African Minerals, the developer and operator of the Tonkolili iron ore mine in Sierra Leone, today announces its financial results for the six months ended 30 June 2014.

Operational Highlights H1 2014

  • Total production of 9.8Mt (H1 2013 : 6.2Mt) of Direct Shipping Ore ("DSO")
  • Total exports of 8.9Mt (H1 2013 : 5.5Mt) of DSO
  • Average freight rate of $23/t (H1 2013 : $18/t)
  • Average FOB received price of $49/t (dry) (H1 2013 : $77/t)
  • Average C1 cash costs of $39/t (H1 2013 : $43/t)

Financial Highlights H1 2014

  • EBITDA of $2.7m (H1 2013 : $100.0m)
  • Revenue of $399.2m (H1 2013 : $404.8m), operating loss $85.1m (H1 2013 : $18.3m)
  • Profit for the period $8.7m (H1 2013: loss $29.3m)
  • Group cash (at 30 June 2014) of $331.8m ($314.0m restricted)
  • Net debt (at 30 June 2014) of $458.8m ($473.3m at 31 December 2013)

Post Period

  • Establishment of de-sliming circuits, with the first currently being commissioned, which will remove production of All in 32 ("A32") and create all year round shippable products with lower moisture content, significantly enhancing the operating margin on DSO material
  • Commissioning of 1G plant completed, and ramp up currently underway which will take production capability up to 25Mtpa
  • Friable hematite production expected to commence by end 2015, ramping up to 11Mtpa of 63% Fe concentrate, displacing the same amount of DSO
  • Concentrator will be based on the conversion of the existing plant 1B which is expected to cost c$311m (+/-25%); Concentrate product expected to have a significantly increased margin versus the DSO that it replaces
  • Appointment of Alan Watling as CEO
  • Working capital and operational shortfalls funded from Project (Hong Kong) funds, with $142m already released, and a further $101m approved to be released in October
  • Management review of project economics concludes that the project is expected to be cash flow positive, even in the current depressed iron ore environment, by year end
  • The Company and Project continue to assess appropriate options to address the medium and long term funding requirements from a strong operational base

Production Guidance

  • Operations remain stable throughout Q3, despite wet season and Ebola outbreak
  • Q3 exports of 4.4Mt shipped with 25 vessels sailed, brings year to date total to 13.3Mt (Q1 4.6Mt in 26 ships;  Q2 4.3Mt in 25 ships)
  • Export guidance reiterated of 16-18Mtpa for full year 2014, with C1 cash costs in the range $34-36/t
  • Provision of new export guidance for 2015: 21-23Mt for the year, with C1 cash cost of under $30/t
  • Exit run rate for 2015 of 25Mtpa, with exit cash cost target of $25/t

Frank Timis, Executive Chairman, said:

We are pleased that the Tonkolili mine, plant, rail, port and marine project continues to perform well and in line with guidance. However, despite strong operating performance, the business has been slow to react to the fast moving challenging circumstances in the iron ore market. The financial gains of Q1 have been largely depleted in Q2, with continuing operational level losses putting significant strain on the balance sheet.

Traversing market and operational impacts will be a priority during the months ahead.  With our new 1G plant already in production and de-sliming circuits now in the process of being commissioned, we expect to reap the benefits shortly from higher production rates, lower operating costs, and better revenue capture.

We are also committed to executing the low capital cost friable hematite strategy as soon as possible which will provide another layer of strong operating margin, even above the base DSO production.

The devastating Ebola Virus Disease outbreak, which thankfully has not directly affected our people or our operations, remains a grave concern which we are monitoring closely.

The return of Alan Watling as CEO is a breath of fresh air at a pivotal juncture and his deep understanding of the current economic and health situation and in particular the specific needs of the Company gives myself and the Board great confidence. We are focussed on driving our project quickly up to the 25Mtpa operating level, targeting globally competitive cash costs of $25/t, and ensuring that the project is profitable - even in its DSO stage and at current five-year low iron ore prices.

We are absolutely focussed on ensuring the financial health and strength of both the operating companies and African Minerals Limited on a long term basis. We continue to evaluate all options available and have engaged Standard Chartered Bank and Jefferies as our advisers to help us with this process. This will inevitably require the support of all of our stakeholders, including our debt and convertible bond holders, who we acknowledge have provided significant help in allowing us to develop the Company to its current operating level. We will continue to update the market as we progress our plans in this regard.

Contacts:

African Minerals Limited

+44 20 3435 7600

Mike Jones

Tavistock Communications

+44 20 7920 3150

Jos Simson / Nuala Gallagher/ Mike Bartlett

Jefferies

+44 20 7029 8000

Nick Adams / Alex Collins

About African Minerals

African Minerals operates the Tonkolili Iron Ore Project (the "Project") in Sierra Leone, with a JORC compliant resource of 12.8 Bt. The multi-generational Project is being developed in a number of staged expansions. In 2013, African Minerals completed sales of 12.1 Mt to its customers. The current year sales guidance is for 16-18 Mt of exports.

Phase II expansion will see exports increase to 25 Mtpa, and will incorporate production of a high grade concentrate product. Concentrate production is expected to begin by the end of 2015 and will eventually displace current DSO production as concentrate volumes increase and the DSO resource depletes over time.

The Company has also developed significant port and rail infrastructure to support the operation of the Project, via its subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in which the Government of Sierra Leone ("GoSL") has a 10% free carried interest.

The Project companies are currently owned 75% by AML, and 25% by Shandong Iron and Steel Group ("SISG"), except for ARPS, which is currently owned 75% by AML and 25% by SISG, with the GoSL having the right to a 10% free carried interest from AML.

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