[miningmx.com] – FIRESTONE Energy, the JSE-listed coal exploration and
development firm, said it was reviewing proposed production levels at its 500,000
tonne per annum (tpa) Smitspan prospect, following supply negotiations with Eskom
and a multinational that may invest in developing the mine.
As a result, Firestone said that it had suspended further exploration and development
on Smitspan until it had pinned down an appropriate production schedule. Smitspan is
located in the Limpopo province’s Waterberg region, which is said to contain half
of South Africa’s remaining coal resources.
However, the 1.9 billion tonne (Bt) resource, as identified in the company’s definitive
feasibility study, was sufficient to meet end-user requirements, it said.
“Our production expectations, which are derived from present negotiations, exceed
this level [500 Ktpa] of production to such an extent as to make the mine-plan upon
which earlier production figures were formulated irrelevant to future operations as
currently anticipated,’ Firestone said in an “activities update’ on Thursday.
Additional exploration and development work on the proposed mine was subsequently
suspended until a new production level had been established.
Miningmx reported earlier this year that Firestone and its joint venture
partner, Seskoko Resources, were working on a reconfigured bank feasibility study
that would see first production from Smitspan in 2014, and that the mine would ramp
up to annual sales of 10 million tonnes (Mt) by 2019.
Commenting on a proposed memorandum of understanding (MoU) with Eskom,
Firestone said the MoU had not yet been concluded, but that it was comfortable with
negotiations and that it would conclude a supply agreement.
“The context within which the MoU is being concluded is complex and involves issues
that are significant to the development of the South African economy,’ it said.
Similarly, negotiations with the unnamed multinational investor were progressing but
taking longer than anticipated. “These negotiations have progressed much
more slowly than the board had initially anticipated, due in part to the length of the
due diligence process and the multinational decision-making processes of the
proposed investor,’ Firestone said.
RESTRUCTURING
Firestone Energy said it was also dealing with regulatory strictures ahead of
the mine development, including a “reassessment of environmental approvals and
water use licences’ as a result of potential changes to rates of production.
It said it was confident changes could be accommodated, and that discussions with
“various departments’ were progressing.
Firestone’s corporate structure was also being adjusted to comply with regulations
that would allow an application for the transfer of the mining right for Smitspan.
More specifically, Firestone has to restructure its South African subsidiaries in order to
meet with funding requirements secured by Sesoko Resources, which had raised
R250m from government-owned development agency, the Industrial Development
Corporation (IDC).
