The failure of Australian company Ariona to provide the second stage of financing due to be provided to Firestone Energy by last Thursday for the development of its joint venture open-cast thermal and coking coal mining project in the Waterberg in Limpopo has not been explained.
The financing hiccup coincides with a takeover offer for Firestone by Australian gold mining company Range River Gold for R270 million.
A third element is the sudden and unexplained resignation yesterday of David Hillier, an Australian director representing Ariona.
Firestone chief executive David Knox, who was in Johannesburg yesterday, said he did not know why Hillier had resigned or why Ariona, together with BBY Nominees and Jaguar Funds Management, did not fulfil its financial commitment to Firestone.
Firestone’s South African black economic empowerment partner is Sekoko Resources, whose chairman, Timothy Tebeila, is also the chairman of Firestone.
Ariona agreed with Firestone last June to acquire a 25.7 percent interest in Firestone from Sekoko.
Firestone would also issue new convertible notes to Ariona, amounting to A$40.7 million (R376m), to enhance Firestone’s balance sheet.
Ariona is a special purpose vehicle representing a consortium of international institutional and private investors focusing on global resource opportunities.
Firestone said yesterday that it was discussing with Ariona the rescheduling of the second stage and final stage of the share sale agreement. It would make a further announcement once a new date for the second stage had been set.
Firestone resumed trading on the Australian Securities Exchange and the JSE yesterday, after requesting and being granted a halt to trading last Thursday, pending the release of an announcement on the final completion under the financial structure by Ariona.
Last week Firestone reaffirmed its advice to shareholders to take no action on the proposed Range River takeover until it had received and considered the target’s statement.
Range River is offering one Range River share for every two Firestone shares held.
Range River also proposes changing its name to the Waterberg Coal Company.
Firestone said that the Australian Securities and Investments Commission had granted it relief to amend the timetable for dispatching Range River’s statement to Firestone’s shareholders. The target’s statement will be sent to shareholders no later than March 14.
Range River said its offer represented a 25 percent premium to Firestone’s closing price on December 13 of A$0.008 a share.
It said the offer was subject to, among other conditions, a minimum acceptance of 50.1 percent of Firestone shares on issue at the end of the offer period.
Range River said it had signed a conditional heads of agreement to acquire the entire issued capital in Ariona, as announced on December 12.
It said it and Ariona had assembled a strong local management team and a strategy that could extract real value from the Waterberg coal project in a timely manner.
Range River said on completion, the structure of the project would be considerably simpler and easier to operate and finance, with Range River controlling 70 percent and its partner with Sekoko left with 30 percent.
Sekoko has signed a memorandum of understanding with Eskom to supply it with 10 million tons of thermal coal annually over 30 years from 2019.
Firestone shares fell 12.5 percent to 7c yesterday.