As part of the MoU, Firestone and Sekoko will supply a minimum of 10 million tonnes of thermal coal on a free-on-rail basis annually to Eskom’s two designated power stations in the Mpumalanga area for a minimum of 30 years.

The production of coal will commence in 2014 and will ramp up over a period of five years to 10Mt per annum.

Firestone non-executive chairman Timothy Tebeila said the agreement with Eskom was a major step towards the company’s goal of achieving a foothold in the South African coal sector.

“We are delighted to have secured this agreement, which we regard as a key step toward achieving Firestone Energy-Sekoko’s objectives of developing its coal assets in South Africa and participating in the social and economic development of South Africa,” he said.

Black economic empowerment company Sekoko Coal has a 40% stake in the Waterberg coal project while Firestone holds the remaining 60%.

The Waterberg project comprises eight farms in the Waterberg coalfield totalling some 7979 hectares with a proven JORC resource of 1.8 billion tonnes.

The JV partners will develop an opencast coal mine on the Smitspan farm in conjunction with infrastructure linking the mine to the Transnet rail system, which is approximately 7km from the proposed minesite.