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FIRESTONE ENERGY LIMITED - June 2014 Quarterly Activities Report

Release Date: 31/07/2014 11:54
Code(s): FSE     PDF:  
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June 2014 Quarterly Activities Report

  Firestone Energy Limited
  (Incorporated in Australia)
  Registration Number: ABN 058 436 794
  Share Code JSE: FSE
  Share Code ASX: FSE
  ISIN: AU000000FSE6
  ("FSE or "the Company")                                                               ASX Release
  SA Registration Number: 2008/023973/10
                                                                                        31 July 2014

                                                                                  FIRESTONE ENERGY
                                                                                       LIMITED
                                                                                   ABN 71 058 436 794

           JUNE 2014 QUARTERLY                                                          Registered office:
                                                                               Level 2, 1 Walker Avenue West Perth,
            ACTIVITIES REPORT                                                         Western Australia 6005
                                                                                            Australia

The Waterberg Coal Project (WCP)                                                     Tel:+61 8 9485 0888
                                                                                     Fax: +61 8 9485 0077

Firestone Energy Limited (FSE) is a participant in the Waterberg Coal                 South African office:
Project (WCP) joint venture, situated in the Limpopo Province, South                   Level 1, The Place,
Africa. The Project currently has identified coal resources of 3.883 billion   1 Sandton Dr, Sandton, 2146, South
tonnes1 of coal contained within the granted mining rights; of which 2.070                    Africa
Billion tonnes are contained within the measured category1.
                                                                                     Tel: +27 10 594 2240
                                                                                     Fax: +27 10 594 2253
The WCP Joint venture entered into a Memorandum of Understanding
with Eskom Holdings in March 2012 for the supply and delivery of 10
million tonnes per annum (mtpa) of coal from the Project.
                                                                                           Contact:
In May 2012 the mineral consultancy, SRK Consulting of Johannesburg,                   Mr Stephen Miller
South Africa were commissioned by the WCP joint venture partners to                 Executive Director/CEO
undertake a technical and economic feasibility study for the development                      Or
                                                                                     Investor relations
of the Project. In October 2013, SRK Consulting delivered to the project
                                                                                        in South Africa:
partners the results of the feasibility study (FS). A summary of the                     Bruce Tinney
activities arising from the FS in the period ending 30 June 2014 is set out           +27 (83) 408 3028
below.
                                                                                            E-mail:
EPC Contract                                                                          info@waterbergcoal.net

                                                                                       Corporate Details:
During the quarter, the WCP Partners awarded the Engineering,
                                                                                      Major Shareholders:
Procurement and Construction Management contract for the                         The Waterberg Coal Company Ltd
development of the plant and associated infrastructure to Ardbel (a joint
venture between ELB Engineering Services and the DRA Group).                         Directors and Officers:

Specifically, Ardbel’s brief is to design, manufacture, supply, delivery,           Non Executive Directors:
assemble, install and commission the 22mtpa coal handling and                       George Oupa Magashula
preparation plant (CHPP).                                                               Edwin Leith Boyd

Ardbel have also commenced work on a review of the project capital                          Officers:
                                                                               Mr Stephen Miller CEO and Executive
expenditure requirements arising from the SRK Feasibility Study. This
                                                                                             Director
process is envisaged to be completed mid-August 2014 and which will                 Ms Amanda Matthee CFO
complement the on-going optimisation of the overall project by the WCP            Mr Edwin Leith Boyd Company
project team.                                                                               Secretary

Ardbel also commenced preparation of a Project Execution Plan (PEP)                    ASX / JSE Symbol:
following completion of the Waterberg Coal Project Feasibility Study;                         FSE
which study is now the subject of due diligence by a Banking Syndicate
for the purposes of project funding. The PEP should be completed during         Web: www.firestoneenergy.com.au
August 2014.
Project Optimisation Study

The WCP technical team continued to work on project “value engineering” and optimisation;
focussing on production scheduling, savings on mining contractor costs, plant operating costs
and capital savings associated with the materials handling and CHPP.

Pursuant to the optimisation work being undertaken on both the mine plan and infrastructure
development; the WCP are currently engaging with Exxaro Resources Limited (Exxaro) to
investigate the potential of sharing of logistics infrastructure in future.

The JSE listed Exxaro is the operator of the immediately adjacent Grootegeluk Mine which
currently produces approximately 18 mtpa of coal product and is also looking at expanding its
operations through the development of the Thabametsi coal project which shares a common
boundary with the WCP. The Grootegeluk mine has been producing coal for over 25 years.

The WCP team have been engaging with the “short listed” mining contractors during the
quarter with a view to finalisation of the process to appoint a preferred mining contractor. It is
anticipated that the preferred mining contractor status should be awarded in the September
quarter.

Eskom; Coal Supply Agreement (CSA) negotiations

Pursuant to the Eskom MOU; Eskom have now been provided demonstrable evidence that the
quantum and qualities of the specified coal can be delivered by the WCP Joint Venture. During
the quarter, Eskom requested that the proposed offtake term be increased from a 30 year
period, to a 40 year period.

Subsequent to receiving the updated economic model, Eskom has relaxed the very strict cut
off for coal specifications which will increase the yield and reduce the operating costs. The
WCP technical team have adjusted the economic model accordingly. As a result of this, Eskom
and WCP are now able to advance discussions to reach agreement on price for delivery of the
specified coal product requested by Eskom. The basis for price negotiation is a base price and
escalator, with five-yearly price re-openers.

WCP have notified Eskom that a construction build commencing January 2015 would see first
coal product in Q4, 2015.

Project funding

As previously advised, the Standard Bank of South Africa Limited (SBSA), have been
mandated to arrange project finance for the construction and development of the WCP. SBSA
have appointed Hatch Goba as the Independent Technical Consultant to review all technical
matters for the WCP as part of its due diligence for the credit process.

During the quarter, the WCP team continued to work closely with Hatch pursuant to the review
process. The team expect completion of the Hatch review by the end of August 2014.

WCP Stakeholder engagement

Interaction by the WCP technical team with strategic stakeholders continued during the
quarter, including meetings with the Lephalale municipality and participation at the Strategic
Infrastructure Project 1 forum.




                                                                                            2
New Office - Johannesburg

During the quarter, the WCP took occupation of its dedicated project offices in Sandton,
Johannesburg. This stronger physical presence coupled with the appointment of additional
members to the technical team, including the project metallurgist and a project manager
reflects the increasing activity as the project further ramps up towards project “readiness”.

Working capital loan

During the period, FSE entered into a further loan agreement with The Waterberg Coal
Company Limited (WCC) (ASX/JSE: WCC), the 45.88% major shareholder in FSE. WCC will
provide additional funding of up to A$3million to be used for FSE’s obligations in relation to the
WCP.

The loan will be under the same conditions as the prior loan. Material terms of which are:

      WCC grants an additional loan facility of up to $3m to be used towards project
       expenditure.

      No interest is payable on the loan.

      The loan is unsecured.

Corporate Activities

During the quarter FSE announced the resignation of Mr Jonathan Hart as Company
Secretary and the appointment of Mr Edwin Leith (Lee) Boyd as Company Secretary with
effect from 21 May 2014.



Stephen Miller
Chief Executive Officer

www.firestoneenergy.com.au




                                                                                             3
Table 1 – Coal Resource on all six Waterberg Coal Project Properties under both
Prospecting Permit and Mining Right
                                                                         CV
                                 Coal       Ash %      IM %   Vol %               TS %
Resource Classification                                                (Mj/kg)
                           Resource¹(Mt)     (ad)     (ad)    (ad)               (ad)
                                                                        (ad)
Measured                       2070.3        57.9      2.2      17.6   10.51     0.96
Indicated                       856.3        59.4      2.3      17.2    9.96     1.00
Inferred                        956.7        58.9      2.2      17.5    10.26    1.03
Total Resources                3883.3        58.5      2.2      17.5    10.33     0.99
Coal Resource ¹ based on minimum thickness cut-off of 0,5m


Note 1: Competent Person Statement

Gemecs (Pty) Limited was commissioned by the Waterberg Coal Company "WCC", to undertake an Updated Independent
Persons Geological Report for the Sekoko Waterberg Coal Project.

The Coal Resources were estimated in accordance with the South African code for the Reporting of Exploration Results,
Mineral Resources and Mineral Reserves (“SAMREC Code”), Australasian Code for Reporting of Exploration Results. Mineral
Resources and Ore Reserves (“the JORC Code”) and South African National Standard (SANS 10320:2004) guidelines.

The information in this announcement that relates to Exploration Results, Mineral Resources or Ore Reserves is based on
information compiled by Mr Coenraad D van Niekerk, Pr.Sci.Nat (Reg. No 400066/98), M.Sc Hons (Geology), MDP, an
employee of Gemecs (Pty) Limited, who is a Fellow of the Geological Society of South Africa. Mr Niekerk is a mining geologist
with 38 years’ experience in the mining industry, sufficient experience relevant to the style of mineralisation and type of
deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the
2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Niekerk
consents to the inclusion in the announcement of the matters based on this information in the form and context in which it
appears.
Appendix 1 – Interests in mining tenements held
Tenement table

WCC has an interest in the following Exploration and Mining Licences.
Licences are located in South Australia:
                                                   Interest at
Property Name              Tenement                Beginning and        Status
                                                   End of Quarter

Lyons                      EL 5221                 100%                 Exploration Licence

Glenloth                   EL 5397                 100%                 Exploration Licence.

Claypan Dam                EL 4445                 100%                 Exploration Licence




The Company’s interest in the Waterberg Coal Project, located in South Africa:
Properties        Right under        Relevant          Holder          Interest at    Issue Date     Expiry Date
                  which       the    Joint Venture                     Beginning
                  properties are                                       and End of
                  held                                                 Quarter
Vetleegte         Vetleegte          First Joint       Uzalile Joint   37.39%         Granted        Renewal lodged 19
                  Prospecting        Venture           Venture                        New Order      September 2011 and
                  Right                                (Sekoko                        Prospecting    prior to the expiry date.
                                                       Resources                      Right    No.
                                                       and Uzalile)                   651/2006,      Section 18(5) of the
                                                                                      on 19/10/06    MPRDA provides that
                                                                                                     prospecting right in
                                                                                                     respect of which an
                                                                                                     application for renewal
                                                                                                     has been lodged will
                                                                                                     remain in force until
                                                                                                     such time as the
                                                                                                     renewal application has
                                                                                                     been      granted    or
                                                                                                     refused.
Olieboomsfontei   Duikerfontein      First Joint       Sekoko Coal     37.39%         Granted        3 July 2016
n                 Prospecting        Venture                                          New Order
                  Right                                                               Prospecting
                                                                                      Right    No.
                                                                                      681/2007,
                                                                                      on 13/10/05.
                                                                                      Renewal on
                                                                                      3 July 2013
Duikerfontein     Duikerfontein      First Joint       Sekoko Coal     37.39%         Granted        3 July 2016
                  Prospecting        Venture                                          New Order
                  Right                                                               Prospecting
                                                                                      Right    No.
                                                                                      681/2007,
                                                                                      on 13/10/05.
                                                                                      Renewal on
                                                                                      3 July 2013
Swanepoelpan      Duikerfontein      First Joint       Sekoko Coal     37.39%         Granted        3 July 2016
                  Prospecting        Venture                                          New Order
                  Right                                                               Prospecting
                                                                                      Right    No.
                                                                                      681/2007,
                                                                                      on 13/10/05
Smitspan          Mining Right       Second            Sekoko Coal     37.39%         Granted        16/09/2041
                                     Joint Venture                                    New Order
                                                                                      Mining Right
                                                                                      No. 22/2011,
                                                                                      on 17/09/11


                                                                                                                      5
Massenberg        Mining Right   Second          Sekoko Coal   37.39%   Granted        16/09/2041
                                 Joint Venture                          New Order
                                                                        Mining Right
                                                                        No. 22/2011,
                                                                        on 17/09/11
Minnasvlakte      Mining Right   Second          Sekoko Coal   37.39%   Granted        16/09/2041
                                 Joint Venture                          New Order
                                                                        Mining Right
                                                                        No. 22/2011,
                                                                        on 17/09/11
Hooikraal         Mining Right   Second          Sekoko Coal   37.39%   Granted        16/09/2041
                                 Joint Venture                          New Order
                                                                        Mining Right
                                                                        No. 22/2011,
                                                                        on 17/09/11


Johannesburg 31 July 2014
Sponsor
Rivergroup




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