smitspan development halted

1st March 2012



JOHANNESBURG (miningweekly.com) – Coal development company Firestone Energy on Thursday said it had stopped all exploration and development work at its Smitspan farm coal project until the new parameters of the project had been finalised, following a multinational cornerstone investor coming onboard.

The company said it was in negotiations with State-owned power utility Eskom over the delayed start of production from Smitspan, in Limpopo.

Current discussions with Eskom and the new cornerstone investor, which Firestone did not name, had resulted in the plan to develop the mine differing substantially from the existing mine plan.

“Our previous development plan intended to start production of coal at the rate of about 500 000 t/y from April. However, our production expectations derived from present negotiations exceed this level of production to such an extent as to make the current mine plan irrelevant.

“In light of this, Firestone has suspended further exploration and development expenditure until the parameters of these anticipated new arrangements are better known,” the company said in a statement.

Firestone has a Joint Ore Reserves Committee-compliant resource of just under 1.9-billion tons of coal in the Smitspan farm. Based on current expectations and a review of the project plan, Firestone expected to start production in 2014.

The revised assumptions about potential rates of production have resulted in a reassessment of the environmental approvals and water use licences.

The process of transferring the mining right to the intended incorporated joint venture company involves a substantial reorganisation of the Firestone corporate structure. The assets and shareholdings of Firestone’s South African subsidiaries are being reorganised in order to accommodate the organisational structure which is set out in both black economic-empowerment partner Sekoko’s funding agreement with the Industrial Development Corporation and the initial Eskom memorandum of understanding.

“This restructuring of Lexshell 126 General Trading, a wholly owned subsidiary of Firestone, is prerequisite to the lodging of the application to transfer the mining right. Auditor KPMG has provided an opinion on the detailed steps that should be followed to achieve the restructuring objectives, and it is anticipated that this restructuring will be completed during the second quarter of 2012,” Firestone stated.


http://www.miningweekly.com/article/smitspan-development-halted-as-firestone-brings-in-new-investor-2012-03-01