Firestone Energy Limited : Quarterly Activities Report for the period to 31 December 2011

Quarterly Activities Report for the period to 31 December 2011 31 January 2012

The Board of Firestone Energy Limited (ASX/JSE: FSE) ("Firestone" or the "Company") is pleased to provide shareholders with its Quarterly Activities Report for the 3 month period ended 31 December 2011.

Highlights

• The off-take and/or coal supply MoU renegotiations to secure increased tonnages and an extended supply period are ongoing,
• Ongoing discussions with a listed multinational mining and power company with regards to investing in the project,
• Technical and environmental work on track, and
• Sekoko Resources (Sekoko) has made a restructuring proposal to Firestone to streamline the overall joint-venture operations.

Overview

Since joining the company at the beginning of the 3rd quarter of 2011, David Knox, the Firestone CEO, has focused his attention on working closely with the newly appointed management team at Sekoko, its major shareholder and joint venture partner. A review of operations, allocated resources and costs found that the Company's respective resources have been operated in accordance with the requirements of the project.

The Company continues discussions with Eskom to secure increased tonnages and extend the supply period. In the event that the Company is successful in this initiative, the overall project may need to be re-modelled and re-budgeted.

Firestone received a proposal from Sekoko, which if implemented, would more closely align the management and economic interests of the two organisations. The advantages outlined in the proposal include streamlining management, simplifying the joint venture structure and providing a more easily understood investment vehicle for both the equity and debt markets. We expect to be able to provide updates during Q2 2012.

Funding

In relation to the funding arrangements between Sekoko and IDC, the Company confirms that it has been informed by Sekoko that the drawdowns under the facility have commenced. The Company, however, understands from Sekoko that the balance of the IDC facility is subject to certain conditions (which are usual for project development facilities) being fulfilled by 30 June 2012. Furthermore, Sekoko has confirmed that approval of the Australian Foreign Investment Review Board has been obtained. The company is assessing the current budget and expenses with regards to its ongoing and potential future contribution to the joint-venture operation. In light of this, it may be necessary to raise additional capital during 1st half, 2012. The company will advise shareholders accordingly.

Marketing Eskom MOU

The board and Sekoko's designated project team are working to finalise a revised MoU and further announcements will be made in due course.

Corporate

Sekoko appointed Mr Jan Britz as CEO, Jan is an experienced mining engineer with extensive experience in the coal mining industry.

Ms Amanda Matthee was appointed Sekoko CFO. Both Firestone and Sekoko now have a focused executive team driving the joint-venture business.

During the quarter, Timothy Tebeila joined the Firestone Energy board as Chairman. His appointment follows a decision made by David Perkins who has held the position of Chairman since January 2011, and recently relinquished the position due to other work commitments. David Perkins will remain a non-executive director and assume the role of Deputy Chairman.

Firestone has mandated a highly regarded sector analyst to cover the Company. A review of the Company's corporate profile is being carried out and is now in the process of being updated by Q1 2012. The corporate profile will be regularly up-to-dated and include industry peer benchmarking, while providing continued analysis on the Company's material activities to the market.

Cornerstone investor

Discussions have continued with a major listed mining and power company to conduct due diligence on the project and further announcements will be made in due course.

Outlook

The Company continues to focus resources on concluding terms with Eskom and working to secure a satisfactory outcome with the proposed cornerstone investor. The management of the joint venture are working closely and costs are being kept to a minimum. The Company is confident of its positioning to unlock value in the project.