[miningmx.com] – FIRESTONE Energy, and its joint venture partner,
Sekoko Resources, said they were reviewing an offer to invest in 30% of their
Waterberg Coal Project from The Tata Power Company (Tata).
As the joint venture partners value the coal project, currently under review, at some
R1bn, the proposed investment will total R300m ($40m). If accepted, Tata would
provide an interim debt funding convertible into shares in the joint venture, and a
final stage investment directly into shares.
“The Firestone board is assessing the offer to ensure that it fully reflects the
value of this significant asset,’ said David Knox, CEO of Firestone Energy. Firestone
described the offer as “highly conditional’ in its JSE announcement on Wednesday.
Firestone and Sekoko Resources are currently reviewing the Smitspan section of the
Waterberg Coal Project with a view to dramatically increase its annual production.
This is owing to negotiations with a cornerstone investor, now revealed to be Tata,
which seek a certain amount of offtake from the joint venture. Negotiations with
Eskom, which will also seek offtake to help supply its power-generation expansions,
will also affect the annual production of the mine.
“The receipt of such an offer vindicates the board’s belief in the Waterberg Coal
Project and adds confidence for the future,’ Knox said in its statement.
This is the second investment by Tata Power in southern Africa’s energy industry this
week. On Monday, it announced with Exxaro Resources that the two companies had
formed a 50:50 joint venture – called Cennergi – to identify and invest in independent
power producers in Botswana, Namibia and South Africa.
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.
