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

Client
Waterberg Coal Joint Venture, which comprises 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 that 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 standard for transactions of this type.

Project Description
The Waterberg project has a significant Joint Ore Reserves Committee-compliant resource of 1.88-billion tonnes 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 first stage of the project involves the development of the Smitspan mine, which has a substantial measured thermal coal resource. A definitive feasibility study on the project has shown that the Smitspan farm contains sufficient coal to produce about 120-million tonnes of coal for power stations, with some of the higher-grade coal suitable for the metallurgical and thermal export markets.

The project also entails the development of the Vetleegte mine, which is a substantial metallurgical coal deposit.

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 Waterberg Coal Joint Venture partners have completed a feasibility study on the development of an opencast mining operation to produce ten-million tonnes a year of coal for Eskom for an initial term of 30 years.

The study was completed pursuant to the memorandum of understanding (MoU) with Eskom for the proposed coal supply agreement (CSA) and is confidential.

The JV partners are updating the study, which will be released as a full bankable feasibility study (BFS) on completion.

A condition precedent of the CSA is for Eskom to complete a burn test on a bulk sample of about 200 000 t of product. Eskom has taken delivery of this bulk sample and it will be tested over the course of 30 days.

Discussions between the JV partners and Eskom on the terms of the CSA are well advanced.

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.