Restated and Amended Memorandum of Understanding for $1.5bn Shandong Iron & Steel Group Investment

African Minerals Limited (AIM:AMI), the iron ore project development company that is developing the Tonkolili project in Sierra Leone, West Africa, is pleased to announce that, further to its press releases of 13 July 2010 and 15 September 2010, Shandong Iron & Steel Group Co Limited (“Shandong”) and AML have amended and restated the terms of their Memorandum of Understanding (“MoU”) signed in July 2010 in respect of Shandong’s planned investment of US$1.5Bn in AML’s flagship iron ore project at Tonkolili and the related infrastructure projects (together the “Project”). The MoU continues to envisage Shandong purchasing a 25% interest in each of AML’s wholly-owned Bermuda subsidiaries of Tonkolili Iron Ore Limited, African Railway & Port Services Limited and African Power Limited (the “Subsidiaries”). This announcement updates the announcement released on 13 July 2010.

Highlights/Key Changes in Restated MoU

• Due diligence by Shandong to be completed by 20 October 2010;

• Subject to AML Board approval, exclusivity granted by each of the Subsidiaries to Shandong  until 20 October 2010;

• Revised target date for signing Subscription Agreement and Off-take Agreement now 20 November 2010, subject to due diligence and agreement of final documentation between the parties;

• Subject to approval of the proposed timetable by the relevant PRC regulatory authorities, (i) all approvals required by Shandong to make the investment to be received, and all other conditions required under Steps 1, 2 and 3 of the Subscription Agreement to be satisfied, by 31 December 2010; and (ii) payment of US$800M under Step 1 of the Subscription Agreement to be received by AML by 21 January 2011;

• The other key terms of the MoU announced on 13 July 2010 remain unchanged.

Commenting on the amended and restated MoU, Frank Timis, Executive Chairman of African Minerals said:

“We have now had the opportunity to work with Shandong for three months, to visit their operations and meet with their technical teams and advisers. We have been impressed with the thoroughness of their due diligence and the quality of their operations and people. The arrangements that we will negotiate with Shandong are for a US$1.5 billion investment that will enable us to accelerate the development of Tonkolili and to build African Minerals into a major independent iron ore producer. This will be a material event for our two companies and for all stakeholders in the Tonkolili project. Both parties have been working hard to complete the due diligence and finalise workable terms that will govern the long term development and operation of the project.”

Enquiries:

African Minerals Limited	Tel: +44 (0) 1481 726833
Alan Watling Griselda Williams
Canaccord Genuity Limited	Tel: +44 (0) 20 7050 6500
Robert Finlay
Guy Blakeney
Mirabaud Securities Limited	Tel: +44 (0) 20 7878 3360
Rory Scott Pav Sanghara
Pelham Bell Pottinger Limited	Tel: +44 (0) 20 7861 3232
Klara Kaczmarek Philip Dennis

Key Terms of the Amended and Restated Binding MoU

Below appears a restated summary of the key terms of the MoU between African Minerals and Shandong Iron & Steel Group Co Limited, as originally entered into and as amended by the parties.

Under the amended and restated MoU and subject to due diligence by Shandong, the parties will conduct good faith negotiations with a view to executing, no later than 20 November 2010, definitive agreements for (i) an investment of US$1.5Bn by Shandong in the Project at a subsidiary level and (ii) a long term iron ore off-take agreement relating to the Project, as follows:

• Shandong will enter into a subscription agreement (the “Subscription Agreement”) having three stages as follows:

• Stage 1 – Shandong will subscribe for new shares in the Subsidiaries, representing 13.3% of the enlarged share capital of each of the Subsidiaries, in return for the payment by Shandong of US$800 million;

• Stage 2 – Shandong will subscribe for new shares representing a further 8.3% of the enlarged share capital of each of the Subsidiaries in return for the payment by Shandong of US$500 million;

• Stage 3 – Shandong will subscribe for new shares representing a further 3.4% of the enlarged share capital of each of the Subsidiaries in return for the payment by Shandong of US$200 million.

• The total amount of the consideration for the share subscription will be US$1.5Bn in return for 25% of the enlarged issued share capital of each of the Subsidiaries.

• The proceeds of the Subscription Agreement will be used towards construction of infrastructure and mine operations at the Project.

• Upon the completion of each stage of the Subscription Agreement, Shandong will have the option either:

• to receive iron ore production, equal to the then percentage of Shandong’s interest in the share capital of each Subsidiary, provided Shandong pays the production costs, tax and royalties in respect of production allocated to Shandong;

or

• to receive dividends, if any, from the Subsidiaries according to Shandong’s interest in each Subsidiary.

• Shandong will be entitled to representation on the board of each Subsidiary representing two fifths of each board of directors and will be entitled to appoint one director to the board of African Minerals Limited;

• Simultaneously with the execution of the Subscription Agreement the parties will enter into an off-take agreement for a term to be agreed between the parties, under which Shandong will, in addition to the iron ore production allocated under the Subscription Agreement, upon commencement of Phases I and II of the Project (production of hematite) guarantee to take, and which AML will guarantee to supply, iron ore at discounts as follows:

• If the benchmark FOB price prevailing at the market then is greater than US$120 per tonne, the discount shall be 15% less than the then benchmark FOB price;

• If the benchmark FOB price prevailing at the market then is greater than US$100 per tonne but equal to or less than US$120 per tonne, the discount shall be 12.5% less than the then benchmark FOB price;

• If the benchmark FOB price prevailing at the market then is greater than US$80 per tonne but equal to or less than US$100 per tonne, the discount shall be 10% less than the then benchmark FOB price;

• If the benchmark FOB price prevailing at the market then is greater than US$60 per tonne but equal to or less than US$80 per tonne, the discount shall be 7.5% less than the then benchmark FOB price;

• If the benchmark FOB price prevailing at the market then is equal to or less than US$60 per tonne, there shall be no discount.

• The extent of the off-take commitment will be 5.32 mtpa at Stage 1 of the Subscription Agreement, rising to 8.64 mtpa for Stage 2 and rising to 10 mtpa by Stage 3.

• The discounts will apply initially only to hematite iron ore produced from the Project; however, upon commencement of production of magnetite iron ore from Phase III of the Project, the discount will apply to the 10 mtpa of guaranteed iron ore, which will then comprise 5 mtpa of magnetite iron ore and 5 mtpa of hematite iron ore.

• Shandong will complete its current technical, legal and financial due diligence exercise on AML and the Subsidiaries by 20 October 2010; implementation of the Subscription Agreement and Off-take Agreement is conditional upon the results of such due diligence being satisfactory to Shandong.

• Subject to AML Board approval, the Subsidiaries have granted Shandong exclusivity to 20 October 2010.

• Subject to approval of the proposed timetable by the relevant PRC regulatory authorities, (i) all approvals and all conditions required to be met for Steps 1, 2 and 3 subscriptions to be obtained or satisfied by 31 December 2010; and (ii) payment under Step 1 of the Subscription Agreement of US$ 800 million is to be made by 21 January 2011.

• The closing of Stages 2 and 3 is to be agreed between the Parties after the completion of due diligence, based on the construction schedule of the Project.

Stay with Sierra Express Media, for your trusted place in news!

---

© 2010, https:. All rights reserved.