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Quarterly activities report

31 July 2009

Waterberg Coal Field South Africa

Olieboomsfontein 220LQ

Percussion drilling of the Olieboomsfontein property during the reporting period has intersected considerable thicknesses of coal including the preferred coal zones 5 11 close to surface. The drilling results at Olieboomsfontein are very encouraging and suggest there is considerable exploration potential to add to the Company's total coal inventory. On going feasibility studies will include this resource upgrade and evaluate the likely improvements in project economics.

Vetleegte 304LQ

During the quarter, the Company announced that the recently completed diamond drilling of the Vetleegte property has resulted in a 24% increase in the resource to 629.3 Mt. The resource upgrade for the Vetleegte property represents a significant increase over the 508Mt resource announced on 18 June 2008 and provides greater confidence in the coal deposit and confirms the Company's view that the Waterberg project is capable of sustaining substantial, long term coal production.

Coal Resource Estimate Gross Tonnes In Situ
	Inferred Mt	Indicated Mt	Total Mt
Vetleegte 304LQ	170.4	458.9	629.3

The resource has been estimated in accordance with the JORC code and is based on a 29 diamond drill hole programme of some 3,340m of advance; all holes intersected coal and have been utilised in the resource estimation. A breakdown of the resource by zone and category, and averaged coal qualities is provided below. Further drilling has been planned with the objective to establish a coal resource to a measured category in those areas of the farm Vetleegte where the preferred coal zones 5 11 inclusive occur lying close to ground surface.

Resource Estimation:

Information in this report that relates to exploration results, coal resources or reserves relating to the property Vetleegte 304LQ is based on information compiled by Mr Dawie van Wyk who is employed by GeoCoal (Pty) Ltd and is a member of the South African Council for Natural Scientific Professions. Mr van Wyk has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr van Wyk consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Northern Territory Australia

The two exploration licenses (ELs 7810 and 10166) near Tennant Creek in the Northern Territory continue to be managed by Emmerson Resources Ltd, on behalf of the Company. The Company is currently reviewing all low value non core assets which will yield no benefit to shareholders.

Corporate

Revised JV Agreement finalised over four farms

On 30 June 2009 the Company and Sekoko Coal (Pty) Ltd agreed to revised commercial terms in respect of their second Agreement over the farms Smitspan 306LQ, Hooikraal 315LQ, Minnasvlakte 258LQ, and Massenberg 305LQ, announced to the ASX on 1 April 2009, following a 12% increase in the coal resource tonnage from 995.9Bt to 1,122.8Bt of saleable coal after washing.

Coal Resource

The resource has been estimated in accordance with the SAMREC and JORC codes and the SANS 10320:2004 (South African National Standard) method of classification of thick inter bedded coal deposits using some 136 boreholes of which 95 were recently drilled by Sekoko. All recent boreholes intersected coal and were logged and sampled by suitably qualified independent geologists. The recent borehole data, together with the historic data, have been used to create geological models and allow estimation of the coal resources. The total coal resource estimate based on the data available at June 2009 (Venmyn Rand) is tabled below whilst coal quality by resource category and farm is tabled at the end of this announcement.

Farm	GTIS Zone Tonnage1 Total Mt	GTIS Coal Tonnage2 Inferred Mt	GTIS Coal Tonnage2 Indicated Mt	GTIS Coal Tonnage2 Total Mt
Smitspan 306LQ	1,850.3	150.2	541.2	691.4
Hooikraal 315LQ	136.5	74.3	21.0	95.3
Minnasvlakte 258LQ	736.6	225.9	51.1	277.0
Massenberg 305LQ	187.6	45.0	14.1	59.1
TOTAL	2,910.9	495.4	627.4	1,122.8

¹ Waterberg coal typically occurs interlaminated with shale which for the most part cannot be mined separately from the coal and thus the zone gross in situ tonnage is the tonnage of coal and shale.
²In the interest of balanced reporting it is the Company's intention to also report the gross in situ tonnage of coal rather than the tonnage of coal and shale. In order to estimate the gross in situ tonnage of coal in each zone, rather than the zone tonnage including the rock, each zone tonnage was discounted by the percent yield at a relative density of 1.9gm/cc (in effect removing the influence of the shale) to derive an estimate of the coal tonnage.

Information in this report that relates to exploration results, coal resources or reserves on the properties Smitspan 306LQ, Hooikraal 315LQ, Minnasvlakte 258LQ and Massenberg 305LQ is based on information compiled by Ms Catherine Telfer who is employed by Venmyn Rand (Pty) Ltd and is a member of The Australian Institute of Mining and Metallurgy and The South African Institute of Mining and Metallurgy. Ms Telfer has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves". Ms Telfer consents to the inclusion in the report of the matters based on her information in the form and context in which it appears.

Summary of revised Agreement

Under the terms of the revised Joint Venture Agreement, Firestone's wholly owned South African subsidiary, Lexshell 126 General Trading (Pty) Ltd , will establish a joint venture whereby Lexshell can earn an initial 30% interest in the Properties in consideration for:

• a reimbursement of expenses to Sekoko of up to ZAR32.99 million (approx A$5.1 million) which has been spent by Sekoko in the exploration and development of the Properties ;
• the issue to Sekoko of new shares in Firestone in the amount of ZAR293 million (approx A$43.4 million) at an issue price of A$0.05 per share, which amounts to approximately 868,176,563 Firestone shares; and
• following the approval of the Bankable Feasibility Study ("BFS") and decision to mine by the Management Board of the joint venture, a management fee of ZAR50 million (approx A$7.7 million) be paid to Sekoko (or its nominee) over a 7 year period from the date of commercial production.

Firestone can earn a further 30% interest (for a total of 60%) upon expenditure of ZAR50 million (approx A$7.7 million) to complete the BFS to a level enabling the establishment of a future commercial mining operation.

The transaction will be conditional on (amongst other things), Firestone completing a legal and technical due diligence on the Properties.

Funding

During the reporting period, the Company undertook a placement to raise A$2.07 million. The funds are intended to be used toward agreed funding commitments in relation to the transaction with Sekoko Coal (Pty) Ltd, which was announced to ASX on 1 April 2009, and other working capital requirements.

Placement details:

• The purpose of the Placement was to raise A$2.07 million by way of the issue of 51,750,000 ordinary shares in the Company at A$0.04 per share (a premium of 18% to the closing price on 11 June 2009), plus one free attaching unlisted option for every two shares allotted. The 25,875,000 options are exercisable at 6 cents each and have an expiry date of 30 June 2014.
• The shares issued pursuant to the Placement carried standard rights applicable to ordinary shares in FSE and, from the date of issue, ranked equally with fully paid ordinary shares .
• The Placement was made to a range of investors without disclosure in accordance with section 708 of the Corporations Act 2001 (Cth).
• The Company did not seek shareholder approval prior to the issue of the shares and options, and relied on its 15% placement capacity under Listing Rule 7.1.

Board Restructure

During the reporting period, the Company announced the appointment of Messrs John Dreyer and John Wallington, both former Anglo Group Mining Executives, to its Board as non executive Directors. The appointment significantly strengthens the Company's Board in the areas of corporate strategy, governance and coal mine development and operations expertise as it moves forward on the Bankable Feasibility Study at its South African Waterberg coal project.

John Dreyer, a lawyer by profession, has held a number of senior executive positions through his career including the position of Executive Director of Anglo Platinum, Business Development, In 2004 Mr. Dreyer retired from Anglo Platinum and joined Pangea Diamond Fields as a director and shareholder. He was instrumental in the listing of that company on AIM (LSE). Prior to joining Anglo, Mr. Dreyer was Chief Executive Officer of Tavistock and Managing Director of Shell Minerals Africa. He is also a former Director of the Richards Bay Coal Terminal Company.

John Wallington, a mining engineer by profession, is an experienced high caliber Mining Executive with a proven track record in delivering results and transforming global organizations. Mr. Wallington was previously the Global Chief Executive Officer (CEO) of Anglo Coal for 6 years; and in a career spanning 27 years, he has held a number of other senior positions at Anglo. While CEO of Anglo Coal, Mr. Wallington developed and implemented the Coal Division strategy, which integrated the vision and direction of the business unit with profit, safety, operational performance and strategic growth targets. He was a major player in bringing together the Black Empowerment transaction in 2007 that enabled Anglo Coal to meet its Transformation Targets.

In addition, during the quarter, three Non Executive Directors, Messrs Lee Boyd, Malcolm Smartt, and Daryl Henthorn resigned from the Board.