[miningmx.com] – SHAREHOLDERS in Firestone Energy ousted CEO, David Knox, and two fellow directors effectively tying a ribbon around the takeover of the company by Waterberg Coal Company (WCC).
About 1.63 million votes were cast against the re-appointment of Knox against 21,689 in favour at Firestone’s annual general meeting today.
Knox opposed the takeover of Firestone Energy by WCC (formerly known as Range River Gold) from the off, saying it undervalued Firestone’s potential as a coal development firm in the Mpumalanga province, and that the higher offer should also comprise a cash sweetener.
The all-scrip offer when it was first submitted by Range River Gold just under a year ago was at a 25% premium to Firestone’s then share price, equal to an offer of A$30m.
WCC subsequently listed on the Johannesburg Stock Exchange on September 30 in an effort to clinch the transaction. Although an outright takeover failed – 50.1% acceptance was required – WCC nevertheless secured the important vote of Sekoko Resources which took its stake in Firestone Energy to 45.65%. Sekoko shareholder, Tim Tebeila, is to leave the Firestone board.
Firestone Energy’s Waterberg Project is scoped to produce 10 million tonnes a year (mtpa) of thermal coal to Eskom. A bankable feasibility study at the end of October found that the project had doubled in measured resource to just over 2 billion tonnes.
The outcome of the proposed takeover is still untidy, however, owing to the “pyramid’ ownership structures between WCC and Firestone Energy which jointly provide access to the Waterberg Project. Miller, however, told the South African Coal Report in October that a return to consolidating Firestone Energy into WCC was a long-term inevitability.
Although executive director of WCC, Miller will effectively become the CEO of Firestone. “I’m responsible for the day-to-day activities of the project,’ he said in October. Miller could not be contacted today.
“It’s logical that in a point in time there should be a consolidation of interests,’ said Miller. “There are a lot of things going on at the moment, but there’s no doubt about that,’ he told the South African Coal Report.
Miller said the funding for the $400m Waterberg Joint Venture project will be completed in the first quarter of 2014 with construction beginning in April. First coal to Eskom will be produced in June or July of 2015, roughly a year later.
Standard Bank, a South African lender, is running the consortium that will finance the project and Miller confirmed speculation that UK bank, HSBC, was interested in adding its firepower to the financing structure.
WCC will be the focus of the finance. “Our expectation is that money will be available for this project,’ says Miller.
There are still headwinds, however. One is converting a memorandum of understanding (MoU), signed between Sekoko Resources and Eskom, into a coal supply agreement. At the moment, there’s a plan the coal be supplied at mine gate thereby removing the risk of building infrastructure for WCC, although this needs to be finalised.
In terms of the MoU, signed in May 2012, Sekoko tied itself to a 30-year supply agreement in terms of which the Waterberg Project would deliver 2mtpa by 2014 ramping up to 10mtpa by 2019. It replaced an earlier agreement in which Eskom would have been supplied with 525ktpa.
There’s also an application with South Africa’s Department of Mineral Resources (DMR) to extend the time WCC is allowed to turn the Waterberg Project to account. An extension of the original prospecting right has been provided which is perhaps a promising sign for the project.
