Company announcements

Quarterly activities report for the period to 30 September 2010

22 October 2010

The Board of Firestone Energy Limited (ASX/JSE: FSE) provides shareholders with its Quarterly Activities Report for the 3 month period ended 30 June 2010.

Highlights

  • The assessment of the New Order Mining Right (“NOMR”) Application by the Department of Minerals Resources (“DMR”) for the Waterberg coal project (“Waterberg Project”) in Limpopo is ongoing and in progress;
  • Ongoing progress with the Bankable Feasibility Study (BFS);
  • Discussions with power producer(s) regarding off-take agreements and other major consumers who have expressed interest in securing a supply of coal from the Waterberg Project are ongoing; and
  • The tender processes for opencast mining contractors and wash/processing plant contractors are in progress and the appointment of preferred service providers will be made in due course.

Post Quarter Events

  • Parsons Brinckerhoff presented the results of the Feasibility Study document on the Waterberg Project to Management and the Board;
  • Agreement in principle on the terms of the draft Shareholders Agreement incorporating and consolidating the three previous joint venture agreements taking the JV Company closer to compliance with the relevant requirements for the granting of mining title legislation; and
  • Appointment of Sizwe Nkosi as Financial Director in the place of Amanda Matthee who resigned to pursue other opportunities.

Planned Activities for next Quarter ending 31 December 2010

  • Continue BFS and associated studies for the Waterberg coal mining project. Meet with potential contractors and suppliers, and collate within the BFS.

Commenting on the results today, John Dreyer, Chairman of FSE, said, “I am pleased to announce that the Company’s Waterberg coal project continued to be developed according to schedule. In addition, the Company is in advanced stages of negotiations with the potential buyers of the Waterberg Project thermal coal in Limpopo. Furthermore, the Company expects the granting of a New Order Mining Right for its Waterberg Coal Project before the end of Q2 2011 and production is expected to follow within 12 months of concluding the necessary offtake agreements and receiving the required legislative approvals.”

Overview

Waterberg Coal Project JV Project

The BFS is progressing well and Parsons Brinckerhoff has been mandated to complete the Definitive Feasibility Study document on the Waterberg Project, results of which were presented to Management and the Board beginning of October 2010. The evaluation of the Waterberg Coal Project will continue with a view to receiving necessary regulatory approvals. Negotiations with potential developers, financiers and off-take parties will be progressed as the final Feasibility Study is advanced.

As reported during Q2 2010, the New Order Mining Right Application for the Waterberg Project was lodged and the Environmental Scoping Report was submitted to the Department of Mineral Resources (DMR) during the quarter. Specialist studies for the Environmental Impact Assessment and Environmental Management Plan are almost complete and due to be submitted during Q4 2010. Furthermore, an amended Acceptance Letter of the Waterberg Project New Order Prospecting Right was submitted to the DMR for the inclusion of the Duikerfontein and Swanepoelpan farms. As previously announced, subject to the granting of the New Order Mining Right, the current planning and project progress, suggests that the Waterberg Project remains on schedule for delivering first coal in the second half of 2012.

Negotiations with surface rights owners on the Waterberg Project is ongoing to allow for the development of the required infrastructure once all necessary legislative approval has been granted.

The tender processes for both the mining contractor and the supply of the design and construction of a wash /processing plant are still in progress. A Memorandum of Understanding will be signed in due course with the preferred Service Providers.

Commitments will be made for procurement of long-lead items for the Waterberg Coal Project, construction will commence following the receipt of final regulatory approvals and transport alternatives will be progressed.

Marketing Off-take Arrangements

Initially coal will be supplied to local markets within South Africa, and other major consumers, which have also expressed interest in coal off-take agreements. Logistics feasibility studies are being assessed as part of the BFS.

Discussions are continuing with various parties regarding long term off-take agreements for domestic and export coal mined at Waterberg; together with the short and long term lean coal production. In addition, an offer for the sale of thermal coal has been submitted to power producer(s).

Corporate

As at 30 September 2010 FSE had consolidated cash reserves of A$1.5million, Management continues to monitor costs carefully and implement cost reduction strategies were necessary.

Appointment of a Director

On 30 September 2010, the Company announced the appointment of Mr Sizwe (“Sizwe”) Nkosi as Sekoko Resources’ nominee director to the FSE Board, effective from 3rd November 2010. Mr Nkosi replaced Ms Amanda Matthee, who has resigned from Sekoko Resources and from the FSE Board as the director.

Mr. Nkosi is a registered South African Chartered Accountant and has a MBA degree from the University of Cape Town`s Graduate School of Business. Sizwe started his career with Foskor Limited as a Financial Manager and De Beers as the Senior Management Accountant. Prior to joining the Company some three years ago Sizwe worked for Investec Bank Limited "Investec", a reputable South African merchant and investment bank, with a role focussed in mergers and acquisitions.

For further information please contact:

Mr. John Dreyer
Chairman
Tel: +61 8 9381 2755
Fax: +61 8 9381 4799

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