AML and SISG complete $1.5Bn investment

African Minerals Limited (“AML” or “the Company”) and Shandong Iron & Steel Group Co., Ltd (“SISG”) complete $1.5Bn investment transaction
Highlights

• Following receipt of all PRC approvals, SISG has now completed its $1.5bn acquisition of a 25% shareholding in the Tonkolili project companies (“the Investment”) and funds have been transferred to be received on Monday 2 April 2012.
• SISG will also purchase iron ore under an off-take arrangement, with an additional equity ore option and dividend ore option, providing the Company and the project with a significant level of guaranteed off-take for the Life of Mine.
• African Minerals will use the funds received to accelerate development of Tonkolili’s Phase II expansion.
• Additionally, the existing $417.7m secured loan facility will be repaid from the proceeds.
• Mr Cui Jurong, Vice President of SISG, has been nominated to the Board of Directors of AML.

Further to the final agreement announced on 1 August 2011, and the successful satisfaction of all conditions precedent, including the receipt of all PRC regulatory approvals, AML is pleased to announce that it has completed the transaction whereby SISG acquires a 25% shareholding in the mine, rail and port and power subsidiaries comprising the Tonkolili iron ore project for a cash consideration of $1.5bn. Funds have been transferred and are expected to be received on 2 April 2012.

The investment includes certain discounted off-take arrangements in respect of iron ore produced at the Tonkolili Mine under which SISG will purchase 2Mtpa of Phase I production, increasing to 10Mtpa, with discounts ranging from 0% to 15%.

Furthermore, SISG will have the right to elect, on an annual basis, to receive 25% of standard production at benchmark prices, and to also receive iron ore in settlement of any declared dividends from the project.

The funds will be available for use by the project companies, and will be used to accelerate the development of Phase II, and the expansion and further development of the Tonkolili project. The Company will also use part of the funds to repay the existing $417.7m Secured Loan Facility to Standard Bank.

SISG, as per the agreement, has nominated Mr Cui Jurong, Vice President of SISG, to the Board of AML.

Commenting on the announcement, Frank Timis, Executive Chairman of African Minerals said:

“We are pleased to welcome SISG, one of the world’s largest steel producers, as a strategic investor in the Tonkolili project. The completion of their detailed due diligence, prior to successful closing of this transaction, validates the scale and scope of the project and secures the funding which will enable us to accelerate the development of Phase II of our growth plans.
This partnership confirms the potential for Sierra Leone to become one of the world’s major iron ore producing nations thereby creating lasting benefits for its people.”

Also commenting on the announcement, Mr Zou Zhongchen, Chairman of SISG said:

“SISG is delighted to have completed this long term partnership with AML which provides our steel mills with a sustainable long term supply of iron ore for generations to come.”

Contacts:
African Minerals Limited
+44 20 3435 7600
Mike Jones

Aura Financial
+44 20 7321 0000
Michael Oke / Andy Mills

Deutsche Bank
+44 207 545 8000
Rupert Green

There will be an analyst and investor tele-conference starting at 1.00 pm BST on Monday, April 2 2012.

Dial in details are: Tel: +44 (0)203 140 0668 : Passcode: 349 862 #
Playback dial in details: Tel: +44 (0) 203 140 0698 : Passcode: 383 890 #

About African Minerals:

African Minerals is developing its Tonkolili iron ore project in Sierra Leone, with a JORC compliant resource of 12.8Bnt. The project, which currently has a 60+ year mine-life, is being developed in 3 phases. Phase I is expected to produce 20 million tonnes of iron ore per annum at full capacity.

Phase II now contemplates a 30Mtpa expansion, taking production to 50Mtpa, and the establishment of an expanded port facility at Tagrin Point, a new standard gauge, heavy haul railway from Tonkolili to Tagrin Point, and an expanded production facility at the mine to produce a 64% high grade hematite concentrate.

African Minerals and its contractors currently employ approximately 9,700 people in Sierra Leone, 82% of whom are Sierra Leonean nationals.

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

The Tonkolili project companies are owned 75% by AML, and 25% by SISG. However, once the Government exercises its right, above, ARPS, will be owned 65% by AML, 25% by SISG and 10% by the Government of Sierra Leone.

www.african-minerals.com

About SISG:

Shandong Iron & Steel Group Co., Ltd (SISG) is one of the world’s largest iron and steel groups specialising in the smelting, processing and the sale of steel and related commodities. It currently produces circa 25Mtpa of steel, and plans to increase its steel ouptut to circa 40Mtpa by 2015

Details of the transaction

• SISG has invested $1.5bn in return for a 25% shareholding in the subsidiaries holding the project assets, namely Tonkolili Iron Ore (SL) Limited, African Power (SL) Limited, and African Railway and Port Services (SL) Limited.
• The investment has been made through SISG’s subsidiary company, Shandong Steel Hong Kong Resources Ltd.
• The funds from the Investment will principally be used by the project companies to accelerate the Phase II development of the mine operation at Tonkolili and for construction of the related infrastructure in Sierra Leone and to repay the outstanding secured loan facility debt of $417.7m to Standard Bank Limited, including interest to be repaid to AML.
• SISG has the right to appoint two out of five directors to the board of each project company (with the exception of African Railway and Port Services, where SISG has the right to appoint two out of seven directors with the additional two board seats to be reserved for the Government of Sierra Leone) and one director to the board of AML, and will have other typical minority governance rights at the project company level.
• Mr Cui Jurong, currently Vice President of SISG, has been nominated by SISG to the Board of AML.
• SISG’s discounted off-take agreement provides a total of 2Mtpa of Phase I production, and an incremental 8Mtpa of Phase II production after Phase II is commissioned, at a discount to benchmark prices. From the date of commencement of production of Phase III, the off-take quantity will include 5Mtpa hematite fines and 5Mtpa magnetite concentrate, save that when there are no more hematite fines for production in the project, SISG shall receive 10Mtpa magnetite concentrate for the remainder of the life of the project, at a discount to benchmark prices.
• Discounts to be applied under this off-take arrangement range from zero to 15% depending on the applicable received FOB iron ore price as indicated below:

• <$60/t – 0% discount
• $60-80/t – 7.5% discount
• $ 80-100/t – 10% discount
• $ 100-120/t – 12.5% discount
• >$120/t – 15% discount

Separately, SISG also has an option to acquire up to 25% of annual iron ore production from each of the three production phases, by reference to the benchmark prices.

SISG may also elect to receive iron ore in lieu of its share of any dividends declared from the mining operations of the project of an amount calculated by reference to the average realized prices for the accountable period, assuming availability of iron ore.

The agreements restrict SISG, from acquiring more than 12.49% of AML’s shares in the public market, however this restriction falls away in the event of a takeover bid by a third party, thereby giving SISG the ability to make a competing bid for AML.

Mr. Frank Timis is required to remain a Director of AML and the project subsidiaries until such time as Phase III development is completed. In the event he was to decide to resign as a Director, SISG would be able to exercise a put option, deemed by an independent fair valuation, to sell its stake in the project companies to AML, with standard carve outs for health, regulatory requirements, etc.

SISG has the right of first offer for an interest of up to 25% in any new venture that AML develops or acquires in Sierra Leone.

AML guarantees that the project subsidiaries will sell 10 million tons of iron ore, and reach an annualised production rate of at least 12 million tons, during 2012.

African Minerals Limited

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