release of an Independent Specialist Valuation
         Report carried out by Venmyn Deloitte in relation to the coal assets that comprise The Waterberg Coal
         Project in which Firestone is a Joint Venture Partner with Sekoko Coal.
        On 27 March 2013, WCC increased the Takeover Offer consideration to 1.25 WCC shares for every 2
         Firestone shares (on pre-consolidation basis). On a post-consolidation basis the consideration will be
         1.25 WCC shares for every 20 Firestone shares.
        On 9 April 2013 Ariona and Sekoko Resources completed a transaction whereby Ariona acquired
         480,000,000 Firestone shares from Sekoko, together with Ariona acquiring from Sekoko an entitlement
         to a direct 10% interest in the Waterberg Joint Venture.

The Company received notification that the WCC off-market takeover bid for all the ordinary shares had been
extended to and closed on 23 September 2013.

Technical Overview

During the year various specialist consultants were engaged to work with SRK on the Definitive Feasibility Study
(“DFS”) for The Waterberg Coal Project. The specialists covered the disciplines of environment, transport and
logistics, infrastructure and hydrology. These specialist reports will be incorporated into the DFS, which is being
managed by SRK. During the 2012 year, SRK were appointed by the joint venture partners to complete the DFS
for the proposed development of an open cast mining operation to produce 10 million tonnes of coal (product) per
year to Eskom for an initial term of 30 years, pursuant to a Memorandum of Understanding that Sekoko Coal had
entered into with Eskom in March 2012.

Of note, during the year Eskom requested a change in mine plan design to accommodate the different
characteristics of the top and bottom coal seams that exist within the defined project area. As a result, such
amendments have now been incorporated in the DFS. The final work product of the DFS is now expected to be
finalised at the end of September 2013.

As part of the DFS, further drilling has been completed on Smitspan to confirm the extent of the faults, and further
drilling on Massenberg to upgrade the resource status of the property. These drilling results will be announced as
part of the DFS.




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                                   FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

MANAGEMENT DISCLOSURE REPORT


PROJECT APPROVALS & PERMITTING


Amended Mining Right

        Notification to amend the granted new order mining right (“NOMR”) has been submitted to the
         Department of Mineral Resources during Q1 of 2013.
        Continued to build relationships with key stakeholders including, inter alia, regular interaction with
         municipality representatives, land owners and state authorities on an issue-by-issue basis.
        Targeted stakeholder engagements; the public participation processes is ongoing.
        Entered into purchase agreements with certain owners of surface rights that the proposed mine
         operation and mine infrastructure will be situated.

Amended Environmental Authorisation

        Application to amend the granted Environmental Authorisation was lodged with the relevant authority
         during Q1 of 2013.
        Scoping Studies completed and submitted to the relevant authority during Q2 of 2013; the impact
         assessment and environmental impact assessment (“EIA”) report are currently in progress.
        Substantial progress with the amendments covering the environmental impact assessment,
         environmental management plan and social and labour plan.

Water Use Licensing

        Good progress has been made with the amendment of the previous IWUL Application. Two Integrated
         Water Use Applications (“IWULA”) will be submitted to the authorities during the course of Q3 of 2013 as
         per the directive and guidelines of the Department of Water Affairs.
        Groundwater Studies for the Project have also being undertaken in parallel in order to further mitigate
         the planned water use requirements.
        Substantial progress has been made with amendments of environmental impact assessment,
         environmental management plan and social and labour plan.

Land Use Planning

A land zoning permit will be finalised and lodged with the Lephalale Local Municipality once the Feasibility Study
Report has been signed off and accepted by the Project Sponsors. Applications in terms of Land Use Regulation
Act 15 of 1987 and the Townships Ordinance 33 of 1934 (“LUPO”) requires the holder of a mining right to also
obtain authorisation in terms of LUPO before carrying out mining activities in a municipality.




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                                     FIRESTONE ENERGY LIMITED
                                          Annual Report 30 June 2013

DIRECTORS’ REPORT

Your Directors submit the annual financial report of the consolidated entity for the financial year ended 30 June
2013. In order to comply with the provisions of the Corporations Act, the Directors report as follows:

DIRECTORS

The names of the Directors who held office during or since the end of the year and until the date of this report are
as detailed below. Directors were in office for this entire period unless otherwise stated. The Board has no sub-
committees.

MR TIM TEBEILA
Non-Executive Chairman

Mr Tebeila is the founder and chairman of Sekoko Resources (Pty) Ltd, a South African-based black-owned
energy and minerals company developing coal, magnetite iron ore and platinum group metals. He has been
responsible for driving the company’s business strategy attracting multinational companies and strategic investors
within the energy and mining sectors expressing interest in his projects. During the past three years, Mr Tebeila
has not served as a director of any other listed entity.

MR STEPHEN MILLER
Executive Director – Appointed 14 June 2013

Mr Miller has 25 years’ experience investing and executing corporate finance, mergers and acquisitions
opportunities in the resources sector.

He established Resource Venture Capital Partners (RVCP) which is dedicated to investment opportunities in the
natural resources sector. RVCP is involved in corporate reorganisations and restructurings, direct investments
and substantial debt and equity capital raisings for project start-ups, developments and corporate takeovers.

Mr Miller has also been a director, founder and chief executive officer of a number of successful resource
companies listed on the Australian and North American exchanges, including East Africa Gold Corporation,
Western Metals Limited and Defiance Mining Corporation.

He is a member of the Institute of Chartered Accountants Australia, a Fellow of the Australian Institute of
Company Directors and previously a Director on the Australia Gold Council. Mr Miller’s qualifications include a
CA, BBus and FAICD.

During the past three years, Mr Miller has been a director of the following ASX-listed entity:

       The Waterberg Coal Company Limited (appointed 5 April 2013)

DR PIUS KASOLO
Non-Executive Director

Dr Kasolo is a highly credentialed geologist and has extensive experience in the evaluation and management of
mining projects, the formulation of company strategy, resource optimisation and business process analysis. Dr
Kasolo sits on several boards in South Africa and has published many papers in his field of geology. During the
past three years, Dr Kasolo has not served as a director of any other listed entity.

MR DAVID KNOX
Non-Executive Director – Appointed 14 June 2013

Mr Knox has significant experience gained within the international energy and resources sectors for over 30
years. He has led the formation and management of a number of internationally recognised groups specialising in
project development financing, trading and banking and in particular, has high-level experience conducting
business in Africa. He served as Chief Executive Officer of Firestone from 20 September 2011 to 14 June 2013.

He is a member of the London Institute of Directors and Chatham House.

During the past three years, Mr Knox has been a director of the following TSX-listed entity:

        Reservoir Minerals Inc. (appointed 24 October 2011)




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                                     FIRESTONE ENERGY LIMITED
                                           Annual Report 30 June 2013

DIRECTORS’ REPORT

MR BRIAN MCMASTER
Non-Executive Director – Appointed 14 June 2013

Mr McMaster is a Chartered Accountant and has almost 20 years’ experience in the area of corporate
reconstruction and turnaround/performance improvement. Mr McMaster’s experience includes numerous
reorganisations and turnarounds, including being instrumental in the recapitalisation and listing of 12 Australian
listed companies. His career has included significant working periods in the United States, South America, Asia
and India.

During the past three years, Mr McMaster has been a director of the following ASX-listed entities:

        Caravel Energy Limited (appointed 2 December 2011)
        Lindian Resources Limited (appointed 20 June 2011)
        Paradigm Metals Limited (appointed 14 September 2012)
        Wolf Petroleum Ltd (appointed 24 April 2012)
        Black Star Petroleum Limited (appointed 9 August 2012)
        The Waterberg Coal Company Limited (appointed 17 April 2012)
        Castillo Copper Limited (appointed 31 August 2013)

MR BEN MPHAHLELE
Non-Executive Director

Morore (Ben) Mphahlele is a strategy and project management consultant as well as director of various
companies. He has had a long career in banking and public sector administration in South Africa. His current
memberships and directorships include Regotje Investments, South African Statistics Council and Hlabirwa
School of Commerce. He has also co-authored a number of articles published in the South African Journal of
Economics. During the past three years, Mr Mphahlele has not served as a director of any other listed entity.

MR DAVID PERKINS
Non-Executive Director – Resigned 14 June 2013

Mr Perkins has a Bachelor of Jurisprudence and Bachelor of Law degrees from the University of New South
Wales, a post graduate Diploma of Corporate Administration and is a Fellow of both the Australian Institute of
Company Directors and Chartered Secretaries of Australia. He is also a member of the Law Society of New South
Wales.

Mr Perkins is the principal of Perkins Solicitors and is a Non-Executive Director of Australian Stockbroking firm,
BBY Limited. He was previously General Counsel and Company Secretary for the JP Morgan Chase and
Company (formerly the Chase Manhattan Bank) for Australia, New Zealand and Oceania.

During the past three years, Mr Perkins did not serve as a director of any other listed entity.

MR KOBUS TERBLANCHE
Non-Executive Director – Resigned 20 June 2013

Mr Terblanche is currently President at Linc Energy Operations Australia and Africa, prior to which he managed a
refining, storage and logistics business for Glencore in the Democratic Republic of Congo. He commenced his
career at Sasol Limited. He then participated in the establishment of Mossgas in the project, production, technical
and business development areas. He was also involved in the formation of PetroSA as general manager of
corporate strategy and new ventures. During the past three years, Mr Terblanche did not serve as a director of
any other listed entity.

MR DAVID HILLIER
Non-Executive Director – Appointed 5 February 2013, resigned 1 March 2013

Mr Hillier is a chartered accountant and has more than 30 years’ experience in the resources industry globally. He
was previously Executive Chairman of Buka Gold Limited, which successfully identified a number of gold
anomalies in the Maryborough Basin in Queensland, an area not previously considered prospective for gold.
Throughout 2008 he worked as Chief Financial Officer, and subsequently as executive director, of Buka’s major
shareholder based in London. Between 1989 and 2002, Mr Hillier held a range of senior executive positions in the
Normandy Mining Limited group of companies and was Chief Financial Officer of Normandy for six of those years.

During the past three years, Mr Hillier has been a director of the following ASX-listed entities:

        Phoenix Copper Limited (appointed 17 September 2010)
        Lawson Gold Limited (appointed 2 February 2010, resigned 2 July 2013)

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                                    FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

DIRECTORS’ REPORT

MR JACK JAMES
Non-Executive Director – Appointed 5 February 2013, resigned 13 June 2013

Mr James has a Bachelor of Business from the Queensland University of Technology and is a chartered
accountant. He provides accounting, secretarial and advisory advice to private and public companies, government
and other stakeholders. He has over 15 years’ experience in chartered accounting specialising in corporate
advisory and reconstruction. Most recently, he held senior roles in Ernst & Young and KordaMentha.

During the past three years, Mr James has been a director of the following ASX-listed entities:

        Eumeralla Resources Limited (appointed 22 August 2011)
        Black Star Petroleum Limited (appointed 9 August 2012, resigned 28 February 2013)

MR OREN ZOHAR
Non-Executive Director – Appointed 5 February 2013, resigned 13 June 2013

Mr Zohar holds a Bachelor of Commerce degree from UWA and a Master of Business Administration from
Melbourne Business School. He is also a chartered accountant and registered and official liquidator. He has
practised in the areas of corporate restructuring and advisory for over 20 years. He was a founding partner of
KordaMentha (WA).

After retiring from KordaMentha in 2006, Mr Zohar co-founded a boutique corporate advisory and private equity
firm, which held an AFS license, provided specialist advisory services for clients and sourced, negotiated and
project managed several syndicated investment opportunities.

During the past three years, Mr Zohar has been a director of the following ASX-listed entities:

        Frankland River Olive Company Ltd (appointed 25 June 2012)
        Black Star Petroleum Limited (appointed 9 August 2012, resigned 28 February 2013)
        Eftel Limited (appointed 14 April 2011, resigned 24 May 2011)


COMPANY SECRETARY

MR DAVID MCENTAGGART – Appointed 5 July 2013
Mr McEntaggart has a Bachelor of Commerce and is a qualified Chartered Accountant with experience in the
mining industry and the accounting profession. His experience includes exposure to Australian and international
resource companies. Mr McEntaggart provides services to a number of ASX-listed companies specialising in
financial accounting and securities exchange compliance.

MR JERRY MONZU – Resigned 5 July 2013
Mr Monzu has over 20 years of experience in publicly listed multinational corporations predominantly in the
resources and mining sectors. He has previously held senior management positions in companies such as
Woodside Energy and Normandy Mining.
Mr Monzu graduated with a Bachelor of Business (Accounting and Finance) from Curtin University and is a
qualified member of CPA Australia and Chartered Secretaries Australia.



PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The principal activities of the entities within the consolidated group during the year were to continue to identify,
evaluate and develop potential mineral exploration and mining projects located in Africa.

Other than for the matters referred to in the Management Disclosure Report there have been no significant
changes in the state of affairs within the consolidated entity.




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                                      FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

DIRECTORS’ REPORT

DIRECTORS’ MEETINGS
The number of Directors’ meetings held and the number of meetings attended by each of the Directors of the
Company during the year to 30 June 2013 are:

                                                                 Meetings held during
                                         Meetings attended
                                                                   time as Director
 Tim Tebeila                                      17                      24
 Stephen Miller                                    -                      1
 Pius Kasolo                                      21                      24
 David Knox                                       1                       1
 Brian McMaster                                    -                      1
 Ben Mphahlele                                    23                      24
 Kobus Terblanche                                 24                      24
 David Perkins                                    21                      23
 Jack James                                       13                      13
 Oren Zohar                                       10                      13
 David Hillier                                    2                       2

On 12 June 2013, a board sub-committee was formed to consider the takeover and any competing bids. The
members of the sub-committee are Dr Kasolo, Mr Mphahlale and Mr Terblanche.

OPERATING AND FINANCIAL REVIEW

An operating review of the consolidated entity for the financial year ended 30 June 2013 is set out in the
Management Disclosure Report.

Shareholder returns                                                    2013                      2012

Net loss for the year                                              (5,848,203)                (4,530,596)
Basic EPS (loss) – cents                                              (0.19)                    (0.15)
Share price as at 30 June – cents                                      0.5                        0.7

The higher administrative, consultants and legal fees for 2013 compared to 2012 largely related to the takeover.
The higher finance costs related to the new convertible notes discussed in the Management Disclosure Report.

The Group’s net assets decreased by $5.1 million largely as a result of higher borrowings due to the new
convertible notes.

During the year, a total of 435,820,082 shares were issued to extinguish the A$2.2 million BBY finance facility and
in lieu of interest payments to BBY on the former convertible notes. Additionally, 300 million options were issued
to the former holders of the Company’s convertible notes. Refer to Note 13 for further details of shares issued
during the year and Note 15 for details of the options issued.

At 30 June 2013, Firestone Energy had the following unissued shares under option on issue:

            Number Under Option                   Expiry                         Exercise Price
                     25,875,000                30 June 2014                          $0.06
                         48,395,000            31 May 2014                           $0.04
                         40,000,000            19 Sep 2014                           $0.025
                        300,000,000             31 Jan 2015                          $0.025
                        414,270,000



DIVIDENDS

There have been no dividends declared or paid during the period.




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                                   FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED)

This report outlines the remuneration arrangements in place for Directors and executives of Firestone Energy
Limited. The information provided in this remuneration report has been audited as required by section 308(3C) of
the Corporations Act 2001. For the purposes of this report, Key Management Personnel are defined as those
persons having authority and responsibility for planning, directing and controlling the activities of the Group,
including any Director of the parent company.

Key Management Personnel

i) Directors
Mr Tim Tebeila                      Chairman
Dr Pius Kasolo                      Non-Executive Director
Mr David Knox                       Non-Executive Director     - appointed 14 June 2013
Mr Brian McMaster                   Non-Executive Director     - appointed 14 June 2013
Mr Morore Benjamin Mphahlele        Non-Executive Director
Mr Kobus Terblanche                 Non-Executive Director     - resigned 20 June 2013
Mr David Perkins                    Non-Executive Director     - resigned 14 June 2013
Mr Jack James                       Non-Executive Director     - appointed 5 February 2013,
                                                                 resigned 13 June 2013
Mr Oren Zohar                       Non-Executive Director     - appointed 5 February 2013,
                                                                 resigned 13 June 2013
Mr David Hillier                    Non-Executive Director     - appointed 5 February 2013,
                                                                 resigned 1 March 2013
Mr Colin McIntyre                   Non-Executive Director     - resigned 23 January 2012

ii) Executive Directors
Mr Stephen Miller                   Executive Director         - appointed 14 June 2013
Mr Sizwe Nkosi                      Executive Director         - resigned 25 November 2011

iii) Other Executives
Mr David Knox                       Chief Executive Officer    - appointed 20 September 2011,
                                                                 resigned as CEO and appointed
                                                                 Non-Executive Director 14 June 2013
Ms Amanda Matthee                   Chief Financial Officer    - appointed 23 August 2012

There were no other changes to Key Management Personnel after the reporting date and before the date the
financial report was authorised for issue.

Policy for determining remuneration
The objective of Firestone’s broad remuneration policy is to ensure that the remuneration package provided to
Directors and executives of the Group properly reflects the relevant person's duties and responsibilities and that
remuneration is competitive in attracting, retaining and motivating people of the highest quality.
The Board is responsible for determining the remuneration policy for all Directors and Key Management
Personnel based upon Firestone’s nature, scale and scope of operating requirements and any other factors which
the Board determines to be appropriate in determining the Group’s remuneration policy.
Non-Executive Directors’ fees are determined within an aggregate directors’ fee pool limit. The maximum
currently stands at $400,000 per annum and was approved by Firestone’s shareholders at the 2008 annual
general meeting.
The Group does not currently have formal policies around Key Management Personnel remuneration, which are
set at market rates.

Short Term Cash Incentives
No short term cash incentives were provided to Directors, Key Management Personnel or other executives during
the year.

Other Payments
No other payments are due to Directors or Key Management Personnel.

Long Term Benefits
Directors or Key Management Personnel currently have no right to superannuation or long term leave payments.


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                                     FIRESTONE ENERGY LIMITED
                                          Annual Report 30 June 2013

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (Continued)

Share-based Remuneration

Under current Accounting Standards any share-based remuneration must be valued in accordance with an
appropriate option pricing model. Share options carry no voting rights and each option is convertible into one
ordinary share in the company. No share-based remuneration (such as options to acquire Firestone shares) was
granted to Directors in the current year or previous financial year. In recognition for successfully arranging funding
for the Company, Mr David Knox was granted 40 million options on 19 September 2012 when he was Chief
Executive Officer. These options have an exercise price of $0.025, expire 19 September 2014 and vested
immediately. The fair value at grant date using a binomial model was 0.194 cents per option and the options
represented 19.8% of his total remuneration for the year. No options were exercised or lapsed during the year.

No other Key Management Personnel received share-based remuneration in the current year or previous financial
year.

For equity holdings by Key Management Personnel at year end, refer to Note 18.

No options were exercised during the year as a result of share-based payments.

Service Contracts

The contract duration, period of notice and termination conditions for Key Management Personnel as at 30 June
2013 are as follows:

Service Contracts (continued)

Mr Stephen Miller, the Chief Executive Officer, receives no remuneration and has no service contract.

Ms Amanda Matthee, the Chief Financial Officer, is engaged through an Executive Services Agreement with
Firestone Energy Limited subsidiary Checkered Flag Investments 2 (Pty) Limited (“Checkered Flag”). The
agreement is for an initial period of two years with an option to extend for a further three years. Termination by
Checkered Flag without cause is by four months’ notice or payment in lieu thereof. Termination by Ms Matthee is
with one month’s notice. Ms Matthee receives remuneration of R2,226,000 per annum, reviewable annually, and
is eligible for performance-based bonuses and the grant of options upon completion of a bankable feasibility study
and upon commencement of production.

There were no formal service agreements with Non-Executive Directors. On appointment to the Board, all Non-
Executive Directors enter into a service agreement with Firestone, in the form of a letter of appointment. The letter
summarises the Board policies and terms which mirror those set out within the Corporations Act 2001, including
compensation, relevant to the office of Director.

Post-employment Benefits
No members of Key Management Personnel are entitled to post-employment benefits.

Performance-related Benefits
The Company provides incentive and performance based payments/benefits, typically in the way of equity
options. There were no performance-related benefits during the year other than the issue of options to David
Knox discussed above.

Financial Performance of the Group

There is no relationship between Firestone’s current remuneration policy for Key Management Personnel and the
company's performance or shareholder wealth. However, the Board takes note of the following indices in respect
of the current and previous four financial years.


                                        2013             2012            2011             2010             2009
Net profit/(loss) after tax           (5,848,203)     (4,530,596)      (4,762,294)      (3,436,308)      (1,316,064)
Working capital                     (10,390,105)     (22,203,524)      (2,808,322)        (938,914)        (113,731)
Closing share price (cents)                    0.5              0.7             1.6              1.3              3.4
% change in closing share price          (28.6%)          (56.3%)           23.1%           (61.8%)          (26.1%)



                                                         10
                                              FIRESTONE ENERGY LIMITED
                                                 Annual Report 30 June 2013

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (Continued)

Directors’ and Key Management Personnel Remuneration
Details of the nature and amount of each element of remuneration of the Key Management Personnel of
Firestone Energy Limited are set out in the following tables. Each person was in office for the full year unless
otherwise specified.
                                               Short term       Post       Share-
                                                                                      Termination
                                               employee      employment    based
                                                                                       payments
                                                benefits       benefits   payments
 Directors                                     Salary/Fees     Super                                     Total
 Specified Directors
 Non-Executive
                      1
 T. Tebeila                            2013      60,000             -        -              -            60,000
                                       2012      35,000             -        -              -            35,000
 P. Kasolo                             2013      50,000             -        -              -            50,000
                                       2012      50,002             -        -              -            50,002
              2
 D. Knox                               2013     374,062             -      77,600           -           451,662
                                       2012     236,250             -        -              -           236,250
                               3
 B. McMaster                           2013         -               -        -              -               -
                                       2012         -               -        -              -               -
 B. Mphahlele                          2013      50,000             -        -              -            50,000
                                       2012      37,501             -        -              -            37,501
                                   4
 K. Terblanche                         2013      48,611             -        -              -            48,611
                                       2012      37,500             -        -              -            37,500
                      5
 D. Perkins                            2013      47,779             -        -              -            47,779
                                       2012      54,167             -        -              -            54,167
                  6
 J. James                              2013      16,667             -        -              -            16,667
                                       2012         -               -        -              -               -
                  7
 O. Zohar                              2013      17,671             -        -              -            17,671
                                       2012         -               -        -              -               -
              8
 D. Hillier                            2013       3,288             -        -              -            3,288
                                       2012         -               -        -              -               -
                          9
 C. McIntyre                           2013         -               -        -              -               -
                                       2012      25,771           2,319      -              -            28,090
              10
 S. Nkosi                              2013         -               -        -              -               -
                                       2012      20,835             -        -              -            20,835
 Executives
              11
 S. Miller                             2013         -               -        -              -               -
                                       2012         -               -        -              -               -
                          12
 A. Matthee                            2013     203,261             -        -              -           203,261
                                       2012         -               -        -              -               -
 Total Key Management                  2013     871,339             -      77,600           -           948,939
 Personnel                             2012     497,026           2,319       -             -           499,345




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                                   FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (Continued)

 1.     Resigned 7 January 2011, reappointed 30                8.    Appointed 5 February 2013, resigned 1 March
        November 2011.                                               2013.
 2.     Appointed CEO 20 September 2011. Resigned              9.    Resigned 23 January 2012.
        as CEO and appointed Non-Executive Director            10.   Appointed 3 November 2010, resigned 25
        on 14 June 2013.                                             November 2011. Executive Director until 6
 3.     Appointed 14 June 2013.                                      October 2011.
 4.     Resigned 20 June 2013.                                 11.   Appointed CEO and Executive Director 14 June
 5.     Resigned 14 June 2013.                                       2013.
 6.     Appointed 5 February 2013, resigned 13 June            12.   Appointed CFO on 23 August 2012.
        2013.
 7.     Appointed 5 February 2013, resigned 13 June
        2013.

Use of Remuneration Consultants

The Company did not use remuneration consultants during the year.

Voting and Comments Made at the Company’s 2012 Annual General Meeting

The Company received only 1% of “against” votes to its remuneration report on the 2012 year. The Company did
not receive any specific feedback at the AGM or during the year on its remuneration policies.

This is the end of the audited Remuneration Report.

LIKELY DEVELOPMENTS

The DFS is expected to be completed in September 2013. It is anticipated that mining activities will commence
during first quarter 2014.

ENVIRONMENTAL REGULATION

The consolidated entity has done everything to the best of its knowledge to comply with all applicable legislation
and has no reason to believe that they did not comply with any of the legislative requirements during the year
ended 30 June 2013 and subsequent to year end.




                                                       12
                                       FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

DIRECTORS’ REPORT

DIRECTORS’INTERESTS

The following relevant interests in shares and options of Firestone were held directly or indirectly by Directors as
at the date of this report:

 Director                                 Ordinary shares              Unlisted options
 Tim Tebeila *                                     572,645,091                                -
 David Knox                                                     -                 40,000,000

* Balance includes amounts nominally held through directorship of a related entity, Sekoko Coal (Pty) Ltd, whereby Sekoko Coal
  has 572,645,091 shares in Firestone Energy Limited at 30 June 2013.

No other Directors held shares or options as at the date of this report.

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

Indemnification

The Company has agreed to indemnify the directors and officers of the Company against all liabilities to another
person (other than the Company or related body corporate) that may arise from their position as directors of the
Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith.
During the financial year the Company paid a premium in respect of a contract insuring the directors and officers
of the company and its controlled entities against any liability incurred in the course of their duties to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability
and the amount of the premium.

NON-AUDIT SERVICES

During the year the consolidated group paid $22,351 (2012: $54,740) to a related entity of the auditor for non-
audit services provided as outlined in Note 19 to the financial statements. The Directors are satisfied that the
provision of non-audit services is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.

The Directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit
services have been reviewed to ensure that they do not impact the integrity and objectivity of the auditor and none
of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has made an application to the court under Section 237 of the Corporations Act 2001 for leave to bring
court proceedings on behalf of the Company, or to intervene in any court proceedings to which Firestone is a
party, for the purpose of taking responsibility on behalf of Firestone for all or part of those proceedings.

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration, under section 307C of the Corporations Act 2001, is included on the next
page and forms part of this directors’ report.




                                                             13
                                     FIRESTONE ENERGY LIMITED
                                           Annual Report 30 June 2013

DIRECTORS’ REPORT

SIGNIFICANT EVENTS AFTER REPORTING DATE

On 30 August 2013, The Waterberg Coal Company Limited agreed to lend the Company up to $3 million, to be
used for the Company’s project financing obligations in relation to the Waterberg Coal Project. The loan is interest
free, unsecured and is to be repaid within 10 days of the Company making full repayment of the loan from Sekoko
(refer to Note 12).

With the exception to the above, there have been no other matters or circumstances that have arisen since 30
June 2013 that have significantly affected, or may significantly affect:

     (i) The consolidated entity’s operations in future financial years, or
     (ii) The results of those operations in future financial years, or
     (i) The consolidated entity’s state of affairs in future financial years.




___________________

Tim Tebeila
Chairman
27 September 2013




                                                           14
   Tel: +8 6382 4600                               38 Station Street
   Fax: +8 6382 4601                               Subiaco, WA 6008
   www.bdo.com.au                                  PO Box 700 West Perth WA 6872
                                                   Australia




  DECLARATION OF INDEPENDENCE BY WAYNE BASFORD TO THE DIRECTORS OF FIRESTONE
  ENERGY LIMITED
  As lead auditor of Firestone Energy Limited for the year ended 30 June 2013, I declare that,
  to the best of my knowledge and belief, there have been no contraventions of:
  •      the auditor independence requirements of the Corporations Act 2001 in relation to the
         audit; and
  •      any applicable code of professional conduct in relation to the audit.


  This declaration is in respect of Firestone Energy Limited and the entities it controlled during
  the period.




  WAYNE BASFORD
  Director


  BDO Audit (WA) Pty Ltd
  Perth, Western Australia
  27 September 2013




BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which 
are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. 
BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. 
Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or
omissions of financial services licensees) in each State or Territory other than Tasmania.




                                                                            15
                                     FIRESTONE ENERGY LIMITED
                                          Annual Report 30 June 2013

 CORPORATE GOVERNANCE STATEMENT

 Firestone has made it a priority to adopt systems of control and accountability as the basis for the administration
 of corporate governance. Some of these policies and procedures are summarised in this statement. To the extent
 that they are applicable, and given its circumstances, Firestone adopts the Eight Essential Corporate Governance
 Principles and Best Practice Recommendations ('Recommendations') published by the Corporate Governance
 Council of the ASX.

 Where Firestone's corporate governance practices follow a recommendation, the Board has made appropriate
 statements reporting on the adoption of the recommendation. Where, after due consideration, Firestone's
 corporate governance practices depart from a recommendation, the Board has offered full disclosure and
 reasoning for the adoption of its own practice, in compliance with the "if not, why not" regime.

 As Firestone's activities develop in size, nature and scope, the size of the Board and the implementation of
 additional corporate governance structures will be given further consideration.

 DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES

 Compliance with the ASX Principles and Recommendations

 The table below is provided to facilitate your understanding of Firestone's compliance with the ASX Corporate
 Governance Principles and Recommendations.

Recommendation    ASX Principles and         Further            Recommendation    ASX Principles and         Further
                  Recommendations          information                            Recommendations          information

     1.1                   X            Refer (a) below              4.3                  n/a             n/a

     1.2                   X            Refer (a) below              4.4                  n/a             n/a

     1.3                   X            Refer (a) below              5.1                   X              Refer (g)
                                                                                                          below
     2.1                   X            Refer (b) below              5.2                  n/a             n/a

     2.2                   X            Refer (b) below              6.1                   X              Refer (h)
                                                                                                          below
     2.3                   ?            Refer (b) below              6.2                  n/a             n/a

     2.4                                                             7.1                                  Refer (i)
                           X            Refer (c) below                                    X
                                                                                                          below
     2.5                   X            Refer (d) below              7.2                  n/a             n/a
                                                                                                          Refer (j)
     2.6                   X            Refer (e) below              7.3                   ?
                                                                                                          below
     3.1                   X             Refer (f) below             7.4                  n/a             n/a
                                                                                                          Refer (k)
     3.2                   ?             Refer (f) below             8.1                   X
                                                                                                          below
     3.3                                                             8.2                                  Refer (k)
                           X             Refer (f) below                                   X
                                                                                                          below
     3.4                   X             Refer (f) below             8.3                   X              Refer (k)
                                                                                                          below
     3.5                   X             Refer (f) below             8.4                  n/a             n/a

     4.1                   X            Refer (c) below

     4.2                  n/a                  n/a




                                                           16
                                    FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

(a)      Principle 1 – Lay solid foundations for management and oversight

Recommendation 1.1: Companies should establish the functions reserved to the board and those delegated to
senior executives and disclose those functions.

Notification of departure from Recommendation

Firestone has not formally disclosed the functions reserved to the Board and those delegated to senior
executives.

Explanation for departure from Recommendation

The Board recognises the importance of distinguishing between the respective roles and responsibilities of the
Board and management. The Board has established an informal framework for Firestone's management and the
roles and responsibilities of the Board and management. Due to the small size of the Board and of Firestone, the
Board do not think that it is necessary to formally document the roles of Board and management as it believes
that these roles are being carried out in practice and are clearly understood by all members of the Board and
management.

The appointments of Non-Executive Directors are formalised in accordance with the regulatory requirements and
Firestone’s constitution.

Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior
executives.

Notification of departure from Recommendation

Firestone has not established formal processes for evaluating the performance of senior executives.

Explanation for departure from Recommendation

The Board is responsible for the strategic direction of Firestone, establishing goals for senior executives and
monitoring the achievement of these goals, monitoring the overall corporate governance of Firestone and
ensuring that shareholder value is increased. Due to the size of Firestone and the stage of the company’s
development, the Board does not consider it is necessary to establish formal processes for evaluating the
performance of senior executives.

(b)      Principle 2 – Structure of the Board to add value

Recommendation 2.1: A majority of the board should be independent directors.


Recommendation 2.2: The chair should be an independent director.

Notification of departure from Recommendations

The Firestone Board does not currently have a majority of independent directors and the Chairman is not
considered independent.

Explanation for departure from Recommendations

The Board’s composition changed during the year. Consistent with the size of Firestone and its activities, the
Board currently comprises six (6) Directors. The Board considers that Mr Ben Mphahlele and Dr Pius Kasolo meet
the criteria set in Principle 2.1 by the Corporate Governance Council to be considered to be independent
Directors.

Both Dr Kasolo and Mr Mphahlele have no material business or contractual relationship with Firestone, other than
as a Director, and no conflicts of interest which could interfere with the exercise of independent judgement.
Accordingly, they are considered to be independent.

The Board’s policy is that the majority of Directors shall be independent, Non-Executive Directors. Due to the size
of Firestone and the stage of Firestone’s development, the Board does not consider it can justify the appointment
of more independent Non-Executive Directors, and therefore, the composition of the Board does not currently
conform to the best practice recommendations of the ASX Corporate Governance Council.

                                                       17
                                      FIRESTONE ENERGY LIMITED
                                           Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

Recommendation 2.3: The roles of chair and chief executive officer should not be exercised by the same
individual.

The Chairman of the Firestone Energy Limited is Mr Tim Tebeila and the CEO is Mr Stephen Miller.


(c)      Principle 2 – Structure of the Board to add value & Principle 4 – Safeguard integrity in financial
             reporting


Recommendation 2.4: The board should establish a nomination committee.


Recommendation 4.1: The board should establish an audit committee.

Recommendation 4.2: The audit committee should be structured so that it:
?     consists only of non-executive directors
?     consists of a majority of independent directors
?     is chaired by an independent chair, who is not chair of the board
?     has at least three members.

Recommendation 4.3: The audit committee should have a formal charter.

Notification of departure from Recommendations

The Board has not established nomination and audit committees.

Explanation for departure from Recommendations

The Board considers that Firestone is not currently of a size, or its affairs of such complexity, that the formation of
separate or special committees is justified at this time. The Board as a whole is able to address the governance
aspects of the full scope of Firestone's activities and ensure that it adheres to appropriate ethical standards.

In particular, the Board as a whole considers those matters that would usually be the responsibility of an audit
committee and a nomination committee. The Board considers that, at this stage, no efficiencies or other benefits
would be gained by establishing a separate audit committee or a separate nomination committee.

(d)      Principle 2 – Structure of the Board to add value

Recommendation 2.5: Companies should disclose the process for evaluating the performance of the board, its
committees and individual directors.

Notification of departure from Recommendation

Firestone does not have in place a formal process for evaluation of the Board, its committees, individual Directors
and key executives.

Explanation for departure from Recommendations

Evaluation of the Board is carried out on a continuing and informal basis. Firestone will put a formal process in
place as and when the level of operations of Firestone justifies this.

(e)      Principle 2 – Structure of the Board to add value

Recommendation 2.6: Companies should provide the information indicated in the Guide to Reporting on
Principle 2.

Skills, Experience, Expertise and term of office of each Director
A profile of each Director containing their skills, experience, expertise and term of office is set out in the Directors'
Report.

Identification of Independent Directors
The independent Directors during the financial year ended 30 June 2013 are disclosed in (b) above.

                                                          18
                                     FIRESTONE ENERGY LIMITED
                                          Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

The Board has considered the relationships listed in Box 2.1 of the ASX Corporate Governance Principles and
Recommendations when making determinations regarding the independence of Directors.

Board access to independent professional advice
To assist Directors with independent judgement, it is the Board's policy that if a Director considers it necessary to
obtain independent professional advice to properly discharge the responsibility of their office as a Director then,
provided the Director first obtains approval for incurring such expense from the Chair, Firestone will pay the
reasonable expenses associated with obtaining such advice.

Selection of Directors
The Board considers the balance of independent Directors on the Board as well as the skills and qualifications of
potential candidates that will best enhance the Board's effectiveness.

Recommendations of candidates for new Directors are made by the Directors for consideration by the Board as a
whole. If it is necessary to appoint a new Director to fill a vacancy on the Board or to complement the existing
Board, a wide potential base of possible candidates is considered. If a candidate is recommended by a director,
the Board assesses that proposed new director against a range of criteria including background, experience,
professional skills, personal qualities, the potential for the candidate’s skills to augment the existing Board and the
candidate’s availability to commit to the Board’s activities. If these criteria are met and the Board appoints the
candidate as a director, that director must retire at the next following General Meeting of Shareholders and will be
eligible for election by shareholders at that General Meeting.

Nomination Matters
The full Board sits in its capacity as a Nomination Committee. The functions that would normally be carried out by
the nominations committee are currently performed by the full Board

Performance Evaluation
Performance evaluations for the Board and individual Directors occurred on an informal basis during the financial
year ended 30 June 2013.

Reappointment of Directors
Each Director other than the Managing Director (if appointed) must retire from office no later than the longer of the
third annual general meeting of the company or 3 years following that Director’s last election or appointment. At
each annual general meeting a minimum of one Director or a third of the total number of Directors must resign. A
Director who retires at an annual general meeting is eligible for re-election at that meeting. Reappointment of
Directors is not automatic.

(f)      Principle 3 – Promote ethical and responsible decision making

Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of
the code as to:
        the practices necessary to maintain confidence in the company’s integrity
        the practices necessary to take into account their legal obligations and the reasonable expectations of
         their stakeholders
        the responsibility and accountability of individuals for reporting and investigating reports of unethical
         practices.

Notification of departure from Recommendation

Firestone has not established a formal code of conduct.

Explanation for departure from Recommendation

The Board considers that its business practices, as determined by the Board and key executives, are the
equivalent of a code of conduct.

Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or a
summary of that policy. The policy should include requirements for the board to establish measurable objectives
for achieving gender diversity for the board to assess annually both the objectives and progress in achieving
them.

Recommendation 3.3: Companies should disclose in each annual report the measurable objectives for achieving
gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.

Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees in
the whole organisation, women in senior executive positions and women on the board.
                                                         19
                                     FIRESTONE ENERGY LIMITED
                                           Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

The Company and all its related bodies corporate have established a Diversity Policy.

The Company recognises the benefits arising from employee and Board diversity, including a broader pool of high
quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from
all available talent.

Diversity includes, but is not limited to, gender, age, ethnicity, cultural background and the persons skill set.

To the extent practicable, the Company will address the recommendations and guidance provided in the ASX
Corporate Governance Council's Corporate Governance Principles and Recommendations.

The Diversity Policy does not form part of an employee's contract of employment with The Company, nor gives
rise to contractual obligations. However, to the extent that the Diversity Policy requires an employee to do or
refrain from doing something and at all times subject to legal obligations, the Diversity Policy forms a direction of
the Company with which an employee is expected to comply.

OBJECTIVES

The Diversity Policy provides a framework for the Company to achieve:

    a diverse and skilled workforce, leading to continuous improvement in service delivery and achievement of
     corporate goals;
    a workplace culture characterised by inclusive practices and behaviours for the benefit of all staff;
    improved employment and career development opportunities for women;
    a work environment that values and utilises the contributions of employees with diverse backgrounds,
     experiences and perspectives through improved awareness of the benefits of workforce diversity and
     successful management of diversity; and
    awareness in all staff of their rights and responsibilities with regards to fairness, equity and respect for all
     aspects of diversity.

The Diversity Policy does not impose on the Company, its directors, officers, agents or employee any obligation to
engage in, or justification for engaging in, any conduct which is illegal or contrary to any anti-discrimination or
equal employment opportunity legislation or laws in any State or Territory of Australia or of any foreign jurisdiction.

RESPONSIBILITIES

The Board's commitment

The Board is committed to workplace diversity, with a particular focus on supporting the representation of women
at the senior level of the Company and on the Board.

The Board is responsible for developing measurable objectives and strategies to meet the Objectives of the
Diversity Policy (Measurable Objectives) and monitoring the progress of the Measurable Objectives through the
monitoring, evaluation and reporting mechanisms listed below.

The Board may also set Measurable Objectives for achieving gender diversity and monitor their achievement.

The Board will conduct all Board appointment processes in a manner that promotes gender diversity, including
establishing a structured approach for identifying a pool of candidates, using external experts where necessary.

Strategies

The Company's diversity strategies include:

      recruiting from a diverse pool of candidates for all positions, including senior management and the Board;
      reviewing succession plans to ensure an appropriate focus on diversity;
      identifying specific factors to take account of in recruitment and selection processes to encourage
       diversity;
      developing programs to develop a broader pool of skilled and experienced senior management and Board
       candidates, including, workplace development programs, mentoring programs and targeted training and
       development;
      developing a culture which takes account of domestic responsibilities of employees; and
      any other strategies the Board develops from time to time.


                                                          20
                                    FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

MONITORING AND EVALUATION

The Chairman will monitor the scope and currency of this policy.

The Company is responsible for implementing, monitoring and reporting on the Measurable Objectives once they
are set.

Measurable Objectives if set by the Board will be included in the annual key performance indicators for the Chief
Executive Officer / Managing Director and senior executives.

In addition, the Board will review progress against the Objectives (if set) as a key performance indicator in its
annual performance assessment.

REPORTING

The Board may include in the Annual Report each year:

      the Measurable Objectives, if any, set by the Board;
      progress against the Objectives; and
      the proportion of women employees in the whole organisation, at senior management level and at Board
       level.

Explanation for departure from Recommendations

While the Company has adopted a diversity policy as mentioned above, the Board do not consider it appropriate
to set measurable objectives at this stage of the Company’s development. The Board will continue to review the
development of Firestone and will adopt measurable objectives at a more appropriate time.

(g)      Principle 5 – Make timely and balanced disclosure

Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX
Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance
and disclose those policies or a summary of those policies.

Notification of departure from Recommendations

Firestone has not established written policies and procedures designed to ensure compliance with ASX Listing
Rule disclosure requirements and accountability for compliance.

Explanation for departure from Recommendations

The Directors have a long history of involvement with public listed companies and through the support of
professional staff, are kept familiar with the disclosure requirements of the ASX listing rules.

Firestone has in place informal procedures that it believes are sufficient for ensuring compliance with ASX Listing
Rule disclosure requirements and accountability for compliance. The Board has nominated the Chief Executive
Officer and the Company Secretary as being responsible for all matters relating to disclosure.

(h)      Principle 6 – Respect the rights of shareholders

Recommendation 6.1: Companies should design a communications policy for promoting effective
communication with shareholders and encouraging their participation at general meetings and disclose their
policy or a summary of that policy.

Notification of departure from Recommendations

Firestone has not established a formal shareholder communication strategy.




                                                        21
                                     FIRESTONE ENERGY LIMITED
                                          Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

Explanation for departure from Recommendations

While Firestone has not established a formal shareholder communication strategy, it actively communicates with
its shareholders in order to identify their expectations and actively promotes shareholder involvement in Firestone.
Firestone achieves this by posting on its website copies of all information lodged with the ASX. Shareholders with
internet access are encouraged to provide their email addresses in order to receive electronic copies of
information distributed by Firestone. Alternatively, hard copies of information distributed by Firestone are available
on request.

(i)      Principle 7 – Recognise and manage risk

Recommendation 7.1: Companies should establish policies for the oversight and management of material
business risks and disclose a summary of those policies.


Recommendation 7.2: The board should require management to design and implement the risk management
and internal control system to manage the company's material business risks and report to it on whether those
risks are being managed effectively. The board should disclose that management has reported to it as to the
effectiveness of the company's management of its material business risks.

Notification of departure from Recommendations

Firestone has an informal risk oversight and management policy and internal compliance and control system.

Explanation for departure from Recommendations

The Board does not currently have formal procedures in place but is aware of the various risks that affect
Firestone and its particular business. As Firestone develops, the Board will develop appropriate procedures to
deal with risk oversight and management and internal compliance, taking into account the size of Firestone and
the stage of development of its projects.

(j)      Principle 7 - Recognise and manage risk

Recommendation 7.3: The board should disclose whether it has received assurance from the chief executive
officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance
with section 295A of the Corporations Act is founded on a sound system of risk management and internal control
and that the system is operating effectively in all material respects in relation to financial reporting risks.

The CEO, Mr Stephen Miller, and the Chief Financial Officer, Ms Amanda Matthee, have provided a declaration to
the Board in accordance with section 295A of the Corporations Act and have assured the Board that such
declaration is founded on a sound system of risk management and internal control and that the system is
operating effectively in all material respects in relation to financial reporting risks.

(k)      Principle 8 – Remunerate fairly and responsibly

Recommendation 8.1: The board should establish a remuneration committee.

Recommendation 8.2: The remuneration committee should be structured so that it:
     consists of a majority of independent directors
     is chaired by an independent chair
     has at least three members.

Recommendation 8.3: Companies should clearly distinguish the structure of non-executive directors’
remuneration from that of executive directors and senior executives.

Notification of departure from Recommendations

Firestone does not have a formal remuneration policy and has not established a separate remuneration
committee.




                                                         22
                                     FIRESTONE ENERGY LIMITED
                                         Annual Report 30 June 2013

CORPORATE GOVERNANCE STATEMENT (Continued)

Explanation for departure from Recommendations

The current remuneration of the Directors is disclosed in the Directors’ Report. Non-executive Directors receive a
fixed fee for their services.

Subject to shareholder approval, the issue of options or shares to non-executive Directors may be an appropriate
method of providing sufficient incentive and reward while maintaining cash reserves.

Due to Firestone's early stage of development and small size, it does not consider that a separate remuneration
committee would add any efficiency to the process of determining the levels of remuneration for the Directors and
key executives. The Board believes it is more appropriate to set aside time at specified Board meetings each year
to specifically address matters that would ordinarily fall to a remuneration committee. In addition, all matters of
remuneration will continue to be in accordance with regulatory requirements, especially in respect of related party
transactions, and none of the Directors will participate in any deliberations regarding their own remuneration or
related issues.

(l)      Securities trading policy

Firestone adopted a Share Trading policy in December 2010. The policy summarises the law relating to insider
trading and sets out Firestone's policy on Directors, officers, employees and consultants of the Group dealing in
securities of Firestone.

The policy is provided to all Directors and employees of the Group and compliance with it is reviewed on an
ongoing basis in accordance with Firestone’s risk management systems.




                                                       23
                                   FIRESTONE ENERGY LIMITED
                                        Annual Report 30 June 2013


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013

                                                                                     Consolidated

                                                              Note              2013                  2012
                                                                                  $                    $

Revenue                                                        2(a)                6,893              31,141
Other income                                                   2(b)               24,972              25,212

Administration expenses                                                        (765,809)           (308,365)
Compliance and regulatory expenses                                             (270,629)           (143,412)
Directors’ fees                                                                (294,015)           (263,095)
Employee and consultant expenses                                               (599,910)           (339,658)
Finance expenses                                               2(c)          (3,775,315)         (3,078,172)
Legal and professional fees                                                    (835,853)           (337,067)
Rent expenses                                                                   (25,300)            (29,900)
Travel and accommodation                                                       (149,693)            (87,280)


Loss before income tax expense from continuing
                                                                             (6,684,659)         (4,530,596)
operations
Income tax benefit                                              3               836,456                       -
Loss after income tax for the year                                           (5,848,203)         (4,530,596)

Other comprehensive income for the year
Items that may be reclassified subsequently to profit or
loss
Movement in foreign currency translation reserve                             (5,001,988)        (11,613,574)

Total comprehensive loss for the year, net of tax                           (10,850,191)        (16,144,170)


Loss per share for the year attributable to the
ordinary equity holders of the Company
Basic and diluted loss per share (cents)                        4                  (0.19)              (0.15)


 For JSE requirements, the Headline Earnings per Share (“HEPS”) has been calculated to be the equivalent of
 the basic and diluted loss per share as displayed above.




The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
                                         with the accompanying notes.




                                                       24
                                  FIRESTONE ENERGY LIMITED
                                    Annual Report 30 June 2013


CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2013

                                                                                     Consolidated
                                                              Note              2013               2012
                                                                                  $                 $
CURRENT ASSETS
Cash and cash equivalents                                      6(a)              397,940          169,475
Trade and other receivables                                     7                248,769          163,330
Other assets                                                    8                      -          112,250
Total Current Assets                                                             646,709          445,055

 NON-CURRENT ASSETS
Receivables                                                      7             1,564,396          849,475
Interest in joint venture asset                                  9            77,109,220       76,735,130
Property, plant & equipment                                     10             4,298,379        4,662,712
Total Non-Current Assets                                                      82,971,995       82,247,317

TOTAL ASSETS                                                                  83,618,704       82,692,372

CURRENT LIABILITIES
Trade and other payables                                        11             2,900,315        2,019,312
Borrowings                                                      12             8,198,499       20,629,267
Total Current Liabilities                                                     11,098,814       22,648,579

NON-CURRENT LIABILITIES
Borrowings                                                      12            22,988,316         5,330,870
Total Non-Current Liabilities                                                 22,988,316         5,330,870

TOTAL LIABILITIES                                                             34,087,130       27,979,449

NET ASSETS                                                                    49,531,574       54,712,923

EQUITY
Issued capital                                                  13            79,553,721        76,380,048
Reserves                                                        14          (10,128,682)       (7,621,863)
Accumulated losses                                                          (19,893,465)      (14,045,262)
TOTAL EQUITY                                                                  49,531,574        54,712,923




     The above consolidated balance sheet should be read in conjunction with the accompanying notes.




                                                 25
                                    FIRESTONE ENERGY LIMITED
                                        Annual Report 30 June 2013


CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013

                                                                                      Consolidated
                                                                                  2013               2012
                                                                Note                $                  $


Cash Flows from Operating Activities
Payments to suppliers and employees                                             (2,370,879)        (1,301,005)
Interest received                                                                     6,893             31,141
Interest paid                                                                       (1,105)          (202,500)
Net cash used in operating activities                           6(b)            (2,365,091)        (1,472,364)


Cash Flows from Investing Activities
Payments to acquire plant and equipment                                             (2,733)          (103,575)
Project expenditure – joint ventures                                            (2,886,867)        (2,473,651)
Net cash used in investing activities                                           (2,889,600)        (2,577,226)


Cash Flows from Financing Activities
Proceeds from issue of shares, net of issue costs                                        -           1,966,961
Proceeds from borrowings, net of transaction costs                               5,483,659           1,790,433
Repayment of borrowings                                                                  -         (1,430,160)
Net cash provided by financing activities                                        5,483,659           2,327,234


Net decrease in cash held                                                          228,968         (1,722,356)
Cash at the beginning of the financial year                                        169,475           1,892,188
Effect of exchange rate changes on cash held in foreign
                                                                                      (503)              (357)
currencies
Cash at the end of the financial year                           6(a)               397,940            169,475




   The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.




                                                      26
                                                               FIRESTONE ENERGY LIMITED
                                                                    Annual Report 30 June 2013


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013

                                                                                                                       Foreign
                                                                               Share- based                           currency
                                                             Accumulated         payment          Convertible        translation
                                            Issued capital      losses           reserve          note reserve         reserve           Total

Balance at 1 July 2012                         76,380,048     (14,045,262)         4,193,895                     -   (11,815,758)       54,712,923
Total comprehensive income for the
2013 year
Loss for the year                                        -     (5,848,203)                    -                  -                 -    (5,848,203)

Other comprehensive income
Foreign currency translation                             -                 -                  -                  -     (5,001,988)      (5,001,988)
Total comprehensive loss for the year                    -     (5,848,203)                    -                  -     (5,001,988)     (10,850,191)


Transactions with owners in their
capacity as owners:
Issue of shares in payment of interest          1,716,667                  -                  -                  -                 -     1,716,667
Issue of shares in lieu of loan repayment       1,457,006                  -                  -                  -                 -     1,457,006
Issue of new convertible notes net of tax                -                 -                  -       2,073,819                    -     2,073,819
Options issued                                           -                 -        533,600                      -                 -       533,600
Share-based payment reversed for options
                                                         -                 -       (112,250)                                       -     (112,250)
not issued                                                                                                       -

Balance at 30 June 2013                        79,553,721     (19,893,465)         4,615,245          2,073,819      (16,817,746)       49,531,574




                                                                                  27
                                                                        FIRESTONE ENERGY LIMITED
                                                                               Annual Report 30 June 2013


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013


                                                                                                                              Foreign
                                                                                       Share-based                           currency
                                                                     Accumulated        payment          Convertible        translation
                                                   Issued capital       losses           reserve         note reserve         reserve            Total

                                                          $                $                 $                 $                 $                 $

Balance at 1 July 2011                                 73,135,309       (9,514,666)         4,081,645                   -       (202,184)       67,500,104
Total comprehensive income for the
2012 year
Loss for the year                                                -      (4,530,596)                  -                  -                 -     (4,530,596)

Other comprehensive income
Foreign currency translation                                     -                 -                 -                  -    (11,613,574)      (11,613,574)
Total comprehensive loss for the year                            -      (4,530,596)                  -                  -    (11,613,574)      (16,144,170)


Transactions with owners in their
capacity as owners:
Issue of shares, net of transaction costs               1,966,961                  -                 -                  -                 -       1,966,961
Issue of shares in payment of interest                    977,778                  -                 -                  -                 -        977,778
Conversion of convertible notes                           300,000                  -                 -                  -                 -        300,000
Share-based payment for options to be                                                                                   -
                                                                                   -          112,250                                     -        112,250
issued

Balance at 30 June 2012                                76,380,048      (14,045,262)         4,193,895                   -    (11,815,758)       54,712,923


                                         The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.




                                                                                           28
                                        FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

1.        STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a)       Statement of Compliance

The financial statements of Firestone Energy Limited for the year ended 30 June 2013 were authorised for issue in
accordance with a resolution of the Directors on 27 September 2013 and covers the consolidated entity consisting of
Firestone Energy Limited (“the Company”) and its subsidiaries (“the Group”) as required by the Corporations Act 2001.

The financial statements are presented in the company’s functional currency, Australian dollars. Firestone Energy
Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange and the Johannesburg Stock Exchange.

(b)       Basis of Preparation

The financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (including Australian Interpretations) issued by the Australian Accounting Standards
Board and the Corporations Act 2001.

The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board. The financial statements have also been prepared on a historical cost basis.
The accounting policies have been consistently applied, unless otherwise stated.

New and amended standards adopted by the Group

The following new standards and amendments to standards are mandatory for the first time for the financial year
beginning 1 July 2012:

         AASB 2011-9: Amendments to Australian Accounting Standards – Presentation of Other Comprehensive
          Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]

          This amendment introduces new terminology for the statement of profit or loss and other comprehensive
          income and income statement. Under the amendments to AASB 101, the statement of profit or loss and other
          comprehensive income is renamed as a statement of profit or loss and other comprehensive income and the
          income statement is renamed as a statement of profit or loss. The amendments to AASB 101 retain the option
          to present profit or loss and other comprehensive income in either a single statement or in two separate but
          consecutive statements. However, the amendments to AASB 101 require items of other comprehensive
          income to be grouped into two categories in the other comprehensive income section: (a) items that will not be
          reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss
          when specific conditions are met. Income tax on items of other comprehensive income is required to be
          allocated on the same basis. The amendments do not change the option to present items of other
          comprehensive income either before tax or net of tax. The amendments have been applied retrospectively,
          and hence the presentation of items of other comprehensive income has been modified to reflect the changes.

         AASB 2010-8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying
          Assets [AASB 12]

Except as noted, the adoption of these standards did not have any impact on the current period or any prior period and
is not likely to affect future periods.

New accounting standards and interpretations issued but not yet effective

New accounting standards and interpretations that have recently been issued or amended but are not yet effective and
have not been adopted by the Group for the reporting period ending 30 June 2013 are outlined in the following table.




                                                            29
                                        FIRESTONE ENERGY LIMITED
                                              Annual Report 30 June 2013

   1.     STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

   (b)    Basis of Preparation (continued)

   New and amended standards adopted by the Group (continued)

Reference      Title                  Summary                                                       Application Application
                                                                                                      date of     date for
                                                                                                     standard      Group
AASB 9         Financial              Amends the requirements for the classification and            1 January   1 July 2015
               Instruments            measurement of financial assets. The available-for-           2015
                                      sale and held-to-maturity categories of financial
                                      assets in AASB 139 have been eliminated.

                                      AASB 9 requires that gains and losses on financial
                                      liabilities measured at fair value are recognised in
                                      profit or loss, except that the effect of changes in the
                                      liability’s credit risk is recognised in other
                                      comprehensive income.

AASB 10        Consolidated           AASB 10 establishes a single ‘control model’ that             1 January   1 July 2013
               Financial Statements   applies to all entities, whereby all of the following         2013
                                      conditions must be present:

                                          ?    Power over the investee (whether or not
                                               power used in practice)
                                          ?    Exposure, or rights, to variable returns from
                                               investee
                                          ?    Ability to use power over investee to affect
                                               the entity’s returns from the investee

                                      It introduces the concept of ‘defacto’ control for
                                      entities with less than 50% ownership interest in an
                                      entity, but which have a large shareholding compared
                                      to other shareholders.

                                      This standard will have no impact on the Company
                                      because the Company does not have ‘defacto’
                                      control of any entities with less than 50% ownership
                                      interest.

AASB 11        Joint Arrangements     Joint arrangements will be classified as either ‘joint        1 January   1 July 2013
                                      operations’ (where parties with joint control have            2013
                                      rights to assets and obligations for liabilities) or ‘joint
                                      ventures’ (where parties with joint control have rights
                                      to the net assets of the arrangement).

                                      This standard is not expected to have a significant
                                      impact on the Group’s existing unincorporated joint
                                      venture.

AASB 12        Disclosure of          AASB 12 includes all disclosures relating to an               1 January   1 July 2013
               Interests in Other     entity’s interests in subsidiaries, joint arrangements,       2013
               Entities               associates and structured entities. New disclosures
                                      have been introduced about the judgements made by
                                      management to determine whether control exists,
                                      and to require summarised information about joint
                                      arrangements, associates and structured entities and
                                      subsidiaries with non-controlling interests.




                                                             30
                                            FIRESTONE ENERGY LIMITED
                                                  Annual Report 30 June 2013

     1.          STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

     (b)         Basis of Preparation (continued)

     New and amended standards adopted by the Group (continued)

Reference          Title                  Summary                                                        Application   Application
                                                                                                         date of       date for
                                                                                                         standard      Group
AASB 13            Fair Value             AASB 13 establishes a single framework for                     1 January     1 July 2013
                   Measurement            determining the fair value of assets and liabilities.          2013
                                          AASB 13 does not change when an entity is required
                                          to use fair value, but rather, provides guidance on how
                                          to determine fair value when fair value is required or
                                          permitted. Application of this definition may result in
                                          different fair values being determined for relevant
                                          assets.
                                          AASB 13 also expands the disclosure requirements
                                          for all assets or liabilities carried at fair value. This
                                          includes information about the assumptions made and
                                          the qualitative impact of those assumptions on the fair
                                          value determined.
AASB 119           Employee Benefits      The main change introduced by this standard is to              1 January     1 July 2013
                                          revise the accounting for defined benefit plans. The           2013
                                          amendment removes the options for accounting for
                                          the liability, and reduces that the liabilities arising from
                                          such plans is recognised in full with actuarial gains
                                          and losses being recognised in other comprehensive
                                          income. It also revised the method of calculating the
                                          return on plan assets.
                                          The revised standard changes the definition of short-
                                          term employee benefits. The distinction between
                                          short-term and other long-term employee benefits is
                                          now based on whether the benefits are expected to be
                                          settled wholly within 12 months after the reporting
                                          date.

AASB 2011-4        Amendments to          This amendment deletes from AASB 124 individual                1 July 2013   1 July 2013
                   Australian             key management personnel disclosure requirements
                   Accounting             for disclosing entities that are not companies.
                   Standards to
                   Remove Individual
                   Key Management
                   Personnel
                   Disclosure
                   Requirements
                   [AASB 124]

Interpretation     Stripping Costs in     This interpretation applies to stripping costs incurred        1 January     1 July 2013
20                 the Production         during the production phase of a surface mine.                 2013
                   Phase of a Surface     Production stripping costs are to be capitalised as part
                   Mine                   of an asset, if an entity can demonstrate that it is
                                          probable future economic benefits will be realised, the
                                          costs can be reliably measured and the entity can
                                          identify the component of an ore body for which
                                          access has been improved. This asset is to be called
                                          the “stripping activity asset”.
                                          The stripping activity asset shall be depreciated or
                                          amortised on a systematic basis, over the expected
                                          useful life of the identified component of the ore body
                                          that becomes more accessible as a result of the
                                          stripping activity. The units of production method shall
                                          be applied unless another method is more
                                          appropriate.



                                                                 31
                                           FIRESTONE ENERGY LIMITED
                                                Annual Report 30 June 2013

       1.      STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

       (b)     Basis of Preparation (continued)

       New and amended standards adopted by the Group (continued)

Reference         Title                  Summary                                                       Application    Application
                                                                                                         date of        date for
                                                                                                        standard         Group
AASB 2012-5       Annual                 The items addressed include clarification that items         1 January      1 July 2013
                  Improvements to the    such as spare parts, stand-by or service equipment are       2013
                  IFRS 2009-2011         required to be classified as property, plant and
                  Cycle                  equipment rather than inventory.


IFRS              Mandatory Effective    Entities are no longer required to restate comparatives      1 January      1 July 2015
                  Date of IFRS 9 and     on first time adoption. Instead, additional disclosures on   2015
                  Transition             the effects of transition are required.
                  Disclosures


       Except as noted above, the impact of the adoption of these new and revised standards and interpretations has not
       been determined by the Group.




                                                               32
                                        FIRESTONE ENERGY LIMITED
                                              Annual Report 30 June 2013

1.     STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(b)    Basis of Preparation (continued)

Going Concern

The financial report has been prepared on the going concern basis, which contemplates the continuity of normal
business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The Group has incurred a loss after tax for the year ended 30 June 2013 of $5,786,203 (2012: $4,530,596) and
experienced net cash outflows from operating activities of $2,365,091 (2012: $1,472,364).

Short term funding of up to $2.2 million, which at 30 June 2013 had only been drawn down by $250,000, has been
advanced by BBY Nominees Pty Limited pursuant to a Share Subscription Agreement.

On 30 August 2013, The Waterberg Coal Company Limited agreed to lend the Company up to $3 million, to be used for
the Company’s project financing obligations in relation to the Waterberg Coal Project. The loan is interest free,
unsecured and is to be repaid within 10 days of the Company making full repayment of the loan from Sekoko (refer to
Note 12).

Subject to ongoing support from the joint venture partner and major shareholders, the Directors believe that the Group
will continue as a going concern and pay its debts as and when they fall due.

(c)    Basis of consolidation

The consolidated financial statements comprise the financial statements of Firestone Energy Limited (“the Company”)
and its subsidiaries (“the Group”) as at 30 June each year.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether a group controls another
entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses
and profit and losses resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of the Group. Investments in subsidiaries are accounted
for at cost in the individual financial statements of Firestone Energy Limited.

(d)    Critical accounting judgements and significant estimates

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying
values of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period
in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.

Recoverability of interest in joint venture

The Group considers the interest in the joint venture asset is recoverable based on future coal sales from a developed
coal mine, and has not been impaired on the basis that the underlying asset will be successfully commercialised. This
is dependent on the Group continuing as a going concern as noted above in Note 1(b). Further details on this balance
can be found in Note 9.




                                                            33
                                        FIRESTONE ENERGY LIMITED
                                              Annual Report 30 June 2013

1.       STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(d)      Critical accounting judgements and significant estimates (continued)

Share-based payments

The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at
the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the
most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also
requires making assumptions about the most appropriate inputs to the valuation model, including the expected life of
the share option, volatility and dividend yield. The assumptions and models used for estimating fair value for share-
based payment transactions are disclosed in Note 15.

Income Taxes

Judgement is required in assessing whether deferred tax assets are recognised in the statement of financial position.
Deferred tax assets are recognised only when it is considered more likely than not that they will be recovered, which is
dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable
profits depend on management’s estimates of future cash flows. Judgements are also required about the application of
income tax legislation.

(e)      Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the balance sheet.

(f)      Income tax

The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable or
disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the reporting
date.

Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax base
of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be
recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect
on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability
is settled. Deferred tax is credited in the statement of profit or loss and other comprehensive income except where it
relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available
against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the Company will derive sufficient
future assessable income to enable the benefit to be realised and comply with the conditions or deductibility imposed
by the law.

(g)      Jointly controlled operations and assets

The interest of the Group in unincorporated joint ventures are jointly brought to account by recognising in its financial
statements the assets it controls, the liabilities that it incurs, the expenses it incurs and its share of income that it earns
from the sale of goods or services by the joint venture.




                                                             34
                                       FIRESTONE ENERGY LIMITED
                                            Annual Report 30 June 2013

1.       STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(h)      Investment in joint venture

Investment in an incorporated joint venture entity is accounted for using the equity method of accounting in the
consolidated financial statements.

Under the equity method, the investment in the joint venture is carried in the consolidated balance sheet at cost plus
post-acquisition changes in the Group’s share of net assets of the joint venture.

After application of the equity method, the Group determines whether it is necessary to recognise any additional
impairment loss with respect to the Group’s net investment in the joint venture.

The Group's share of the joint venture post-acquisition profits or losses is recognised in the statement of profit or loss
and other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. When the Group's share of losses in the joint venture equals or exceeds its interest in the
joint venture, including any unsecured long-term receivables and loans, the Group does not recognise further losses,
unless it has incurred obligations or made payments on behalf of the joint venture.

The reporting dates of the joint venture and the Group are identical and the joint venture’s accounting policies conform
to those used by the Group for like transactions and events in similar circumstances

(i)      Mineral exploration and evaluation and development expenditure

The Group has adopted the policy of capitalising the costs of purchasing its mining tenements and all exploration and
evaluation expenditure in relation to its mineral tenements as incurred.

The capitalised exploration and evaluation expenditure relating to a particular area of interest will be transferred to
development expenditure when a decision to develop that area of interest is made.

All projects are subject to detailed review on an annual basis and accumulated costs written off to the extent that they
will not be recoverable in the future.

(j)      Property, plant and equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash
flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have
been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the Group will include the cost of materials, direct labour, borrowing costs
and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in
which they are incurred.

Surface rights refer to ownership of the land that the entity intends to mine, and is separate from a license to tenure
over the land. These assets will be classified as property and carried at cost. The property will be amortised over a life
of mine basis, with amortisation commencing upon production of saleable coal.

Depreciation

The depreciation amount of all fixed assets including building and capitalised lease assets is depreciated on a straight
line basis over their useful lives to the Group commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives
of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset                                   Depreciation Rate

Motor vehicles                                               5 years
Office furniture & equipment                                 4 years
Software                                                     3 years
Leasehold improvements                                       3 years

                                                           35
                                       FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

1.       STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(j)      Property, plant and equipment (continued)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and
losses are included in profit or loss.

(k)      Impairment of assets

At each reporting date, the Group reviews the carrying values of tangible assets and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the
asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the profit or
loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.

(l)      Financial instruments

The Group does not currently undertake any hedging.

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related
contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out
below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are stated at amortised cost using the effective interest rate method. They are included in current
assets, except for those maturities greater than 12 months after the reporting date which are classified as non-current
assets. Loans and receivables are included in trade and other receivables (Note 7). They are measured initially at fair
value and subsequently at amortised cost.

Financial liabilities

Non-derivative financial liabilities are recognised initially at fair value and subsequently at amortised cost, comprising
original debt less principal payments and amortisation.

Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been
impaired. If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost, the loss is
measured as the difference between the assets carrying amount and the present value of estimated future cash flows,
excluding future credit losses that have not been incurred. The cash flows are discounted at the asset’s original
effective interest rate. Any impairment losses are taken to the statement of profit or loss and other comprehensive
income.

Compound financial instruments - Borrowings

Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital
at the option of the holder.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability
that does not have an equity conversion option. The equity component is recognised initially at the difference between
the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly
attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying
amounts.




                                                           36
                                         FIRESTONE ENERGY LIMITED
                                               Annual Report 30 June 2013

1.       STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(l)      Financial instruments (continued)

Compound financial instruments – Borrowings (continued)

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised
cost using the effective interest method. The equity component of a compound financial instrument is not re-measured
subsequent to initial recognition.

Interest, dividends, losses and gains relating to the financial liability are recognised in profit or loss. Distributions to the
equity holders are recognised against equity, net of any tax benefit.

Derivatives

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair
value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in
the fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow
hedges, which is recognised in other comprehensive income.

(m)      Revenue recognition

Revenue from the sale of goods and disposal of other assets is recognised when the Group has passed control of the
goods or other assets to the buyer. Interest revenue is recognised when it is due, on the accruals basis.

(n)      Borrowing costs

Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction
or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the
assets are substantially ready for their intended use or sale. Assets capitalised within AASB 6 have not been
considered to be qualifying assets.

Transaction costs relating to compound financial instruments are offset against the debt/equity on the balance sheet,
and amortised over the life of the convertible notes.

(o)      Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any
loss of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.

(p)      Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged
as expenses on a straight line basis over the lease term.

(q)      Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.




                                                              37
                                        FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

1.       STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(r)      Share-based payment transactions

Equity-settled transactions

The Group may provide benefits to employees (including senior executives) or consultants of the Group in the form of
share-based payments, whereby employees or consultants render services in exchange for shares or rights over
shares in the Company (equity-settled transactions).

The cost of these equity-settled transactions with employees or consultants is measured by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation
using an appropriate option pricing model for options or market price for ordinary shares or the fair value of the services
received.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked
to the price of the shares of Firestone Energy Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (the vesting period).

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings
per share. Refer to Note 13 for a listing of all ordinary shares under option at year-end.

(s)      Employee leave benefits

Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected
to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services
up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid
or payable.

Employee benefits payable later than one year have been measured at the present value of the estimated future cash
outflows to be made for those benefits.

(t)      Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it
is probable that an outflow of economic benefits will results and that outflow can be reliably measured.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the
passage of time is recognized as interest expense.

(u)      Foreign currency translation

Both the functional and presentation currency of Firestone Energy Limited is Australian dollars. Each entity in the
Group determines its own functional currency and items included in the financial statements of each entity are
measured using that functional currency.

Transactions

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
rate of exchange ruling at the reporting date.

All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences
on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken
directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss.




                                                            38
                                        FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

1.       STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued...)

(u)      Foreign currency translation (continued)

Transactions (continued)

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined.

Foreign subsidiaries translation

The functional currency of the foreign operations, Checkered Flag Investments 2 (Pty) Ltd, Lexshell 126 General
Trading (Pty) Ltd and Utafutaji Trading 75 (Pty) Ltd, is South African Rand (ZAR). As at the reporting date the assets
and liabilities of these subsidiaries are translated into the presentation currency of Firestone Energy Limited at the rate
of exchange ruling at the reporting date and their income statements are translated at the weighted average exchange
rate for the year.

Equity accounts are translated at their historical exchange rates. The exchange differences arising on the translation
are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign
operation is recognised in statement of profit or loss and other comprehensive income.

(v)      Issued capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of
new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the
purchase consideration.

(w)      Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.

(x)      Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(y)      Goods and Services Tax (GST) and Value Added Tax (VAT)

Revenues, expenses and assets are recognised net of the amount of associated GST/VAT, unless the GST/VAT
incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of
the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST/VAT receivable or payable. The net amount of
GST/VAT recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
balance sheet.

Cash flows are presented on a gross basis. The GST/VAT components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(z)      Segment reporting

Management has determined that the consolidated group has one reportable segment, being coal exploration in South
Africa. As the company is focused on mineral exploration, the Board monitors the consolidated group based on actual
versus budgeted exploration expenditure incurred by area of interest.

This internal reporting framework is the most relevant to assist the Board (who are the chief operating decision makers)
with making decisions regarding the Group and its ongoing exploration activities, while also taking into consideration
the results of exploration work that has been performed to date.




                                                            39
                                       FIRESTONE ENERGY LIMITED
                                               Annual Report 30 June 2013


2.     REVENUE & EXPENSES
                                                                                      2013               2012
(a)   Revenue                                                                          $                   $

  Interest received                                                                       6,893            31,141
                                                                                          6,893            31,141

(b)   Other income

 Rent income                                                                            22,975             22,841
 Foreign exchange gain                                                                     955              2,094
 Other                                                                                   1,042                277
                                                                                        24,972             25,212

(c)   Finance expenses

 Interest expense                                                                    2,536,137          2,433,857
 Share-based payment expense for options issued to former
 holders of convertible notes (refer to Note 15)                                       456,000                  -
 Non-cash interest on convertible note                                                 319,258                  -
 Amortisation of convertible note transaction costs                                    463,920            644,315
                                                                                     3,775,315          3,078,172

 Included within the statement of profit and loss and other comprehensive income are the following expenses:
 Superannuation expenses                                                                     -              2,319
 Depreciation                                                                           44,288             57,502
 Share-based payment expense for options issued to former CEO
                                                                                        77,600                   -
 (refer to Note 15)


3.     INCOME TAX EXPENSE

(a)    Income tax recognised in profit or loss
No income tax is payable by the parent or consolidated entities as they recorded losses for income tax purposes for the
year.

 Current income tax                                                                         -                    -
 Deferred income tax                                                                  836,456                    -
 Income tax benefit as per the statement of profit or loss and
 other comprehensive income                                                           836,456                    -

(b)    Income tax recognised directly in equity

 Net deferred tax debited directly to equity                                          836,456                    -




                                                         40
                                        FIRESTONE ENERGY LIMITED
                                                 Annual Report 30 June 2013


3.     INCOME TAX EXPENSE (Continued)

(c)    Numerical reconciliation between income tax expense recognised in profit or loss and the accounting
       loss before income tax multiplied by the parent entity’s statutory income tax rate
                                                                                 2013                2012
                                                                                   $                  $

 Accounting loss before tax                                                     6,684,659           4,530,596

 Income tax benefit at 30% (2012: 30%)                                          2,005,398           1,359,179
 Foreign tax rate adjustment                                                      (21,112)            (12,289)
 Non-deductible amounts:
 Interest paid in shares                                                         (515,000)          (293,333)
 Other share-based payments                                                      (160,080)                  -
 Non-cash interest on convertible notes                                           (95,777)                  -
 Other non-deductible expenses                                                    (17,364)           (41,357)
 Unrecognised tax losses                                                         (359,609)        (1,012,200)
 Income tax benefit attributable to loss from
                                                                                  836,456                    -
 ordinary activities before tax

 (d) Recognised deferred tax balances

 Deferred Tax Assets
 Recognised revenue tax losses                                                    836,456                    -

 Deferred Tax Liabilities
 Convertible note                                                                (836,456)                   -
 Net deferred tax balances                                                                -                  -



 (e) Unrecognised deferred tax balances

 Unrecognised revenue tax losses
                                                                                17,577,960         15,292,030
 attributable to members of the Company

 Potential tax benefit at applicable tax rates                                   5,210,778          4,548,345
 Net unrecognised deferred tax asset at
                                                                                 5,210,778          4,548,345
 applicable tax rates

4.     LOSS PER SHARE
                                                                                 2013               2012
                                                                                 Cents              Cents

 Basic loss per share (cents per share)                                             (0.19)              (0.15)
 The loss and weighted average number of ordinary shares
 used in the calculation of basic loss per share is as follows:                     $                  $
 Loss for the year                                                             (5,848,203)        (4,530,596)

                                                                                Number             Number
 Weighted average number of shares outstanding during the
                                                                            3,156,326,311       2,983,192,306
 year used in calculations of basic loss per share

Diluted loss per share
There is no dilution of shares due to options as the potential ordinary shares are not dilutive and are therefore not
included in the calculation of diluted loss per share.




                                                            41
                                      FIRESTONE ENERGY LIMITED
                                            Annual Report 30 June 2013


5.     SEGMENT INFORMATION

Segment information provided to the Board:
                                                                              2013               2012
                                                                               $                   $
 Revenue from external sources                                                        -                -
 Segment loss                                                               (1,294,653)        (688,752)
 Segment assets                                                             81,364,992        81,307,190
 Segment capital expenditure                                                  5,258,746        2,833,304

 Reported segment assets are equivalent to the interest in joint venture (Note 9) plus surface right properties
 included in Note 10.

 A reconciliation of reportable segment loss to operating
 loss before income tax is provided as follows:

 Segment loss                                                               (1,294,653)         (688,752)

 Interest revenue and other income                                                7,310            32,921
 Administration expenses                                                      (314,749)         (142,600)
 Finance costs                                                              (3,019,777)       (2,774,086)
 Compliance and regulatory expenses                                           (270,629)         (143,412)
 Directors’ fees                                                              (294,015)         (263,095)
 Employee and consultant expenses                                             (598,496)         (139,463)
 Legal and professional fees                                                  (835,853)         (337,067)
 Rent expenses                                                                 (25,300)          (29,900)
 Travel and accommodation                                                      (38,497)          (45,142)
 Loss before income tax                                                     (6,684,659)       (4,530,596)

As the Group is in the exploration phase it has no major customers.




                                                            42
                                        FIRESTONE ENERGY LIMITED
                                              Annual Report 30 June 2013


6. (a) CASH AND CASH EQUIVALENTS
                                                                                  2013                2012
                                                                                   $                    $

 Cash at bank                                                                      397,940            169,475

Cash at bank earns interest at floating rates based on daily bank deposit rates. The Group’s exposure to interest rate
risk is discussed in Note 16. The maximum exposure to credit risk at the end of the reporting period is the carrying
amount of cash and cash equivalents noted above.

For the purposes of the cash flow statement, cash and cash equivalents comprise the following at 30 June:

 Cash and cash equivalents                                                         397,940            169,475


6. (b) RECONCILIATION TO STATEMENT OF CASH FLOWS

 Reconciliation of loss after income tax to net
 cash flows from operating activities:                                              2013             2012
                                                                                      $                $

 Loss after income tax                                                           (6,842,659)         (4,530,596)
  Adjustments:
    Depreciation                                                                      44,288             57,502
    Amortisation of borrowing costs                                                  463,920            644,315
    Non-cash interest on convertible note                                            319,258                  -
    Share-based payment expense                                                      533,600                  -
    Interest paid via share issues                                                 2,561,667            977,778
    Interest capitalised to Sekoko loan (investing activity)                         439,023            271,323
    Foreign exchange                                                                  (2,337)               357
                                                                                 (2,325,240)         (2,579,321)
 Changes in operating assets and liabilities:
   Increase in receivables                                                         (185,439)          (101,220)
   Increase in trade and other payables                                              145,588          1,208,177
 Net cash outflow from operating activities                                      (2,365,091)         (1,472,364)


6. (c) NON-CASH INVESTING AND FINANCING ACTIVITIES

                                                                                    2013               2012
                                                                                     $                  $
 Shares issued to redeem convertible note to ordinary shares                               -          300,000
 Interest paid via share issues                                                            -          997,778
 Convertible notes issued in lieu of interest payments on existing
                                                                                   845,000                    -
 convertible notes
 Shares issued to extinguish BBY loan (refer to Note 12)                         1,457,006                    -
 Shares issued in lieu of interest payments on convertible notes existing at
                                                                                 1,716,667                    -
 31 January 2013

New convertible notes were issued on a 1:1 basis in place of the $21,300,000 convertible notes existing at 31 January
2013, with the cash exchanged between the other counterparties to the notes, and in lieu of $845,000 interest payable
on the existing convertible notes. Refer to Note 12 for more information about the terms and conditions of the new
convertible notes. The carrying value of the new convertible notes was split between debt and equity in accordance
with accounting standards.




                                                               43
                                       FIRESTONE ENERGY LIMITED
                                            Annual Report 30 June 2013


7.     TRADE AND OTHER RECEIVABLES
                                                                                     2013                2012
                                                                                       $                  $
 Current

 GST / VAT recoverable                                                               236,732              48,399
 Prepayments                                                                          12,037             114,931
                                                                                     248,769             163,330
 Non-Current

 Environmental rehabilitation bond                                                 1,564,396             849,475

Information about the Group’s exposure to foreign exchange risk and interest rate risk is provided in Note 16.


8.     OTHER ASSETS
                                                                                    2013                2012
                                                                                     $                    $


 Share-based payment deferred                                                               -            112,250

The share-based payment asset represented the deferred expense associated with options to be issued under a 2012
short-term funding agreement with BBY Nominees Pty Limited (refer to Note 15). These options were not issued and
the deferred expense was reversed during the current year.


9.     INTEREST IN JOINT VENTURE
                                                                                    2013                2012
                                                                                     $                    $

 Interest in capitalised exploration and evaluation expenditure                   77,109,220          76,735,130



                                                                                    2013                2012
                                                                                     $                    $
 Opening balance                                                                 76,735,130           85,197,758
 Additional costs                                                                  5,258,746           2,833,305
 Foreign currency movements                                                      (4,884,656)        (11,295,933)
 Closing balance                                                                 77,109,220           76,735,130

The Company is a participant with Sekoko Coal (Pty) Ltd in a coal project in the Waterberg locality in South Africa. The
Company holds a 60% interest and Sekoko Coal (Pty) Ltd a 40% interest, and the project is funded in the same ratio.
The joint venture operation is carried out through the Company’s 100%-owned subsidiaries, Lexshell 126 General
Trading (Pty) Ltd and Checkered Flag Investments 2 (Pty) Ltd.

The Joint Venture is unincorporated at 30 June 2013 and is accounted for in accordance with Note 1(g).




                                                           44
                                     FIRESTONE ENERGY LIMITED
                                          Annual Report 30 June 2013


10.   PROPERTY, PLANT AND EQUIPMENT
                                                                                 2013                 2012
                                                                                  $                    $
 Office furniture and equipment:
   Cost                                                                           170,254              189,433
   Accumulated depreciation                                                     (130,302)            (103,536)
                                                                                   39,952               85,897
 Motor vehicles:
   Cost                                                                              8,851               9,509
   Accumulated depreciation                                                        (6,196)             (4,754)
                                                                                     2,655               4,755
 Property – surface rights:
   Cost                                                                         4,255,772            4,572,060


 Total property, plant and equipment                                            4,298,379            4,662,712

 Movements in the carrying amounts of each class of property, plant & equipment are set out below:

                                                                                 2013                 2012
 Office furniture and equipment                                                   $                    $
 Balance at the beginning of year                                                  85,897               45,500
 Additions                                                                          2,733             103,575
 Depreciation expense                                                            (42,524)             (55,509)
 Foreign exchange adjustment                                                      (6,154)              (7,669)
 Carrying amount at the end of the year                                            39,952               85,897

 Motor vehicles
 Balance at the beginning of year                                                    4,755               7,747
 Depreciation expense                                                              (1,764)             (1,993)
 Foreign exchange adjustment                                                         (336)               (999)
 Carrying amount at the end of the year                                              2,655               4,755

 Property – surface rights
 Balance at the beginning of year                                               4,572,060            5,321,266
 Foreign exchange adjustment                                                    (316,288)            (749,206)
 Carrying amount at the end of the year                                         4,255,772            4,572,060


11.   TRADE AND OTHER PAYABLES
                                                                                 2013                 2012
Current                                                                            $                    $

Trade payables                                                                      622,922             626,324
Payables – Sekoko                                                                   395,014             185,589
Employee entitlements                                                                34,478              41,891
Accruals                                                                          1,847,239           1,064,796
Other                                                                                   662             100,712
                                                                                  2,900,315           2,019,312

Trade payables are non-interest bearing and are normally settled on 30 day terms. Information about the Group’s
exposure to foreign exchange risk is provided in Note 16.




                                                        45
                                       FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013


12.    BORROWINGS
                                                                                       2013                 2012
 Current                                                                                 $                    $
 Unsecured loans carried at amortised cost
               1
 Loan – Sekoko                                                                       7,948,449            4,690,858
                                                                                                2                    3
 Loan – BBY                                                                           250,000             260,000

 Loans carried at amortised cost
                                                                                                                     5
 Convertible note                                                                               -       15,678,409
                                                                                     8,198,499           20,629,267

 Non-current
 Loans carried at amortised cost
                                                                                                    4                    5
 Convertible note                                                                    24,356,814          21,300,000
 Amount reported as current                                                                         -    (15,678,409)
 Transaction costs                                                                    (1,525,196)         (1,907,500)
 Transaction costs – amortised                                                           156,698            1,616,779
                                                                                      22,988,316            5,330,870

 1.    Interest is charged at the South African prime rate of 8.5% (30 June 2012: 9%). The loan is unsecured.

 2.    These funds were advanced under a short-term funding agreement with BBY Nominees Pty Limited and will be
       repaid in shares, which will be issued at the lower of the 5 day volume weighted average price leading up to but
       not including the date of drawdown, or 90% of the closing bid price on the day prior to the drawdown date of the
       Company’s ordinary shares quoted on the ASX. No value for this embedded derivative has been brought to
       account at 30 June 2013 as it is not material as at that date. Shares will not be issued pursuant to this facility if
       the issue would cause a note holder to hold more than 19.99% of the Company’s shares. The Company is able
       to terminate the Agreement at no cost. The Company must also meet various performance conditions. It may be
       in breach of one of the conditions and is seeking to remedy this.

 3.    These funds were advanced under a short-term funding agreement with BBY Nominees Pty Limited and were
       repaid in shares on 5 February 2013. The loan did not attract interest. Refer also to Notes 8 and 15.

 4.    The total face value of the notes is $27.145 million and the maturity date 31 January 2017. They bear interest at
       a fixed rate of 8% per annum. The notes can be converted at any time before the maturity date at a conversion
       price of $0.025. They are secured over the assets of the Group.

 5.    The total draw down facility was $25 million with a maturity date of 3 years from the date of issuing each note.
       The notes could be converted at any time before the maturity date. Interest was at a fixed rate of 10% per
       annum. The effective interest rate on the liability was also 10%. The notes commenced maturing in October
       2012. For convertible notes issued prior to 13 July 2010, the conversion price was $0.04. Notes issued
       subsequent to that date ($8.2 million notes, of which $3.7 million were converted) had a conversion price set to
       the higher of $0.02 or the 7.5% discount to the 5 day volume weighted average price. All of the notes were rolled
       into the new convertible note facility.

Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in Note 16.




                                                            46
                                       FIRESTONE ENERGY LIMITED
                                               Annual Report 30 June 2013


13.     ISSUED CAPITAL
                                                                                      2013                  2012
                                                                                        $                    $

3,549,698,723 (2012: 3,113,878,641) fully paid ordinary shares                       79,553,721            76,380,048




Movement in ordinary share capital:                                               No of Shares             $ Value

Balance at 1 July 2011                                                            2,781,314,361            73,135,309
18 July 2011 – Share Purchase Plan                                                   12,025,000               226,414
3 August 2011 – Note conversion                                                      15,000,000               300,000
8 September 2011 – Share Placement – Linc Energy                                    150,336,423             1,804,037
22 February 2012 – Shares issued as payment of interest                             155,202,857               977,778
Less: share issue costs                                                                       -               (63,490)
Balance at 30 June 2012                                                           3,113,878,641            76,380,048
5 February 2013 – Shares issued as payment of interest                              241,145,620             1,716,667
5 February 2013 – Shares issued to extinguish BBY loan                              194,674,462             1,457,006
Balance at 30 June 2013                                                           3,549,698,723            79,553,721

Options

Unissued ordinary shares of the Company under option as at 30 June 2013 are as follows:

              Number                      Expiry                 Exercise Price           Listed / Unlisted
                  25,875,000          30 June 2014                    $0.06                   Unlisted
                  48,395,000           31 May 2014                    $0.04                       Listed
                  40,000,000           19 Sep 2014                   $0.025                     Unlisted
                300,000,000            31 Jan 2015                   $0.025                     Unlisted
                414,270,000

No option holder has any right under the options to participate in any other share issue of the Company.


14.     RESERVES

Nature and purpose of reserves

Share-based payments reserve
This reserve is used to record the value of:

   i.     equity benefits provided to employees, Directors or consultants as part of their remuneration or services to the
          entity; and
  ii.     equity benefits provided as part of financing transactions.

Convertible note reserve
The convertible note reserve is used to record the equity component of the convertible notes.

Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation balances of
foreign subsidiaries.




                                                           47
                                       FIRESTONE ENERGY LIMITED
                                            Annual Report 30 June 2013


15.   SHARE-BASED PAYMENTS

The following table illustrates the number and weighted average exercise prices (WEAP) of share options granted as
share-based payments on issue during the year.

                                                     2013           2013              2012           2012
                                                   Number           WEAP            Number           WEAP
         Outstanding at 1 July                   236,904,767         $0.06        236,904,767         $0.06
         Granted during the year                 340,000,000        $0.025               -              -
         Exercised during the year                      -              -                 -              -
         Expired during the year                (236,904,767)        $0.06               -              -
         Outstanding as at 30 June               340,000,000        $0.025        236,904,767         $0.06

The weighted average remaining contractual life for share-based payment share options outstanding as at 30 June
2013 is 1.55 years (2012: 0.89 years).

The range of exercise prices for share-based payment options outstanding as at the end of the year was $0.025 (2012:
$0.05 - $0.06).

40,000,000 unlisted 2 year options with an exercise price of 2.5 cents were issued to the Company’s then CEO and
current Non-Executive Director, Mr David Knox, on 19 September 2012. The fair value of the options was calculated at
0.19 cents per option using a binomial model and the following assumptions:

                 Dividend yield (%)                                       Nil
                 Expected volatility (%)                                  100%
                 Risk-free interest rate (%)                              3.00%
                 Expected life (years)                                    1.5
                 Exercise price (cents)                                   2.5
                 Share price at grant date (cents)                        0.9

300,000,000 unlisted 2 year options with an exercise price of 2.5 cents were issued to the former holders of the
Company’s convertible notes on 5 February 2013. The fair value of the options was calculated at 0.15 cents per option
using a binomial model and the following assumptions:

                 Dividend yield (%)                                       Nil
                 Expected volatility (%)                                  100%
                 Risk-free interest rate (%)                              3.00%
                 Expected life (years)                                    1.5
                 Exercise price (cents)                                   2.5
                 Share price at grant date (cents)                        0.8

25,000,000 3 year options that were to be issued to BBY Nominees Pty Limited under the 2012 Share Subscription
Agreement were not issued and the deferred expense reported in 2012 (refer to Note 8) was reversed.

16.    FINANCIAL RISK MANAGEMENT

(i)    Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance.

The Group’s overall strategy remains unchanged from the previous year.

The capital structure of the Group consists of borrowings, cash and cash equivalents and equity attributable to equity
holders of the parent, comprising issued capital, reserves and accumulated losses.

None of the Group’s entities are subject to externally imposed capital requirements.

Gearing levels are reviewed by the Board on a regular basis after factoring in the cost of capital and the risks associated
with each class of capital. The gearing ratio at 30 June 2013 was 63% (2012: 47%).

The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they
can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.

                                                          48
                                        FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

16.     FINANCIAL RISK MANAGEMENT (Continued)

(ii)    Financial risk management objectives

The Group’s activities may expose it to a variety of financial risks in the future: market risk (including currency risk and
interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program does focus on the
unpredictable nature of the financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group.

Risk management is carried out under an approved framework covering a risk management policy and internal
compliance and control by management. The Board identifies, evaluates and approves measures to address financial
risks.

(iii)   Market risk

Cash flow interest rate risk

The Group’s main interest rate risk arises from cash deposits held as investments prior to being spent on exploration
and evaluation activities, environmental bonds, and the Sekoko loan. Deposits and loans at variable rates expose the
Group to cash flow interest rate risk. During 2013 and 2012, the Group’s deposits at variable rates were denominated
in Australian Dollars and South African Rand. The Sekoko loan is denominated in South African Rand.

Sensitivity Analysis – Interest Rate Risk

The effect of possible interest rate movements used to determine the impact upon profit and loss and equity have been
determined based upon management’s assessment of current and future market conditions.

At 30 June, the Group had the following exposure to Australian short term interest rates and South African prime rates:

                                                                                    2013                   2012
                                                                                     $                      $
 Subject to Interest Rate Risk
 Financial assets
 Cash and cash equivalents                                                            397,940                  169,475
 Environmental rehabilitation bond                                                  1,564,396                  849,475


 Financial liabilities
 Borrowings                                                                         7,948,449             4,690,858

The following sensitivity analysis is based interest rate risk exposures in existence at the reporting date.

At 30 June the effects on post tax loss and equity from a change in interest rates would be as follows:

 Future possible changes in interest rates based on                                 2013                   2012
 management’s estimates:                                                             $                      $

 Interest Rates + 100bp (2012: 100bp)                                                 (59,862)                 (36,719)
 Interest Rates - 100bp (2012: 100bp)                                                   59,862                   36,719

Foreign currency risk

As a result of significant investment operations by the Company’s subsidiaries in South Africa, the Group’s balance
sheet can be affected significantly by movements in the Australian dollar / South African Rand exchange rate.

Large transactions are denominated in South African Rand. The Group seeks to mitigate some of the effect of its
foreign currency exposure by holding South African Rand.

The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating
entity in currencies other than the functional currency.

The Group does not have a policy to enter into forward contracts and does not negotiate hedge derivatives to exactly
match the terms of the hedged item.




                                                            49
                                         FIRESTONE ENERGY LIMITED
                                               Annual Report 30 June 2013

16.     FINANCIAL RISK MANAGEMENT (Continued)

(iii)   Market risk (continued)

Sensitivity Analysis – Foreign Currency Risk

At 30 June the Australian dollar equivalents of assets and liabilities held in South African Rand are as follows:


                                                                                   2013                   2012
                                                                                    $                      $
 Subject to Foreign Exchange Movements
 Financial assets
 Cash and cash equivalents                                                              3,162                 7,145
 Trade and other receivables                                                       1,734,719               849,475
                                                                                   1,737,881               856,620

 Financial liabilities
 Trade and other payables                                                            465,006               221,693
 Borrowings                                                                        7,948,449             4,690,858
                                                                                   8,413,455             4,912,551


The financial assets and liabilities of the subsidiaries are held in the functional currency of the subsidiaries, which is
South African Rand. As a result, there is minimal foreign exchange risk in terms of the possible effect on profit or loss.

At 30 June the effects on post tax equity from a change in the Australian Dollar / South African Rand exchange rate
would be as follows:

 Future possible changes in foreign exchange rates                                 2013                   2012
 based on management’s estimates:                                                   $                      $

 Exchange Rate + 10% (2012: 10%)                                                     606,875                368,721
 Exchange Rate - 10% (2012: 10%)                                                   (741,736)              (450,659)


(iv)    Credit risk

Credit risk arises from cash and cash equivalents, deposits (including environmental bonds) with banks and financial
institutions, as well as credit exposures on outstanding receivables and committed transactions.

Cash transactions are limited to high credit quality financial institutions.

Environmental bonds are held with high credit quality financial institutions. The rights to the bonds are held by the
Company’s joint venture partner Sekoko Coal (Pty) Ltd, who will remit the funds to the Company upon expiry.

In relation to other credit risk areas management assesses the credit quality of the customer, taking into account its
financial position, past experience and other factors.

(v)     Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an
adequate amount of committed credit facilities. The Consolidated entity manages liquidity risk by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The
Group will aim at maintaining flexibility in funding by accessing appropriate committed credit lines available from
different counterparties where appropriate and possible. Surplus funds when available are generally only invested in
high credit quality financial institutions in highly liquid markets.




                                                              50
                                            FIRESTONE ENERGY LIMITED
                                                  Annual Report 30 June 2013

16.        FINANCIAL RISK MANAGEMENT (Continued)

(v)        Liquidity risk (continued)

 Maturity analysis of financial assets and liabilities based on management's expectations:

                                                            6-12                                          Contractual        Carrying
 Year ended 30 June 2013                 <6 months         months          1-5 years       >5 years       cash flows         Amount

 Financial assets
                           1
 Trade & other receivables                    236,732                 -     1,564,396                 -     1,801,128          1,801,128

 Financial liabilities
 Trade & other payables                   (2,900,315)               -                -                -    (2,900,315)       (2,900,315)
              2
 Borrowings                               (9,284,299)     (1,085,800)     (32,773,311)                -   (43,143,410)      (31,186,815)
 Net maturity                            (11,947,882)     (1,085,800)     (31,208,915)                -   (44,242,597)      (32,286,002)

                                                            6-12                                          Contractual        Carrying
 Year ended 30 June 2012                 <6 months         months          1-5 years       >5 years       cash flows         Amount

 Financial assets
                           1
 Trade & other receivables                     48,399                 -       849,475                 -       897,874            897,874

 Financial liabilities
 Trade & other payables                   (2,019,312)               -                -                -    (2,019,312)       (2,019,312)
              2
 Borrowings                              (14,847,776)     (7,324,890)      (5,684,137)                -   (27,856,803)      (25,960,137)
 Net maturity                            (16,818,689)     (7,324,890)      (4,834,662)                -   (28,978,241)      (27,081,575)
  1
       No impairment is required on long term receivables, as they are long term deposits which are interest-bearing.
  2
       The convertible note holder has the option to convert the face value of the liability to equity at any time until maturity.

17.        COMMITMENTS

(i)      Operating Lease Commitments

The company has no operating lease commitments.

(ii)     Other Commitments

A production royalty, equivalent to ZAR0.50 (A$0.06) per tonne of coal sold, is payable to Sekoko Coal (Pty) Ltd during
the term of the mining operations to a maximum aggregated amount of ZAR45 million (A$4.97 million).




                                                                 51
                                         FIRESTONE ENERGY LIMITED
                                              Annual Report 30 June 2013


18.      RELATED PARTY TRANSACTIONS

(a)      Key management personnel remuneration
                                                                                        2013                  2012
                                                                                          $                    $
  Short-term employee benefits                                                          871,339              497,026
  Share-based payments                                                                   77,600                    -
  Post-employment benefits                                                                    -                2,319
                                                                                        948,939              499,345

(b)      Key management personnel equity holdings

(i)      Option holdings – Unlisted

The numbers of options over ordinary shares in the Company held during the financial year by each Director and key
management personnel of Firestone Energy Limited, including their personally related parties, are set out below:


         2013            Balance at                                                                 Balance at        Vested and
                         the start of     Granted as         Options             Options          the end of the     exercisable at
                           the year      remuneration       Exercised            Expired              period            30 June
  Directors
  T Tebeila              110,000,000 *               -                   -   (110,000,000) *                  -                  -
            1
  S Miller                           -               -                   -                 -                  -                  -
  P Kasolo                           -               -                   -                 -                  -                  -
            2
  D Knox                             -      40,000,000                   -                 -         40,000,000         40,000,000
                   1
  B McMaster                         -               -                   -                 -                  -                  -
  B Mphahlele                        -               -                   -                 -                  -                  -
                     3
  K Terblanche                       -               -                   -                 -                  -                  -
                 3
  D Perkins                          -               -                   -                 -                  -                  -
              1, 3
  J James                            -               -                   -                 -                  -                  -
              1, 3
  O Zohar                            -               -                   -                 -                  -                  -
             1, 3
  D Hillier                          -               -                   -                 -                  -                  -
  Executives
                1
  A Matthee                         -                -                   -                 -                  -                  -
                          110,000,000       40,000,000                   -     (110,000,000)         40,000,000         40,000,000

Note 1 - appointed during the financial year
Note 2 - resigned as CEO and appointed Non-Executive Director on 14 June 2013. Options granted 19 September 2012.
Note 3 - resigned during the financial year

* Balance includes amounts nominally held through directorship of a related entity, Sekoko Coal (Pty) Ltd. Sekoko Coal held
  110,000,000 options in Firestone Energy Limited, which expired on 30 May 2013.




                                                             52
                                               FIRESTONE ENERGY LIMITED
                                                   Annual Report 30 June 2013

18.      RELATED PARTY TRANSACTIONS (Continued)

(b)      Key management personnel equity holdings (continued)

(i)      Option holdings – Unlisted (continued)



          2012            Balance at                                                               Balance at the       Vested and
                          the start of          Granted as     Options           Net change          end of the        exercisable at
                            the year           remuneration   Exercised            other               period             30 June
  Directors
                1
  T Tebeila                          -                    -                -    110,000,000 *        110,000,000 *      110,000,000 *
  D Perkins                          -                    -                -                -                    -                  -
  P Kasolo                           -                    -                -                -                    -                  -
               1
  B Mphahlele                        -                    -                -                -                    -                  -
                 1
  K Terblanche                       -                    -                -                -                    -                  -
          2
  S Nkosi                            -                    -                -                -                    -                  -
             2
  C McIntyre                 3,125,000                    -                -      (3,125,000)                    -                  -
  Executives
            1
  D Knox                             -                    -                -                -                    -                  -
                             3,125,000                    -                -      106,875,000          110,000,000        110,000,000

Note 1 - appointed during the financial year
Note 2 - resigned during the financial year

* Balance includes amounts nominally held through directorship of a related entity, Sekoko Coal (Pty) Ltd, whereby Sekoko Coal has
1,052,645,091 shares and 110,000,000 options in Firestone Energy Limited at 30 June 2012.

(ii)     Share holdings

The numbers of shares in the Company held during the financial year by each Director and executive of Firestone
Energy Limited, including their personally related parties, are set out below:


                2013               Balance at the                                                               Balance at the
                                    start of the         Granted as      On exercise         Net change           end of the
                                       period           remuneration      of options            other               period
  Directors
  T Tebeila                        1,052,645,091 *                   -                -      (480,000,000)        572,645,091 *
            1
  S Miller                                       -                   -                -                  -                    -
  P Kasolo                                       -                   -                -                  -                    -
            2
  D Knox                                         -                   -                -                  -                    -
                   1
  B McMaster                                     -                   -                -            900,000             900,000
  B Mphahlele                                    -                   -                -                  -                    -
                     3
  K Terblanche                                   -                   -                -                  -                    -
                 3
  D Perkins                             2,500,000                    -                -        (2,500,000)                    -
              1, 3
  J James                                        -                   -                -                  -                    -
              1, 3
  O Zohar                                        -                   -                -                  -                    -
             1, 3
  D Hillier                                      -                   -                -                  -                    -

  Executives
                    1
  A Matthee                                     -                    -                -         31,133,437           31,133,437
                                    1,055,145,091                    -                -      (450,466,563)          604,678,528

Note 1 - appointed during the financial year
Note 2 - resigned as CEO and appointed Non-Executive Director on 14 June 2013
Note 3 - resigned during the financial year

* Balance includes amounts nominally held through directorship of a related entity, Sekoko Coal (Pty) Ltd, whereby Sekoko Coal has
  572,645,091 shares in Firestone Energy Limited at 30 June 2013.




                                                               53
                                               FIRESTONE ENERGY LIMITED
                                                 Annual Report 30 June 2013


18.     RELATED PARTY TRANSACTIONS (Continued)

(b)     Key management personnel equity holdings (continued)

(ii)    Share holdings (continued)


                   2012               Balance at                                                                Balance at the
                                      the start of       Granted as          On exercise     Net change           end of the
                                       the period       remuneration          of options        other               period
  Directors
               1
  T Tebeila                                      -                       -             -   1,052,645,091 *      1,052,645,091 *
  D Perkins                              2,500,000                       -             -                 -           2,500,000
  P Kasolo                                       -                       -             -                 -                    -
               1
  B Mphahlele                                    -                       -             -                 -                    -
                 1
  K Terblanche                                   -                       -             -                 -                    -
          2
  S Nkosi                                  150,000                       -             -         (150,000)                    -
             2
  C McIntyre                            27,450,000                       -             -      (27,450,000)                    -

  Executives
           1
  D Knox                                         -                       -             -                 -                    -
                                        30,100,000                       -             -     1,025,045,091        1,055,145,091

Note 1 - appointed during the financial year
Note 2 - resigned during the financial year

* Balance includes amounts nominally held through directorship of a related entity, Sekoko Coal (Pty) Ltd, whereby Sekoko Coal has
  1,052,645,091 shares and 110,000,000 options in Firestone Energy Limited at 30 June 2012.

All equity transactions with key management personnel other than those arising from the issue or exercise of
compensation options have been entered into under terms and conditions no more favourable than those the Group
would have adopted if dealing at arm's length.

(c)     Investments in Controlled Entities

Subsidiaries of Firestone Energy Limited are set out below:

                                                           Place of                  Equity holding
                                                        Incorporation
                                                                                    2013              2012
                                                                                     %                 %
  Parent Entity:
  Firestone Energy Limited                           Australia                      n/a               n/a


  Controlled Entities:
  Checkered Flag Investments 2 (Pty) Ltd             South Africa                   100               100
  Lexshell 126 General Trading (Pty) Ltd             South Africa                   100               100

Lexshell 126 General Trading (Pty) Ltd holds a 100% interest in Utafutaji Trading 75 (Pty) Ltd.

An impairment assessment is undertaken each financial year by examining the financial position of the related party
and the market in which the related party operates to determine whether there is objective evidence that a related party
receivable is impaired. When such objective evidence exists, the Group recognises an allowance for the impairment
loss.




                                                                    54
                                      FIRESTONE ENERGY LIMITED
                                           Annual Report 30 June 2013


18.    RELATED PARTY TRANSACTIONS (Continued)

(d)    Other transactions and balances with related parties

(i)    Sekoko Coal (Pty) Ltd

Sekoko Coal (Pty) Ltd is a related party to the Group, through its common director Mr Tim Tebeila, who effectively
controls Sekoko.

Firestone Energy Limited, through Checkered Flag Investments 2 (Pty) Ltd and Lexshell 126 General Trading (Pty) Ltd,
has management control of all JV planning and expenditure.

The following transactions have taken place with Sekoko Resources Pty Ltd, the parent entity of Sekoko Coal (Pty) Ltd:

                                                                                     2013                 2012
                                                                                      $                    $
       Transactions
       Management fees                                                                  132,228             149,359
       Reimbursement of expenditure incurred on behalf of
                                                                                        163,803                81,246
       joint venture with Checkered Flag and Sekoko
       Reimbursement of expenditure incurred in relation
                                                                                     4,974,433            3,628,524
       to planned joint venture with Lexshell and Sekoko

       Amounts owed to Sekoko as at 30 June
       Payables                                                                        395,014              185,589
       Borrowings (refer to Note 12)                                                 7,948,449            4,690,858
                                                                                     8,343,463            4,876,447

These amounts were charged based on normal commercial terms and conditions.

(ii)   BBY Limited

Until Firestone Energy Limited’s non-executive Deputy Chairman David Perkins resigned on 14 June 2013, BBY
Limited and its subsidiary BBY Nominees Pty Limited (collectively “BBY”) were related parties Mr Perkins is also a
director of BBY Limited. BBY is the nominee and representative for the holders of the convertible notes and provided
the short-term loan advanced under the Share Subscription Agreement. For further details of the convertible note
facility and the loan, refer to Note 12.


19.    AUDITOR’S REMUNERATION
                                                                                 2013                   2012
                                                                                  $                      $


  Amounts paid or payable to BDO Audit (WA) Pty
  Ltd:
  Audit or review of the financial reports of the
  Group                                                                                 50,780                 51,414
  Other services by BDO Corporate Tax (WA) Pty
  Ltd and BDO Corporate Finance (WA) Pty Ltd                                            22,351                 54,740
  Audit and other services provided by BDO South
  Africa                                                                                26,743               37,527
                                                                                        99,874              143,681




                                                         55
                                          FIRESTONE ENERGY LIMITED
                                                Annual Report 30 June 2013


20.    CONTINGENT LIABILITIES

The consolidated entity had no contingent liabilities at 30 June 2013.


21.    PARENT ENTITY INFORMATION

(a)   Summary financial information

                                                                                     2013           2012
                                                                                      $              $

Assets
Current assets                                                                         472,854        437,243
Non-current assets                                                                  74,693,484     77,299,613
Total assets                                                                        75,166,338     77,736,856
Liabilities
Current liabilities                                                                  2,650,168     17,693,424
Non-current liabilities                                                             22,988,316      5,330,870
Total liabilities                                                                   25,638,484     23,024,294

Equity
Issued capital                                                                       79,553,721     76,380,048
Reserves                                                                              6,689,065      4,193,895
Accumulated losses                                                                 (36,714,932)   (25,861,381)
Total equity                                                                         49,527,854     54,712,562

Loss for the year                                                                  (10,853,551)   (18,020,843)

Total comprehensive loss                                                           (10,853,551)   (18,020,843)

(b)   Contingent liabilities of the parent entity

 Firestone Energy Limited had no contingent liabilities as at 30 June 2013.

(c)   Commitments of the parent entity

 Firestone Energy Limited had no commitments as at 30 June 2013.


22. SIGNIFICANT EVENTS OCCURRING AFTER THE REPORTING PERIOD

On 30 August 2013, The Waterberg Coal Company Limited agreed to lend the Company up to $3 million, to be used for
the Company’s project financing obligations in relation to the Waterberg Coal Project. The loan is interest free,
unsecured and is to be repaid within 10 days of the Company making full repayment of the loan from Sekoko (refer to
Note 12).

With the exception of the above, no other matters or circumstances have arisen since 30 June 2013 that have
significantly affected, or may significantly affect:

      (i) The consolidated entity’s operations in future financial years, or
      (ii) The results of those operations in future financial years, or
      (ii) The consolidated entity’s state of affairs in future financial years.




                                                               56
                                       FIRESTONE ENERGY LIMITED
                                             Annual Report 30 June 2013

DECLARATION BY DIRECTORS


The Directors of the company declare that:

1.   The financial statements and accompanying notes are in accordance with the Corporations Act 2001 and:

       (a)    comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
              reporting requirements; and

       (b)    give a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
              performance for the year ended on that date.

2.   The Company has included in the notes to the financial statements an explicit and unreserved statement of
     compliance with International Financial Reporting Standards.

3.   In the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
     and when they become due and payable.

4.   The remuneration disclosures included in pages 9 to 12 of the Directors’ Report (as part of the audited
     Remuneration Report), for the year ended 30 June 2013, comply with section 300A of the Corporations Act 2001.

5.   The Directors have been given the declarations by the chief executive officer and the chief financial officer
     required by section 295A.



This declaration is made in accordance with a resolution of the Directors.




___________________
Tim Tebeila
Chairman


27 September 2013




                                                           57
     Tel: +8 6382 4600                               38 Station Street
     Fax: +8 6382 4601                               Subiaco, WA 6008
     www.bdo.com.au                                  PO Box 700 West Perth WA 6872
                                                     Australia




 INDEPENDENT AUDITOR’S REPORT


 To the members of Firestone Energy Limited


 Report on the Financial Report
 We have audited the accompanying financial report of Firestone Energy Limited, which comprises
 the consolidated balance sheet as at 30 June 2013, the consolidated statement of profit or loss and
 other comprehensive income, consolidated statement of changes in equity and consolidated
 statement of cash flows for the year then ended, notes comprising a summary of significant
 accounting policies and other explanatory information, and the directors’ declaration of the
 consolidated entity comprising the company and the entities it controlled at the year’s end or from
 time to time during the financial year.
 Directors’ Responsibility for the Financial Report
 The directors of the company are responsible for the preparation of the financial report that gives a
 true and fair view in accordance with Australian Accounting Standards and the Corporations Act
 2001 and for such internal control as the directors determine is necessary to enable the preparation
 of the financial report that gives a true and fair view and is free from material misstatement,
 whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting
 Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
 International Financial Reporting Standards.
 Auditor’s Responsibility

 Our responsibility is to express an opinion on the financial report based on our audit. We conducted
 our audit in accordance with Australian Auditing Standards. Those standards require that we comply
 with relevant ethical requirements relating to audit engagements and plan and perform the audit
 to obtain reasonable assurance about whether the financial report is free from material
 misstatement.
 An audit involves performing procedures to obtain audit evidence about the amounts and
 disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
 including the assessment of the risks of material misstatement of the financial report, whether due
 to fraud or error. In making those risk assessments, the auditor considers internal control relevant
 to the group’s preparation of the financial report that gives a true and fair view in order to design
 audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
 an opinion on the effectiveness of the group’s internal control. An audit also includes evaluating
 the appropriateness of accounting policies used and the reasonableness of accounting estimates
 made by the directors, as well as evaluating the overall presentation of the financial report.
 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
 basis for our audit opinion.




BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.



                                                                                58
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001. We confirm that the independence declaration required by the Corporations
Act 2001, which has been given to the directors of Firestone Energy Limited, would be in the same
terms if given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)   the financial report of Firestone Energy Limited is in accordance with the Corporations Act
      2001, including:
      (i)   giving a true and fair view of the consolidated entity’s financial position as at 30 June
            2013 and of its performance for the year ended on that date; and
      (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
           and
(b) the financial report also complies with International Financial Reporting Standards as
    disclosed in Note 1.
Emphasis of Matter

Without modifying our opinion, we draw attention to Note 1 in the financial report, which indicates
that the group incurred a net loss of $6,622,659 during the year ended 30 June 2013 and, as of that
date, the group experienced net cash outflows from operating activities of $2,365,091. These
conditions, along with other matters as set forth in Note 1, indicate the existence of a material
uncertainty that may cast significant doubt about the group’s ability to continue as a going concern
and therefore, the group may be unable to realise its assets and discharge its liabilities in the
normal course of business.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30
June 2013. The directors of the company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Firestone Energy Limited for the year ended 30 June
2013 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd




Wayne Basford
Director
Perth, Western Australia
Dated this 27th day of September 2013

                                                    59
                                     FIRESTONE ENERGY LIMITED
                        Annual Report 30 June 2013
ASX ADDITIONAL INFORMATION

Shareholder Information

Additional information as required by the Australian Securities Exchange Limited Listing Rules and not
disclosed elsewhere in this report is set out below. This information is current as at 30 August 2013.


Distribution of equity security holders



         Ranges                Number of       Number of Shares                  % of issued
                                Holders                                            Capital
                 1 - 1,000            1,809                       773,552                  0.02
          1,001 – 10,000              1,360                      4,532,462                 0.13
        10,001 - 100,000              1,243                     62,908,796                 1.77
     100,001 – 1,000,000                931                    315,346,307                 8.88
     1,000,000 - and over               182                  3,166,137,606               89.19
Total                                 5,525                  3,549,698,723                  100

There are 4,227 holders of shares holding less than a marketable parcel.

Twenty largest holders of quoted shares



Number                           Shareholders                              Number of        % of
                                                                           Shares held     issued
                                                                                           Capital
   1       BBY NOMINEES PTY LTD                                              600,844,061    16.93
   2       SEKOKO RESOURCES PTY LTD                                          520,000,000    14.65
   3       AET SFS PTY LTD (ARIONA SBSA)                                     480,000,000    13.52
   4       AET SFS PTY LTD (RANGE SBSA)                                      476,061,100    13.41
   5       LINC ENERGY LIMITED                                               283,336,423     7.98
   6       BIOTRACE TRADING 316 (PTY) LTD                                     60,896,890     1.72
   7       UZALILE INVESTMENTS PTY LTD                                        55,000,000     1.55
   8       SUNGU SUNGU RESOURCES                                              27,099,352     0.76
   9       SANPOINT PTY LTD (FIORE FAMILY FUND A/C)                           25,000,000     0.70
   10      FMR INVESTMENTS PTY LIMITED                                        18,001,750     0.51
   11      UOB KAY HIAN PRIVATE LIMITED (CLIENTS A/C)                         14,378,563     0.41
   12      PHASHA INVESTMENT HOLDINGS (PTY) LT                                14,254,000     0.40
   13      MR DARYL PONSFORD                                                  14,000,000     0.39
   14      AUSTRALIA AND NEW ZEALAND BANKING GROUP                            12,027,916     0.34
           LIMITED
   15      MR TERENCE EDWARD STANTON + MS GRACE                               12,000,000     0.34
           MURIEL STANTON (TE&GMSTANTON SUPER FUND
           A/C)
   16      CITICORP NOMINEES PTY LIMITED                                      11,985,242     0.34
   17      MR MICHAEL SKELLERN                                                10,300,000     0.29
   18      MR EMILE ALFRED NESSIM                                             10,000,000     0.28
   19      JP MORGAN NOMINEES AUSTRALIA LIMITED (CASH                          9,467,685     0.27
           INCOME A/C)
   20      SEPHOR INVESTMENTS LIMITED 60 MARKET                                9,000,000     0.25
           SQUARE
                                                   Total                   2,663,652,982    75.04




                                                        60
                                      FIRESTONE ENERGY LIMITED
                        Annual Report 30 June 2013
ASX ADDITIONAL INFORMATION

Quoted and unquoted equity securities

 Equity Security                        Quoted                          Unquoted
 Ordinary Shares                    3,549,698,723                            -
 Options                                48,395,000                     365,875,000

Substantial shareholders

Substantial shareholders who have notified the Company in accordance with section 671B of the Corporations
Act 2001 are:

Shareholder                                                                 Number of
                                                                             shares

The Waterberg Coal Company Limited                                        1,599,994,177
Sekoko Resources (Pty) Ltd                                                  572,645,091
BBY Nominees Pty Limited                                                   600,844,062
Linc Energy Limited                                                        283,336,423


 Option holdings at 30 August 2013                                         Number of        Number of
                                                                            Holders          Options

 Listed Options expiring 31 May 2014 exercisable at 4 cents
 (FSEO)                                                                          317        48,395,000

 Holdings of more than 20%
 Nil                                                                                                   -

 Unlisted Options expiring 30 Jun 2014 exercisable at 6 cents
 (FSEAI)                                                                         10         25,875,000

 Holdings of more than 20%
 Nil                                                                                                   -
 Unlisted Options expiring 19 Sept 2014 exercisable at 2.5 cents                  1         40,000,000

 Holdings of more than 20%
 Mr David Knox                                                                    1         40,000,000
 Unlisted Options expiring 31 January 2015 exercisable at 2.5
 cents                                                                            1        300,000,000

 Holdings of more than 20%
 BBY Nominees Pty Ltd                                                             1        300,000,000

Voting rights

Ordinary shares carry one vote per share. There are no voting rights attached to the options in the Company.

Stock Exchange

The Company is dual listed on the Australian Securities Exchange and the Johannesburg Securities Exchange
and has been allocated the code “FSE”. The “Home Exchange” is Perth.

Other information

Firestone Energy Limited, is incorporated and domiciled in Australia, and is a publicly listed company limited
by shares.




                                                          61
                                      FIRESTONE ENERGY LIMITED
                        Annual Report 30 June 2013
ASX ADDITIONAL INFORMATION

On-market buy-back

There is no current on-market buy-back.


Firestone's interests in mining tenements

Country / Location                                  Tenement                      Interest *

South Africa – Waterberg region                 Smitspan (306LQ)                     60%

South Africa – Waterberg region                 Hooikraal (315LQ)                    60%

South Africa – Waterberg region              Minnasvlakte (2584LQ)                   60%

South Africa – Waterberg region                 Vetleegte (304LQ)                    60%

South Africa – Waterberg region              Swanepoelpan (262LQ)                    60%

South Africa – Waterberg region               Duikerfontein (263LQ)                  60%

South Africa – Waterberg region             Olieboomfontein (220LQ)                  60%

South Africa – Waterberg region               Massenburg (305LQ)                     60%

* Firestone Energy has entered into a Joint Venture with Sekoko Coal Pty Ltd through which the Company has
acquired the right to a 60% “participation interest” in the project area that forms The Waterberg Joint Venture.




                                                          62
Johannesburg
27 September 2013

Sponsor

River Group


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