AML Executes Agreements with SISG to Invest $1.5bn

For immediate release

1 August 2011

African Minerals Limited ("AML" or "the Company") Executes Agreements with Shandong Iron & Steel Group Co., Ltd. ("SISG") to Invest $1.5bn in the Tonkolili Project Companies

Highlights

·; SISG will invest $1.5bn in return for a 25% shareholding in the Tonkolili project

·; SISG will also purchase iron ore under an off-take arrangement, guaranteeing long-term orders for Tonkolili's production

·; African Minerals will use the funds raised to accelerate development of Tonkolili and to repay existing debt

African Minerals Limited (AIM: AMI) have signed final agreements ("the Agreements") with SISG, the terms of which are materially unchanged from those set out in the Company's announcement of 3 May 2011. SISG has agreed to acquire 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. The Agreements include certain discounted off-take arrangements in respect of iron ore produced at the Tonkolili Mine. SISG will purchase 2Mtpa of Phase I production, an incremental 8Mtpa after Phase II is commissioned and 10 Mtpa during Phase III, with discounts in each phase ranging from zero to 15%.

The Company will use the funds to accelerate the expansion and further development of the Tonkolili project and to repay the existing $417m Secured Loan Facility.

The $1.5bn consideration will be paid upon closing, which is principally conditional upon receipt of relevant Chinese regulatory approvals. The parties have agreed a longstop date for closing of 31 December 2011.

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. SISG's investment 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 confirm this long term partnership with AML and endorse a relationship with Sierra Leone which provides our steel mills with a sustainable long term supply of iron ore."

Ends

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

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 of the project is fully funded and at full capacity is expected to produce 12 million tonnes of iron ore per annum once it ramps up from initial production in Q4 2011. Phases II and III are expected to boost production incrementally by 23Mtpa and 45Mtpa respectively. African Minerals and its contractors currently employ approximately 5,000 people in Sierra Leone, 78% of whom are Sierra Leonean nationals.

The Company is also developing significant port and rail infrastructure to support the development of the project, via its subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in which the Government of Sierra Leone has the right to acquire a 10% interest. With the exception of this interest, the Tonkolili project companies are wholly owned by AML.

www.african-minerals.com

About SISG:

Shandong Iron & Steel Group Co., Ltd (SISG) is one of the largest iron and steel groups in China specialising in the smelting, processing and the sale of steel and related commodities. It is currently the world's ninth largest steel group.

Highlights of the transaction

• SISG will invest $1.5bn ("the Investment") in return for a 25% shareholding in the subsidiaries holding the project assets.

• The consideration will be paid in full on closing.

• Closing of SISG's investment will be conditional on receipt of, amongst other things, necessary governmental and regulatory approvals and industrial scale product testing of the Phase I iron ore.

• The funds from the Investment will 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 repay the outstanding debt of $417m.

• SISG will have the right to appoint two out of five directors to the board of each project company (with the exception of ARPS, 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.

• SISG 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.

• In addition, there will be a separate iron ore off-take arrangement for a total of 2Mtpa of Phase I production, and an incremental 8Mtpa of Phase 2 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 to the off-take arrangement range from zero to 15% depending on the applicable iron ore price as indicated below:

Ø

Ø $60-80/t - 7.5% discount

Ø $ 80-100/t - 10% discount

Ø $ 100-120/t - 12.5% discount

Ø >$120/t - 15% discount

• 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.

• Funding for Phase III of the Tonkolili project is expected to be principally in the form of debt finance but, to the extent that shareholder funding is required, shareholder loans or equity will be provided pro-rata by the parties.

• 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 committed to remain a Director of AML and the project subsidiaries until such time as Phase III development is completed. In the event he were to decide to resign, SISG would be able to exercise a put option to sell its stake in the project companies to AML.

• 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 annual production rate of 12 million tons, during 2012.