Name and Location
Waterberg joint venture (JV) coal project, Limpopo, South Africa.

Client
Firestone Energy (60%) and Sekoko Resources (40%).

In June 2012, Sekoko and Ariona Company, a special-purpose vehicle representing a consortium of international institutional and private investors, which focuses on global resource opportunities, signed a formal share sale and purchase agreement (SPA). Signing the SPA means that Firestone will have a new substantial shareholder, Ariona, which will control between 19.9% and 25.69% of the issued capital of the company. The transaction is subject to several conditions precedent, which are normal to transactions of this type.

Project Description
The Waterberg project has a significant Joint Ore Reserves Committee-compliant resource of 1.88-billion tons of high-quality coal. It comprises eight farms in the Waterberg coalfield totalling about 7.8 ha.

The project is located 5 km to the west of the Grootegeluk colliery mining lease boundary, about 240 km north-west of Pretoria and 70 km south of the Botswana border. The area is accessed through the R517 between Modimolle and Lephalale. The rail line from Thabazimbi terminates north of the Grootegeluk colliery, with power lines from the Matimba power station traversing the area.

The proposed project entails the construction of an opencast coal mine on the Smitspan farm. The definitive feasibility study (DFS) has shown that the Smitspan farm contains sufficient coal to produce around 120-million tons of coal for power stations, with some of the higher-grade coal suitable for the metallurgical and thermal export markets.

The DFS, updating the prefeasibility study released earlier by the company, shows that a standalone 1.5-million-ton-a-year mine will be economically viable within the first five years of operation.

The proposed Smitspan first-stage opencast mine has dimensions of 4.1 km west to east and 2.2 km north to west, with only a 75 m depth to the base of coal seam No 7, a low-waste/coal-strip ratio and top coal within 28 m of the surface.

Value
Construction of the mine is estimated at R500-million and will be built in phases, with the first module costing R40-million.

Duration
Production is expected to start in 2014.

Latest Developments
The technical team working on the Waterberg JV coal project continues to progress the bankable feasibility study (BFS) for the proposed mine.

The various specialist studies required for the completion of the BFS, namely environmental, rail, infrastructure, geotechnical and hydrology studies, started during the quarter ended December 31, 2012, and are well under way.

The environmental consultants have also initiated the public involvement process required to amend the existing environmental-right management programme at the project.

Meanwhile, Firestone has received A$600 000 of working capital funding from Ariona, a special-purpose vehicle representing international institutional and private investors, as part of a A$39.6-million investment agreement.

The funding will allow Firestone to focus on completing the BFS for the Waterberg coal project.

Key Contracts and Suppliers
Parsons Brinckerhoff (first stage of a DFS relating to the establishment of an opencast coal mine on the Smitspan farm); Sound Mining Solutions (mine design report); Virtual Consulting Engineers (infrastructure contractor); Ingwenya Mineral Tech (coal processing contractor); RCE Consultants (rail and civil engineering services) and the Industrial Development Corporation (finance).

On Budget and on Time?
The project’s BFS has been postponed to later this year.

Contact Details for Project Information
Firestone Energy (South Africa), tel +27 11 706 3542/48, fax +27 11 706 3573 or email enquiries@firestoneenergy.net.
Sekoko Resources, tel +27 11 706 3542/48 or fax +27 11 706 3573.