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marie Swanepoel
29th October 2009
Updated 4 hours ago
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JOHANNESBURG (miningweekly.com) – JSE- and ASX-listed coal explorer Firestone Energy on Tuesday reported that the prefeasibility study of its joint venture (JV) Waterberg coal project was approaching completion, and that draft reports were currently being reviewed.

Firestone said in a statement that during the quarter ended September, the company’s focus had been on completing the preparations and compilations of supporting documents for the mining right application, as well as the prefeasibility study.

Firestone’s JV partner in the project, Sekoko Coal, has been advised by the municipal authorities that these Waterberg new coal projects were “highly regarded as important future contributors to the local economy” and were a key part of the regional development strategy.

“This very strong local support from the Lephalale Local Municipality and the Waterberg District Municipality is expected to assist in expediting the permitting issues and the mining right application approval.”

Firestone reported that Sekoko Coal had been granted mining approval from the Department of Mineral Resources to start an initial small-scale mining operation from the Waterberg coal project. Permits were also in place to construct a box-cut/small-scale mine and develop a trial open-cut and underground mining operation.

It was planned to start mining operations by beginning of 2010 and would eventually build up to a rate of 60 000 t/m run-of-mine (ROM), which after washing would yield about 30 000 t/m of saleable coal. The small-scale mine would be low cost open-cut mining and mining contractors would be used for the operations.

Firestone stated that it was continuing to work towards securing an off-take sales agreement with State-owned power utility Eskom.

During the quarter under review, the company also received shareholder approval for a milestone transaction acquiring a 2,9-billion ton additional resource. The second JV agreement with Sekoko Coal was over four farms; Smitspan, Hooikraal, Minnasvlakte, and Massenberg.

Under the terms of the JV agreement, Firestone’s wholly JV whereby Lexshell would now earn an initial 30% interest in the properties in consideration by issue new shares to the value of R293-million, as well as a reimbursement of expenses to Sekoko of up to R32,99-million,which has been spent by Sekoko in the exploration and development of the properties.

Following the approval of the bankable feasibility study (BFS) and decision to mine by the management board of the JV, a management fee of R50-million was also to be paid to Sekoko over a seven-year period from the date of commercial production.

Firestone has the opportunity to earn a further 30% interest through spending R50-million to complete a BFS, enabling the establishment of a future commercial mining operation.
Edited by: Mariaan Webb