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Firestone Energy is making good progress with its definitive feasibility study on its coal project in the Waterberg and hopes to produce 10 Mtpa of coal to Eskom in H2, 2015.

During the quarter, the Waterberg Joint Venture Partners continued the progression of the Definitive Feasibility Study (DFS) on the proposed development of an opencast mining operation to produce 10 million tonnes (Mt) of coal per annum to Eskom for an initial term of 30 years pursuant to the Memorandum of Understanding (MOU) that the joint venture entered into with Eskom in March 2012 (as amended).

The production of the DFS is one of the Conditions Precedent in the process of converting the current Eskom MOU to a Coal Supply Agreement. The Chapters of the DFS are in final draft stage, and the technical team are currently interrogating the financial model as prepared by SRK and reviewing the proposed mine plan.

As part of the DFS, the technical team are engaging with strategic stakeholders, including inter-alia, Eskom, the Department of Water Affairs and Transnet Freight Rail about the delivery of services to the project. These discussions regarding proposed arrangements for the delivery of service are progressing well.

Based on current discussions and arrangements; and subject to confirmation of funding arrangements, project start-up and pre-production works is expected to commence in January 2014; and coal production is expected to commence in the 2nd half of 2015.

Drilling

All Phase 2 drilling to delineate major faults on the Smitspan project area and extend the resources on Smitspan and Massenberg, was completed during the June quarter. Drill samples have been submitted to the laboratory and sample an results are expected at the end of July. A further 55 boreholes are planned in order to upgrade the geological confidence from inferred to indicated levels on the remaining farms. Thirty of the holes are scheduled to be drilled on Hooikraal, and the remainder on Massenberg, Swanepoelpan and Vetleegte. The drill rigs are already onsite at Massenberg.

Interim Resource Statement
During the June quarter SRK released an Interim Resource Statement1, covering the Smitspan and Massenberg properties only. The updated Resource Statements reflect a resource tonnage of 1,090.88Mt at Measured Status, 69.04Mt at Indicated Status, and 23.27Mt at Inferred Status for Smitspan and Massenberg. The balance of the resources on the farms held under Mining Rights and Prospecting Rights are not included in this estimate and reflect further potential.

Geological Model

A new contract has been negotiated with Sable to maintain and update the Sekoko Geological Database. The updated database will be passed onto Gemecs Pty Limited, who will create a new Geological Model incorporating the data, to be used for both a Resource update and further mine planning and value engineering pursuant to the DFS.

Surface rights

During the quarter, negotiations for the purchase of surface rights, commenced with the surface rights holders. It is expected that agreements with current owners will be finalised during the next quarter.

Corporate Activities

There were several board changes during the quarter with the resignation of David Perkins, deputy chairman, Oren Zohar, Jack James and Kobus Terblanche. Brian McMaster, Stephen Miller and David Knox were appointed to the board. Additionally, Stephen Miller was appointed CEO of the company, replacing David Knox.

The company continued discussions during the quarter with interested parties regarding the future funding for Firestone. Discussions are on-going. The company received notification during the quarter that the Waterberg Coal Company’s off-market takeover bid for all the ordinary shares in Firestone had been extended to 30 July 2013.

Firestone Energy Limited is an independent, Australian exploration and development company listed on the Australian Stock Exchange and the Johannesburg Stock Exchange.

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