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June 2015 Quarterly Activities Report
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")
June 2015 Quarterly Activities Report
The Waterberg Coal Project
Firestone Energy Limited (FSE) is a participant in the Waterberg Coal Project (WCP) joint
venture, situated in the Limpopo Province, South Africa. The Project currently has identified
coal resources of 3.883 billion tonnes1 of coal contained within the granted mining rights; of
which 2.070 billion tonnes are contained within the measured category1.
In October 2013, SRK Consulting (Australasia) Pty Ltd delivered to the project partners the
results of the definitive feasibility study (DFS) for the proposed development of a coal project
to deliver up to 10 million tonnes of coal product to Eskom Holdings SOC Ltd (Eskom) on a
take or pay basis, pursuant to a memorandum of understanding dated on or about 23 March
2012 (the Eskom Project).
A further DFS, for a proposed development of an export project mine, was completed in Q1
of 2015. This proposed development would see total production of up to 4 million tonnes per
annum (mtpa) of high quality export thermal coal product over a 3 to 4 year period (the
Export Project). This study was completed subsequent to the preparation of a DFS for the
proposed Eskom Project.
With respect to the Export Project DFS, an optimisation study is current in progress. A
significant focus of this optimisation study is the review of the projects capital requirements
with a view to enhancing the viability of the project. The optimisation includes consultation
with world-class plant designers and competitive contract vendors for the mining and
processing facilities and services. The WCP Partners are confident that the optimisation
process will derive positive outcomes resulting in considerable reductions in capital funding
requirements for the project.
During the quarter the WCP Joint Venture Partners (WCP Partners) and its consultants
revised its original washing process plans to enable production of a higher quality of coal
suitable for the export market.
Additionally, the optimised plant design allows flexibility for production of a higher quality
power station feed product. This power station product is planned to be stockpiled during
the export grade coal mining phase until the potential Independent Power Production (IPP)
platform is completed. Utilisation of this product as IPP feed will result in optimal resource
utilisation and a barren waste dump. Coal Processing Plant.
During the quarter WCP Partners commenced negotiations with experienced processing and
services providers for a build-own-operate (BOO) dual module plant, each with a 550 tons
per hour capacity.
The proposed plant design configures a two-stage wash process providing greater flexibility
in product quality output. The advantage of such a design is clearly an ability to optimise a
given product output mix to meet a range of commercial coal requirements including export
quality, IPP platform feed stock and Eskom specification product from the one plant.
The WCP Partners are confident that adopting a BOO strategy in conjunction with well
experienced operators will significantly reduce up front capital requirements and provide for
a swift progression to mining and production.
The WCP Partners expect to complete its evaluation of BOO providers during the
September quarter.
Mining Operations
Negotiations with a number of parties for the award of the mining contract were advanced
during the quarter. The bidding process, guided by our mining engineer, has progressed to
a point where we have indicative pricing on a ZAR/ROM per ton which is within the
parameters of the WCP Partners' financial modelling and with the WCP Partners' costings in
the DFS.
Project Water Supply
In October 2014 WCP Partners advised they had entered into a memorandum of
understanding with the Lephalale Municipal Council (LMC) with respect to the Paarl Waste
Water Treatment Facility (the Facility) whereby the WCP Partners will take over the
management and operation of the Facility for the purpose of supplying water to the WCP.
During the quarter the WCP Partners were in negotiations with the LMC to complete the
formally binding long form of the agreement.
The Facility has a treatment capacity of 10 million litres per day, or 3.64 million cubic metres
per annum which will provide the WCP with sufficient water not only for its proposed Export
Project development, but also Stage 1 of its proposed IPP development which is currently
under technical and economic assessment.
Project Optimisation Study - The Eskom Project
With the current focus on the Export Project and the IPP platform, value engineering work on
the Eskom Project remains a lower priority and will continue so until further direction is
received from Eskom in terms of advancing the status of negotiations with respect to the
Coal Supply Agreement.
Power Production for Project Construction Purposes
WCP Partners are in discussions with multiple parties regarding the onsite production of
power generation. Guided by WCP consultants, SMEC Australia Pty Ltd (SMEC), who have
extensive experience with this sector; they will be providing guidance and advice to the WCP
Partners in respect of electricity generation plant specifications to ensure achievement of
optimal technological configuration and operational efficiency for the plant. SMEC will also
be assisting the WCP Partners to identify the most pre-eminent project and funding partners.
Export Product Off-take Arrangements
Negotiations are ongoing with a number of international parties who have expressed
considerable interest in entering into a long term off-take arrangements for the export
product that is expected to be produced from the Export Project development.
Project Funding - The Export Project
Accruing from the preliminary results of the DFS and the optimisation studies for the Export
Project, the WCP Partners are in discussions with certain banks with respect to funding
arrangements for the proposed development. Pursuant to the financing discussions,
Snowden Mining Industry Consultants Pty Ltd (Snowden Group) has been commissioned
as independent technical experts to produce a due diligence report for the purposes of
project funding.
IPP Strategy
On 11 December 2014 the government of South Africa announced it would be turning to the
private sector to help solve its energy crisis. The government announced a "5-point plan" to
urgently bring about extra generation capability for an energy starved economy. The major
plank of the 5-point plan was the launching of a coal fired independent power producer
programme for an initial 2,500MW of generation capacity. Additionally, the government
announced it would be looking for co-generation options. WCP Partners has positioned itself
to capitalise on both sets of opportunities.
In preparation for the long awaited announcement of the IPP Programme; WPC submitted
registration of its intent to participate on 19 December 2014 having on 7 December 2014
lodged its registration with the Department of Environmental Affairs of its intent to build a
power generation plant to be situated within the confines of its existing granted mining and
prospecting rights; which collectively form the WCP area.
During the current quarter, WCP Partners have been preparing preliminary technical and
economic models to determine the most appropriate, capital efficient and economical fashion
in which to facilitate the development of an IPP Project from feed stock generated from its
proposed coal mining projects.
WCP Partners are currently engaging with a number of parties, including mining and civil
engineering contractors on the mining project(s); and potential technology partners, IPP
developers and financial groups to partner with it in creating a new independent integrated
energy company to be located within the confines of the WCP mining project area.
Corporate
Refinancing the SBSA Facility
On 16 March 2015 FSE advised the market that the funding facility made available by the
Standard Bank of South Africa (SBSA) to its major shareholder, the Waterberg Coal
Company Limited (WCC) (45.88%), was due for repayment on 9 April 2015. At that time
FSE advised the market that WCC were in discussions with respect to refinancing the SBSA
facility.
FSE and WCC sought a voluntary suspension of its shares whilst WCC conducted
negotiations with SBSA (and other participants) with respect to "refinancing" the SBSA
convertible note facility. Given that the international financial market and commodities
markets continue to be somewhat challenging; interested parties (in the refinancing) have
been undertaking very comprehensive due diligence programmes. This has resulted in the
process being drawn out much longer than originally anticipated. Negotiations are now at an
advanced stage and the Board is hopeful of finalising arrangements prior to expiry of the
current voluntary suspension period which is 10 August 2015.
Stephen Miller
Managing Director
Firestone Energy Limited
Table 1 - Coal Resource on all six Waterberg Coal Project Properties under both Prospecting Permit and Mining Right
Resource Classification Coal Resource1(Mt) Ash %(ad) IM %(ad) Vol %(ad) CV (Mj/kg)(ad) TS %(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 Resource1 based on minimum thickness cut-off of 0,5m
Note 1: Competent Person Statement
Gemecs (Pty) Limited was commissioned by the Waterberg Coal Company, 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 2004 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.
Corporate Information
FIRESTON ENERGY LIMITED
ABN 71 058 436 794
Registered office:
Level 2, 1 Walker Avenue West Perth, Western Australia 6005
Australia
Tel: +61 8 9485 0888
Fax: +61 8 9485 0077
South African office:
Level 1, The Place,
1 Sandton Dr
Sandton, 2146
South Africa
Tel: +27 10 594 2240
Fax: +27 10 594 2253
Contact:
Mr Stephen Miller
Managing Director
Or
Investor relations
in South Africa:
Lawrie Mackintosh
E-mail:
info@waterbergcoal.net
Directors and Officers:
Non-Executive Directors:
Dr Mathews Phosa (Chairman)
Edwin Leith Boyd
Officers:
Mr Stephen Miller Managing Director
Ms Amanda Matthee CFO
Mr Edwin Leith Boyd Company Secretary
ASX / JSE Symbol:
FSE
Johannesburg
31 July 2015
Sponsor
River Group
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