JOHANNESBURG (miningweekly.com) – ASX- and JSE-listed Firestone Energy has successfully executed a term sheet for the underwriting of a A$25-million capital raising to fund, among other things, a bankable feasibility study (BFS) for its Waterberg coal project, in South Africa.

The completion of a BFS study, at a cost of R50-million or A$7,1-million, would allow Firestone to earn an additional 30% stake in four properties adjacent to its Waterberg project.

This was in terms of a second joint-venture (JV) agreement with South African junior miner Sekoko Coal, signed in July, which allowed Firestone to earn an initial 30% interest in the four properties.

“Our resource, location and potential production and exploration upside is creating a very exciting medium- to long-term investment proposition.  The JV holds the rights to one of the largest holdings in the highly prospective Waterberg coal region, which is estimated to hold approximately 50% of South Africa’s remaining coal,” commented Firestone CEO Garth Higgo.

South Africa’s Department of Mineral Resources last week granted Sekoko Coal approval to start a small-scale mining operation at the Waterberg coal project.

The proceeds from the capital raising would also be used to meet financial commitments related to its JV partnership with Sekoko Coal, as well as for working capital requirements.

Further details of the capital raising would be published at a later date, the company said.

Firestone’s shareholders have now also approved the second JV agreement with Sekoko, which would see the exploration company reimburse Sekoko with up to R32,9-million for exploration and development work already undertaken by the junior miner on the four properties.

It would also issue Sekoko with R293-million worth of Firestone shares.

Further, a management fee of R50-million would also be payable to Sekoko, following the approval of the BFS and a decision to proceed with the project by the JV management board.

This amount would be payable over a seven-year period from the date of commercial production.

The JV was planning to start mining operations at the Waterberg project at a rate of 60 000-t/m run-of-mine by the end of the year. This was expected to yield between 30 000 t/m and 40 000 t/m of saleable coal.

The small mining operation would provide a starter pit for a large-scale 18-million tons a year, which was expected to start ramping up in 2011.

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