Company announcements

Quarterly Activities Report for the 3 month period ended 30 September 2013

31 October 2013

The Board of Firestone Energy Limited (ASX/JSE: FSE) (the “Company”, "FSE" or “Firestone”) is pleased to provide Shareholders with its Quarterly Activities Report for the 3 month period ended 30 September 2013.

The Waterberg Coal Project: The Definitive Feasibility Study

As previously advised to the market, SRK Consulting of Johannesburg, South Africa were commissioned by the Waterberg Joint Venture Partners to undertake a Definitive Feasibility Study (“DFS”) on a proposed development of an opencast mining operation to produce 10 Million tonnes of coal (product) per annum to Eskom for an initial term of 30 years pursuant to the Memorandum of Understanding (“MOU”) that the joint venture entered into with Eskom (the South African parastatal power utility) in March 2012 (as amended). During the quarter, the requisite technical work for the DFS was completed.

The project partners expect to publish the findings of the DFS to the market within the next two (2) weeks following compilation of the final outstanding reports.

The production of the DFS is one of the Conditions Precedent in the process of converting the current Eskom MOU to a Coal Supply Agreement.

As part of the DFS, the Project Partners technical team are engaging (on a regular basis) with strategic stakeholders, including inter-alia, Eskom, the Department of Water Affairs, and Transnet Freight Rail for the timely delivery of services to the project. These discussions regarding proposed arrangements for the delivery of service are progressing well.

Based on current discussions and arrangements, and subject to confirmation of funding arrangements, project start-up and pre-production works is expected to commence in April 2014. Based on this timetable, coal production is expected to commence in the third quarter of 2015.

Updated Resource Statement

In the June quarter, the joint venture partners reported that a drilling programme had been completed and an updated geological model was in the process of being completed. This exercise has now been completed. Accruing from this geological modelling, an updated resource statement was advised to the market on 24th October 20131.

The updated Independent Competent Persons Resource Statement reflects the increased borehole database following the completion of the 2013 drilling program on the four farms covered by the Mining Right (Smitspan, Massenberg, Hooikraal and Minnasvlakte), and the two farms held under Prospecting Rights (Vetleegte and Swanepoelpan).

The total GTIS Coal Resource on all six of the properties is 3.883 billion tonnes; of which 2.070 billion tonnes is a Measured Resource (Table 1).

Table 1 – Coal Resource on all six Waterberg Coal Project Properties under both Prospecting Permit and Mining Right
Resource Classification Coal Resource 1 (Mt) Ash % (ad) IM % (ad) Vol % (ad) CV (Mj/kg) (ad) TS % (ad)
Measured 2,070.3 57.9 2.2 17.6 10.51 0.96
Indicated 8,56.3 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 3,883.3 58.5 2.2 17.5 10.33 0.99
Coal Resource 1 based on minimum thickness cut-off of 0.5m

The updated Resource Statement represents a significant increase in the coal resource of the Waterberg Coal Project over the previously disclosed resource statement. SRK Consulting (Pty) Limited (December 2012) declared a GTIS resource of 1.183 billion tonnes on the two farms Smitspan and Massenberg, of which 1.005 billion tonnes was in the Measured category.

The doubling of the Measured Resource to 2.0 billion tonnes gives the Project Partners technical team the flexibility to optimise the SRK Definitive Feasibility Study mine plan, currently set up to supply 10 million tonnes of coal per annum to Eskom. We expect optimisation of the mine plan to have a favourable impact on yields, operating costs, and annual production tonnes.

A further drilling programme comprising 55 boreholes is planned in order to upgrade the geological confidence from inferred to indicated levels on the remaining farms. 30 of the holes are scheduled to be drilled on Hooikraal, and the remainder on Massenberg, Swanepoelpan and Vetleegte.

Surface rights

During the quarter, arrangements were concluded for the purchase of the surface rights of the farms of Massenberg and Swanepoelpan. As at the current date, the Joint Venture Partners have now either purchased, or completed arrangements to purchase the surface rights of Smitspan, Massenberg, Hooikraal, and Swanepoelpan.

Corporate Activities

During the quarter FSE advised the market that it had entered into a loan agreement with The Waterberg Coal Company Limited (WCC) whereby WCC would advance up to A$3 million to be used for FSE’s project finance obligations in relation to the Waterberg Coal Project. The loan is unsecured and non-interest bearing. During the quarter, FSE drew down on the WCC loan facility.

Subsequent to the end of the quarter (10 October 2013); the Company received notification from The Waterberg Coal Company Limited that its off-market takeover bid for all the ordinary shares in FSE had closed. At the conclusion of the offer, The Waterberg Coal Company Limited’s shareholding in FSE was 45.88%.

Quarterly Activities Report for the Period to 30 September 2013 and Appendix 5B

Yours sincerely
Stephen Miller
Chief Executive Officer
www.firestoneenergy.com.au

Footnote:

1Competent Person Statement

Gemecs (Pty) Limited was commissioned by the Waterberg Coal Project Joint Venture Partners, to undertake an Updated Independent Persons Geological Report for the 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.

This resource upgrade and attaching report was advised to the market and lodged with ASX on 24th October 2013.

Johannesburg
31 October 2013

Sponsor
River Group

About Firestone Energy

Firestone Energy Limited is an independent, Australian exploration and development company listed on the Australian Stock Exchange Ltd (ASX) and the Johannesburg Stock Exchange (JSE). Firestone Energy has entered into a Joint Venture with Sekoko Resources (Pty) Ltd through which Firestone Energy has acquired the right to 60% participation interests in the Waterberg Coal Project located in Lephalale area, Limpopo Province, South Africa.

The first stage of the project is to develop the Smitspan mine which has a substantial measured thermal coal resource and to develop the Vetleegte mine which is a substantial metallurgical coal deposit.

Firestone Energy is committed to becoming a profitable independent coal and energy producer at its projects in South Africa, thereby making a substantial contribution to the social and economic development of the Lephalale area and South Africa.

Corporate Details

ASX: FSE
JSE: FSE

Issued Capital: 3,549 million ordinary shares

Major Shareholders:
The Waterberg Coal Company Ltd
Sekoko Resources (Pty) Ltd
Linc Energy Ltd
BBY Nominees Pty Ltd

Directors and Officers

Non Executive Directors:
Tim Tebeila (Chairman)
Dr Pius Kasolo
Ben Mphahlele
Brian McMaster
David Knox

Officers:
Mr Stephen Miller CEO and Executive Director
Ms Amanda Matthee CFO
Mr David McEntaggart Company Secretary

Contact:
Level1, 33 Richardson St, West Perth,
Western Australia 6005
Tel: +61 (08) 9200 4465
Fax:+61(08) 9200 4469
Web: www.firestoneenergy.com.au

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© 2013 Firestone Energy