Financial Results for the year to 30 June 2012

17 September 2012

International Ferro Metals Limited

("IFL" or the "Company")

Financial Results for the year to 30 June 2012

Highlights

Financial highlights

·; Revenue of ZAR1.5 billion; down 5% on 2011 (ZAR1.58bn)

·; Operating margin improved to 3% (2011: -3%)

·; Company returned to profitability with a profit before tax of ZAR67 million in the second half of the year

·; Ore sales of 345,000 tonnes, 20% higher than the prior year, due to reduced internal ore consumption during Eskom-related furnace shutdowns (2011: 288,000 tonnes).

·; Adjusted Rand production costs for the year decreased by 4.9% from prior year which represents 40% of the target cost reduction.

·; EBITDA of ZAR63 million against a loss of ZAR72 million in the prior year (H2 FY12: ZAR136 million)

·; Net borrowings of ZAR308 million at 30 June 2012

Operational highlights

·; FeCr production down 21% to 153,046 tonnes as a result of furnace roof rebuilds and Eskom related shutdown

·; Sky Chrome ramping up as planned and now replacing Lesedi open pit mine which closed in July'12

·; UG2 chrome recovery plant delivering 15ktpm since April 2012 as planned

Post period highlights

·; Sky Chrome ramps up to record 70,000 tonnes per month run of mine

·; Furnaces performing well delivering a better than expected 39,700 tonnes of ferrochrome in July and August

·; Co-gen plant achieved 6.9% of total power demand in July; 10.2% in August, nearing 11% target

Chris Jordaan, Chief Executive Officer of IFL commented:

"The 2012 financial year marks a turnaround for the Company as the cost reduction programme started to take effect resulting in a return to profitability in the second half. We remain confident that the long-term stainless steel and ferrochrome growth story remains intact. Measures being taken by the Company will ensure it is a low-cost producer with robust, sustainable operations. We are confident that IFL is better positioned than it has been for some time."

There will be a presentation to analysts of the full year results today, Monday 17 September 2012 at 9am (UK time) at 16 Lincoln's Inn Fields, London WC2A 3ED. The presentation slides and a recording of the presentation will be available on the Company's website from 8.30am, www.ifml.com.

For further information please visit www.ifml.com or contact:

International Ferro Metals Limited

Chris Jordaan, Chief Executive Officer

Mob: +27 (0) 82 653 1463

Brunswick Group

Carole Cable / Clemmie Raynsford

Tel: +44 (0) 20 7404 5959

Numis Securities Limited

James Black / Stuart Skinner

Tel: +44 (0) 20 7260 1000

About International Ferro Metals:

International Ferro Metals produces ferrochrome, the essential ingredient in stainless steel, from its integrated chromite mine and ferrochrome processing operations in South Africa. International Ferro Metals is listed on the London Stock Exchange under the symbol IFL.

Forward Looking Statements

This announcement contains certain forward looking statements which by their nature contain risk and uncertainty because they relate to future events and depend on circumstances that occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.

CHAIRMAN'S REVIEW

Overview

Headwinds continued to blow against the South African ferrochrome industry throughout the year. China's economic slowdown has resulted in a tempering of steel production and a consequent excess of ferrochrome stocks. Caused to a substantial degree by rampant increases in electricity costs, South Africa's ferrochrome industry now suffers competitive pressures on an international scale. Its once vaunted place as the world's leading ferrochrome producer has been ceded to China. Ironically, this has been rendered possible by South Africa supplying chrome ore, feed stock which China lacks in sufficient quantity to supply its smelters.

The recent advent of Chinese ferrochrome production has reduced the ability of South African producers to control the balance of supply and demand by shutting furnaces from time to time. When this happens now, the Chinese can, to a certain and albeit limited extent, supply the shortfall in China.

These adverse circumstances, however, are not necessarily permanent. The South African ferrochrome industry and the Company in particular, are reacting vigorously by reducing costs. Electricity price increases are showing signs of moderating, and the outlook for the Chinese stainless steel industry is positive on the other side of the current slowdown. The South African government is considering imposing an export tariff which would have the effect of making ore more expensive for those without chromite mines. Ore forms the largest individual cost in ferrochrome production.

Our response

The Company was one of the first in the industry to embark upon a root and branch cost reduction programme. The strategy has been to address technical opportunities for production efficiencies and to make acquisitions which have the effect of lowering input costs.

The Company developed the adjoining Sky Chrome ore body, accomplished efficiencies in the Lesedi mine, and entered into an agreement with Rustenburg Platinum Mines Ltd to finance the construction of a UG2 Chrome Re-treatment Plant from which it takes chrome concentrates, an arrangement that can give it 30% of its beneficiated ore requirements at a low cost. At the smelters, the Company changed its reductant input by partially substituting anthracite for coke, which had become very expensive. The furnace roof repairs which were completed during the year have been successful, resulting in significantly increased production, diminishing unit costs.

The co-generation plant that the Company had installed ramped up (after some teething problems) to where it is now, currently supplying 10% of total power requirements. This is well on the way to achieving the Company's 11% target. Against the backdrop of increasing electricity prices, the co-gen facility is a useful buffer.

With these initiatives, the Company is achieving its ambition of positioning itself at the low end of the cost curve.

Financial performance

The cost reduction programme mentioned above had a significant effect on the Company's financial performance, mediating to some degree the unfavourable ferrochrome price conditions experienced during the year. The Company returned to profitability in the second half, sufficient to reduce the full year's loss to ZAR72 million. This was a marked improvement over last year's loss of ZAR214 million and augers well for the future.

Health and safety

The Company treats the health and safety of its employees as an absolute priority as we strive towards our goal of achieving Zero Harm. We have put in place a number of different initiatives as we evolved to assist with our goal. The initiatives are delivering and results in the past year in particular have been promising. To further enhance our work with regard to the health and safety of our employees across our operations, the Board established a Health, Safety and Environment Committee this year, chaired by the Chairman and comprising four members of the Board, including the CEO. The committee, which is advised by senior management personnel, is chartered to review all matters affecting health, safety and the environment and reports to the full Board.

Conclusion

All in all, this year has continued to be a challenge to the Company, and indeed to the entire South African ferrochrome industry. Although conditions have been difficult, the Company has demonstrated resilience and a determination to succeed in its objective of being a significant producer of ferrochrome, and through that, deliver value to shareholders. The cost reduction programme and the return to profitability in the second half can be seen as a turnaround in the Company's fortunes, an event that provides grounds for cautious optimism.

The Company is confident that as the global economy recovers from the current sluggish period, demand for stainless steel and ferrochrome will also, as its feedstock returns to levels where margins will widen.

CHIEF EXECUTIVE'S REVIEW

Overview

The 2012 financial year marks a turnaround for the Company. From an operational perspective, the first half was especially challenging due to the furnaces' roof replacements, however, this was balanced by significant operational improvements in the second half. Major projects were completed and augmented the improved performance. This ushers in a new level of operational efficiency and effectiveness for the Company, which was supported by a significant improvement in safety performance.

The first half of the year posted a financial loss mainly due to the furnace shutdowns during the roof refit programme. Cash generation improved in the second half and a net profit was achieved in this period. Combined, the Company achieved a net loss before tax of ZAR72 million compared to a net loss of ZAR214 million in the previous year.

Strategy

The Company's strategy to be a low cost producer of chrome ore and alloy related products for the global stainless steel industry has progressed in line with our expectations. The strategy has been executed by developing and implementing value driven projects that will reduce costs whilst improving sustainable operational stability. Marketing optimisation also forms a key part of the strategy.

Our major projects were successfully completed during the period and aided significantly in repositioning IFL towards the lowest quartile of the cost curve. This will afford the Company the ability to expand our markets in line with our long-term strategy of investing in a diversified portfolio of long-life, low cost assets. Marketing has also been re-structured to reduce costs further and improve realised prices.

Operations

Mining operations performed to expectations in the year. There was good progress in the ramp-up at Sky Chrome and this more than replaced tonnages from the Lesedi open pit mine, which reached the end of its life in July 2012 as planned.

Furnace operations recommenced in the first quarter but were affected in the third and fourth quarters by the Eskom energy buy-back programme. Mining operations were not influenced by this programme. The furnaces were successfully restarted in June at the conclusion of the buy-back programme and we have been pleased with its subsequent performance. Further process improvements were realised; specifically, power and ore efficiencies as well as reductant mix optimisation.

Cost reduction projects

IFL's cost competitiveness was historically negatively influenced by high raw material input costs, increased power costs and poor reliability from the furnaces. The latter caused inefficient use of raw materials and power. A number of strategic projects were identified and implemented in order to reduce input costs, improve efficiencies and reposition the Company lower down on the cost curve. These projects included the furnace roof rebuilds, the co-generation plant, the development of the Sky Chrome mine and the UG2 project. These projects have all been successfully implemented.

After the furnaces' roof refits, the furnaces were restarted in the early part of the second quarter. The goal was to improve operational uptime by eliminating furnace roof leaks. The design has proved to be a success and no leaks have been recorded subsequent to the roof refits. This has enabled improved operational stability and further efficiencies in raw material and energy use. The efficiencies achieved are now at class leading levels.

Following the start-up of the furnaces in August and September 2011 respectively, the co-generation plant was restarted. The co-generation engines operate most effectively in narrow gas composition band limits. Due to hydrogen levels in the offgas exceeding these band limits, the engines were converted to operate in a wider hydrogen band limit. The engines are now operating at close to design level, and delivered in excess of 10% of the Company's total power demand in August 2012.

Sky Chrome's open pit mining operations commenced in June 2011 and ramped up to 50 thousand tonnes per month ("ktpm") run-of-mine in the first quarter of calendar 2012. The mine was further ramped up to 70ktpm run-of-mine after the Lesedi open pit mine ceased operations in July 2012 as expected. The mining rate will be kept at levels in balance with the internal ore demand and specific target markets.

Construction of the UG2 plant at the Anglo Platinum Waterval Concentrator was completed in January 2012 and the first UG2 product was received in March 2012. Consistent supply has been established and IFL has progressed significantly in the consumption of UG2 as an ore source.

Despite Eskom's average 17% price increase and general inflationary pressures, rand production costs improved significantly, reducing by 4.5% from the previous year when adjusted for changes in reductant and electricity prices. The successful implementation and integration of the cost reduction projects has helped deliver a lower cost, more competitive ferroalloy operation and will enable the Company to achieve its strategic goal to become a low cost producer of chrome ore and ferrochrome related products for the stainless steel industry. Competitiveness will further improve as the full benefits of these projects are realised in the first half of FY13.

Power supply

Eskom pro-actively initiated an energy buy-back programme during Q3 and Q4 of FY12. The Company elected to participate in this scheme; the first furnace was shut down for three months and the second furnace for an overlapping two months.

Since 2008, Eskom has had no forced power outages and we expect this situation to continue, helped in part by initiatives such as the electricity buy-back programme.

The first module of Eskom's capital expansion programme will reportedly commence commissioning towards the end of 2013. The Company expects Eskom to utilise the voluntary demand market participation in the coming year and the Company intends to participate in this. Participation will have a minimal net effect on the Company's power supply utilisation as planned maintenance work will be conducted during participation times.

Sales & Marketing

The Company achieved ferrochrome sales of 167,644 tonnes for the year to 30 June 2012 compared to 186,963 tonnes in the preceding year. The decline in sales was due to IFL's participation in Eskom's electricity buy-back programme and the furnace roof rebuilds, during which there was no production. Inventories were maintained at around the target level of 10,000 tonnes with year-end stocks recorded at 10,849 tonnes. IFL has been successful in embedding a diversified customer base across all regions with new sales initiatives in both Asia and North America.

Ore sales for the financial year reached 344,598 tonnes, 20% higher than the preceding year, which stood at 288,245 tonnes. The higher ore sales were as a result of reduced internal ore consumption during the energy buy-back programme participation.

Sustainability

Sustainability remains a fundamental part of the Company's strategy. The ability to operate in a sustainable manner will be strengthened by means of solid leadership and inclusive management of personal safety.

The Company has a zero fatality rate and remains focused on the continued improvement of its health and safety standards.

IFL's licence to operate is predicated on its ability to operate without permanent harm to its employees, the communities it operates within and the environment. The Company therefore defines success as achieving its operational and financial results in a safe and environmentally sustainable manner. To this end, IFL will pro-actively continue to reduce safety and environmental risks, strive to retain its fatality free record and persistently reduce its total recordable injury rate.

IFM's integrated sustainable development management system has earned re-certification in terms of ISO 14001:2004, ISO 9001:2008 and OHSAS 18001:2007 in the period under review.

Health & Safety

Since establishment in 2005, the Company has maintained a zero fatality rate and improved its record of fatality-free man hours by achieving more than 22 million fatality-free man-hours which equates to almost 3 million fatality-free shifts. During FY11 a decline in safety performance raised concerns and management took prompt action. The steps taken were further embedded in FY12 and had a positive impact. Lost-time injuries reduced from 22 in FY11 to 13 in FY12. The FY12 lost time injury frequency rate ("LTIFR") is 3.06, down from 5.94 in FY11, a 48.5% improvement.

The LTIFR improvement was achieved due to management's relentless focus on safety. Safety management structures with clearly articulated roles and responsibilities, simple processes and systems of risk assessment, incident reporting and investigation have been implemented. Stringent corrective actions were introduced and meticulously implemented.

Environmental impact

The Company continues to focus on environmentally sustainable operations and two of our key projects continue to improve our sustainability and reduce costs.

Mining operations inevitably impact the natural environment. However, IFL aims to minimise these impacts, rehabilitate the areas it disturbs during operational activity and preserve the long-term health and viability of the environment around its mines and operations. As a bare minimum, the Company is committed to meeting environmental legislative requirements through responsible and progressive approaches to environmental management, impact mitigation and rehabilitation. Carbon emissions and water usage are closely monitored.

Environmental authorisation for the proposed alloy expansions and additional co-generation plant was granted by the Department of Economic Development, Environment, Conservation and Tourism and the Record of Decision was issued in December 2011. Since 2005, the Company has operated under a Department of Water Affairs directive and in June 2012 the Integrated Water Use Licence was granted.

The co-generation plant, which harnesses furnace off-gases to generate electricity, is classified as a Clean Development Mechanism Project under the Kyoto Protocol. The co-generation operation has been significantly improved and delivered 4.5% of our total electricity needs for the year. This shows our progress as we move towards our target of 11%, post period end we recorded electricity production of in excess of 10% in August.

The Chrome Tailings Retreatment Plant at Anglo Platinum Limited's Waterval Concentrator was commissioned in February 2012 and delivers 15ktpm of chrome concentrate to IFL. The UG2 feed represents about 30% of the Company's beneficiated ore requirements and contributes to a more stable feed to the furnaces.

Black Economic Empowerment (BEE) transaction

In April 2009 the Company lodged its proposed BEE transaction with the then South African Department of Minerals and Energy (now the Department of Mineral Resources ("DMR")), as the final element of its previously submitted application to convert its old order mining right to a new order mining right under the South African Mineral and Petroleum Resources Development Act. The Company actively engages the relevant stakeholders and the DMR to finalise the BEE transaction which is expected to be concluded in the 2013 financial year.

Ferrochrome Market Update

Global stainless steel production increased by approximately 4% to an estimated 32.1 million tonnes (ingot/slab equivalent) for calendar 2011according to the International Stainless Steel Forum. China accounted for 39% of global production whereas Europe and the United States collectively accounted for 32%.

Although the year under review presented early signs of an improvement in consumer confidence, growth was hampered by renewed uncertainty in the Eurozone and varied economic data emerging from the USA. As a result, the ferrochrome benchmark price remained at US$1.20/lb in Q1 and Q2 of the financial year declining to US$1.15/lb in Q3. The significant reduction in alloy production, owing to the ferrochrome producers in South Africa selectively participating in the Eskom energy buy-back programme, ultimately resulted in an improvement in the benchmark price to US$1.35/lb in Q4.

Internal ferrochrome production in China continued to grow, partly due to increased ore imports from South Africa, but more significantly, due to lower ore prices. A disconnect between the benchmark price and realised prices in China started to develop during Q1 2012 due to high ferrochrome production levels in China.

Softening market conditions were evident in all regions towards the end of Q2 2012 as disappointing economic data emerged from the USA and concerns in the Eurozone continued. The subsequent possible sovereign debt bail-outs, as well as the austerity measures, dampened global sentiment and reduced imports, especially from China. This not only reduced stainless steel demand from Europe, but saw China's annual economic growth dropping below 8% towards the end of the year under review.

Outlook

Although the global economy is expected to remain under pressure for the rest of calendar 2012, the IMF forecasts growth to improve to 3.9% in 2013 and China is expected to lead the recovery, with a growth rate of c. 8%. The rate of a global recovery, however, will be highly dependent on progress in Europe and the United States.

Growth in stainless steel demand is expected to continue at a rate of approximately 5.5% over the next five years according CRU Group, which will require approximately 2.4 million tonnes of additional ferrochrome. The pace of stainless steel production, which largely tracks economic growth, is very different in the various regions of the world. Capacity growth is shifting from traditional producing regions in the West to Asia and more predominantly China.

Ferrochrome demand in China is expected to grow in excess of 7% and a high proportion of the supply will be serviced internally by Chinese based ferrochrome capacity. The cost of chrome ore will have a significant impact on the cost of ferrochrome production in China as the cost of power, coke and labour is expected to remain competitive. Therefore, Chinese smelters will remain key competitors in the ferrochrome market. We believe their fortunes will, to a large extent, depend on access to low grade and lower priced ore from South Africa. We expect ferrochrome contract prices to improve significantly in the early part of calendar 2013 and spot prices could increase towards the end of calendar 2012.

The possibility of an export levy on chrome ore is currently being considered by the South African Government. It is reported that the Department of Mineral Resources would approach National Treasury about imposing a levy on all raw mineral exports. Currently only diamonds are levied and at a rate of 5% on the total value. This will have a direct impact on especially Chinese ferrochrome production cost as ore cost contribute c. 50% of their production cost. We may see an update in this regard as early as the end of 2012.

The Company has reduced costs significantly over the last year. Additional initiatives are underway to further reduce costs and improve competitiveness. These will focus, in particular, on reducing marketing costs and improving price realisation and further reductions in specific fixed costs.

As the global ferrochrome market improves, the Company remains confident that the long-term ferrochrome growth story remains intact. The combination of a sustainable long-term market for stainless steel and ferrochrome, and measures being taken within the Company to ensure it is a low-cost producer with robust operations, mean the Company is confident that it is better positioned than it has been for some time.

FINANCIAL REVIEW

Overview

2012 was a year of consolidation for IFL which saw the successful completion of the furnace roof rebuilds, the commencement of the UG2 chrome concentrate supply from Anglo Platinum, the ramp-up of Sky Chrome open pit operations to 50,000 tonnes per month run-of-mine, the successful completion of the modifications to the co-generation plant and significant achievements in reducing costs.

Eskom electricity buy-back agreement

From March to May this year the Company participated in the industry-wide Eskom electricity buy-back programme to assist with the power utility's electricity supply requirements. Eskom bought back the electricity which would have been consumed by the furnaces at a financially beneficial rate to the Company. Following the conclusion of the buy-back programme both furnaces were restarted quickly and efficiently.

On 1 April 2012 Eskom applied an average increase in electricity prices of 16%, well below the 25% that had previously been approved by the National Energy Regulator of South Africa (NERSA). Electricity price increases for the next 5 years are expected to be published by NERSA in February 2013 after public participation.

UG2 Plant

Construction of the UG2 Chrome Re-Treatment Plant ("CRP") at Anglo Platinum's Waterval operations was completed during the year and the first 10,000 tonnes of chrome concentrate was received in March 2012, with the full contractual 15,000 tonnes per month delivered since April 2012. IFL paid for the construction of the plant at a cost of ZAR161 million, which entitles the Company to 15,000 tonnes of concentrate per month, until November 2020. There are no additional costs other than the cost of transporting the concentrate about 50km to IFL's facilities at Buffelsfontein and government royalties. UG2 feed to the pelletising plant is being introduced gradually and had reached 4,800 tonnes for the month of July 2012.

Co-generation plant

The co-generation plant experienced challenges with elevated hydrogen levels in the furnace off-gas after the furnace roof rebuild programme. However, modifications were successfully completed in May 2012 to increase the hydrogen operating range of the engines.

The plant generated 28.2GWh or 4.5% of the Company's total electricity requirement for the year. Subsequent to year-end, the plant generated 13.6GWh for the months of July and August 2012, representing 8.5% of total electricity requirement. In August 2012 10% of our total electricity requirement was generated. At steady-state production the plant should provide the Company with the target of 11% of its total electricity requirements, and August showed it is well on track to achieve this.

FeCr production

FeCr production decreased 21% to 153,046 tonnes as a result of the furnace roof rebuilds during June to August 2011 and the Eskom electricity buy-back agreement during March to May 2012, which combined saw the furnaces out of production for four months of the year. The furnaces were switched back into production in the beginning of June. Production results achieved post year-end in July and August exceeded expectations on both ferrochrome production and efficiencies.

Profitability and sales

The Company returned to profitability in the second half of the year with a profit before tax of ZAR67 million. This reduced the first half loss of ZAR139 million to a loss before tax of ZAR72 million for the full year. Operating margin improved from a negative 3% in 2011 to positive 3% in 2012, with a margin of 8% in the second half of 2012.

The average U.S. dollar European benchmark price for ferrochrome was $1.23/lb for the year, down 6% on the prior year's $1.30/lb.

Sales volumes were down 10% on the prior year to 168,000 tonnes, however sales value was down by only 5%. This is due to a 12% depreciation of the rand against the dollar which significantly countered the lower sales volumes and lower ferrochrome prices.

Monetisation of lower grade ores continued with sales of 345,000 tonnes contributing ZAR188 million to revenue.

The Company made EBITDA of ZAR136 million in the second half against a loss of ZAR73 million in the first half. This resulted in an overall EBITDA for the year of ZAR63 million against a loss of ZAR72 million in the prior year. Earnings per share of 7.1 SA cents in the second half reduced the first half's loss of 16.4 cents to a loss of 9.4 cents for the full year.

The positive tax charge of ZAR19 million to the income statement is a deferred tax credit resulting from unclaimed calculated tax losses available for offset against future profits.

Production costs

The Company continues to make strong progress in reducing costs. The ferrochrome production cost for the year reduced by 2% to ZAR6.13/lb from ZAR6.25/lb in FY2011, this was achieved in spite of general South African mining cost inflation of 8.5% for the year. Stripping out changes in unit electricity and reductant costs, which are outside of management's control and affects all South African producers, the Company is targeting a cost reduction of 12% (ZAR0.76/lb) on FY2011's production cost.

On this basis, production cost for the year was ZAR5.95/lb, a reduction of 4.9% on FY2011 which represents 40% (or ZAR0.30/lb) of the targeted cost reduction.

The table below provides a breakdown of production costs:

* Adjusted for changes in unit reductant and electricity prices from FY2011

Commentary on production costs, adjusted for electricity and reductant price changes from FY2011 is as follows:

Ore cost remained flat for the year. Beneficiation recoveries from Sky Chrome open pit should improve markedly as mining reaches deeper unweathered material. UG2 concentrate was only introduced into the pelletising plant subsequent to year-end and will also have a significant effect on ore cost going forward.

Adjusted reductant cost decreased 13.5% mainly due to a 15% higher anthracite usage and is expected to reduce even further as anthracite usage has increased significantly subsequent to year-end.

Adjusted electricity cost remained flat. Electricity consumption improved markedly as the furnaces reached steady state after year-end which will have a significant impact on costs going forward. The cogen plant produced 4.5% of total electricity requirements for the year. This improved to 6.9% and 10.2% respectively in the first two months of the new financial year. Management is confident that the targeted 11% will be achieved from the second quarter of the new financial year.

Operating costs increased by 6.5% in line with inflation and are expected to stay within inflation going forward.

Fixed costs per unit decreased by 22% as a result of further cost containment, standing charges written out directly to the income statement and increased dilution effect from the metal recovery plant during the two months of the year when only one furnace was in production. At full production, per unit fixed cost is expected to be ZAR0.03 below that of FY2011.

Other income and other expenses

Administration and other expenses decreased 11% to ZAR101 million due to a ZAR17 million furnace roof impairment recognised in the prior year. Unabsorbed fixed costs of ZAR127 million (2011: ZAR25 million) were charged directly to the income statement for the periods where the furnaces were not in production. Other income includes ZAR164 million received from the electricity buy-back agreement with Eskom.

Capital expenditure

Capex for the year was ZAR181 million, mainly comprising ZAR22 million on underground mining development, ZAR26 million on Sky Chrome, ZAR46 million on the UG2 plant (now fully paid) and ZAR56 million on the furnace roofs. Capex for FY2013 is estimated at ZAR140 million.

Capital is managed very conservatively and projects are mainly selected on the basis of highest risk-adjusted returns and affordability.

Cash

The Company's net borrowings increased to ZAR308 million at 30 June 2012 from ZAR248 million at 30 June 2011. The increase of ZAR60 million is attributable to ZAR75 million for operations, ZAR107 million for working capital, ZAR199 million utilised in investing and ZAR44 million utilised in financing activities. Net borrowings are expected to increase to around R400 million at October 2012 as working capital is rebuilt after the Eskom electricity buy-back related shut downs at which stage it is expected to steadily decrease.

The Bank of China ZAR500 million loan facility was rolled forward for a year to June 2013. The Company continues to operate within its existing banking facilities and maintains a conservative interest bearing debt to equity ratio of 25%.

Outlook

The Company looks forward to achieving its targeted cost reductions when the full effects of higher production volumes, improved electricity efficiency, higher cogeneration output and higher UG2 consumption are achieved.

Dividends

The Board of Directors resolved not to declare a dividend for the year ended 30 June 2012.

The above income statement should be read in conjunction with the notes to the financial statements.

The above statement of comprehensive income should be read in conjunction with the notes to the financial statements.

The above statement of changes in equity should be read in conjunction with the notes to the financial statements.

The above statement of financial position should be read in conjunction with the notes to the financial statements.

1. CORPORATE INFORMATION

International Ferro Metals Limited ("the Parent") is a Company limited by shares incorporated in Australia whose shares are publicly traded on the London Stock Exchange, as of 1 September 2007. The Company previously traded on the Alternative Investment Market of the London Stock Exchange.

The financial report for the year ended 30 June 2012 was issued in accordance with a resolution of Directors on 17 September 2012.

2. ACCOUNTING POLICIES

Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value.

The financial report is presented in South African Rand and all values are rounded to the nearest thousand Rand (ZAR'000) unless otherwise stated.

Comparative information is reclassified where appropriate to enhance comparability.

Going concern

As at 30 June 2012, the Group had net current liabilities of ZAR136 million including the Bank of China working capital facility. As at the date of this report, the Company has drawn down ZAR450 million on the Bank of China working capital facility which is due to be repaid on 25 June 2013. The Board plans to renew the Bank of China facility before it expires. In addition, the Board is confident that the Company has additional avenues of funding available to it which could be used with forecast operating cash flows to repay this facility should it not be renewed. For this reason, after making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, and hence, continues to adopt the going concern basis in preparing the accounts.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In the process of applying the Group's accounting policies, management has made certain judgements. Refer to Annual report for details.

4. SEGMENT INFORMATION

Identification of reportable segments.

The group has determined operating segments based on the information provided to the Board of Directors (Chief Operating Decision Maker).

The group operates predominately in one business segment, being the mining and processing of chromite in South Africa and sale of ferrochrome. There is no material difference between the financial information presented to the Chief Operating Decision Maker and the financial information presented in this report.

Sales revenue by geographic location

Revenue obtained from external customers is attributed to individual countries based on the location of the customer.

Major customers

The group received 85% (2011: 70%) of its external revenue from its China and European customers. During 2012 the group received 54% (2011:49%) of its external revenue from CMC Cometals and 31% (2011:39%) from JISCO.

There are no additional customers which account for more than 10% of the group's external revenues.

5. SALES REVENUE

a) Fair value adjustments represent re-valuations performed on ferrochrome sales contracts for which the price is linked to future fluctuations in the published ferrochrome price until the day of consumption by the end customer Other sales relate to chrome ore sales.

6. OTHER INCOME

a) Other income of ZAR164,194 relates to other income received from the electricity buy-back agreement with Eskom. Under the agreement, Eskom purchased the electricity that would have been consumed by the furnaces at a financially beneficial rate to the Company. The balance of other income of ZAR5,736 mainly relates to electricity services provided to Samancor and insurance premium refunds received.

Other income for the prior year of ZAR77,288 relates to the sale of IFM's 25% net profit interest in the retreatment of the tailings dams and current arisings from IFM's existing chrome operations to Phoenix Platinum Mining (Pty) Ltd. The balance of other income of ZAR1,065 relates to profit on sale of assets and rental income received.

7. ADMINISTRATIVE AND OTHER EXPENSES

a) Loss on disposal of assets of ZAR3,760 relates to an impairment of a transformer that was replaced.

8. REMUNERATION OF KEY MANAGEMENT PERSONNEL

Remuneration of Key Management Personnel

* Other fees represent costs for any additional work undertaken for the Company and retention fees paid.

** Superannuation represents payments made in respect of a defined contribution pension scheme.

9. STAFF COSTS (EXCLUDING REMUNERATION OF KEY MANAGEMENT PERSONNEL)

* Superannuation represents payments made in respect of a defined contribution pension scheme.

** Other costs relate to retention bonus provisions.

10. SHARE BASED PAYMENT (EXPENSE)/INCOME

Refer to note 31 for further details of the phantom option plan and share option plan.

11. FINANCING INCOME AND COSTS

12. INCOME TAX

Calculated taxation losses

The Group has recognised a net deferred tax asset of ZAR236 million as it is probable this will be fully utilised in future, as the Group expects to generate future taxable profits based on current forecasts. IFML has unrecognized tax losses of ZAR198 million (2011:ZAR164 million) in relation to the parent entity.

Unredeemed mining capital expenditure

13. EARNINGS PER SHARE

a) Due to the reported loss per share, the additional rights issued are anti-dilutive and hence have not been incorporated in the calculation of diluted earnings per share and the calculation of average weighted number of ordinary shares.

14. DIVIDENDS PAID AND PROPOSED

The Board of Directors resolved not to declare a dividend for the year ended 30 June 2012 (2011: nil).

15. CASH AND CASH EQUIVALENTS

16. TRADE AND OTHER RECEIVABLES

a) Trade debtors relate to the sale of ferrochrome and chrome ore. Payment terms are thirty days from date of final invoice.

b) Tax refunds relate to the relevant Goods and Services Tax and Value Added Tax refunds owing in Australia and South Africa.

c) Other debtors mainly relate to foreign exchange contract debtor of ZAR2,843.

Details of the terms and conditions of receivables are discussed in detail under note 33.

The carrying value of trade and other receivables is assumed to approximate the fair value due to the short term nature of the trade and other receivables.

17. PREPAYMENTS

18. INVENTORIES

19. FINANCIAL INVESTMENTS

a) These financial assets consist of investment portfolios which are managed by various financial institutions in favour of a rehabilitation trust. The funds can only be applied to relevant rehabilitation expenditure. These financial assets are classified at fair value through profit and loss.

The fair value of these financial instruments has been estimated by the financial institutions using a variety of valuation techniques. These financial instruments are classified as a level 2 in the fair value hierarchy as their fair values have been estimated using inputs other than quoted prices that are observable for the assets, either directly or indirectly.

20. PROPERTY, PLANT & EQUIPMENT

a) Mineral rights and reserves of ZAR61million relating to the Sky Chrome deposit is held in Purity Metals Holdings Limited ("Purity"), a wholly owned subsidiary of the Group.

b) Capital work in progress relates to capital costs incurred for the expansion of the Group's associated infrastructure.

c) The adjustment to plant & equipment relate to reallocation of capital work in progress to the various assets.

Property, mineral rights and plant and equipment of IFMSA have been pledged as security for the working capital facility provided by Bank of China. (Refer to note 25 for further details). The carrying value of Plant, property and equipment at 30 June 2012 is ZAR2.02 billion (2011: ZAR1.97 billion).

21. INTANGIBLE ASSETS

a) Licence fees relate to the fees paid for the use of patented technology.

b) The UG2 Chrome Retreatment Plant ("CRP") at Anglo Platinum's Waterval operations in Rustenburg has been producing the contractual 15,000 tonnes per month since April 2012. The supply agreement entitles IFM to receive 15,000 tonnes per month of chrome concentrate until November 2020.

22. OTHER NON-CURRENT ASSETS

a) Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to the Department of Minerals and Resources for environmental rehabilitation.

23. TRADE AND OTHER PAYABLES

a) Refer to note 35.

b) Other creditors and accruals represent advance debtor payments.

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

24. PROVISIONS

a) The provision for employee entitlements represents accrued annual leave liabilities, retention bonus and other employee provisions. It is expected that these costs will be paid in the next financial year.

b) The provision for decommissioning and restoration represents management's estimate of the restoration and exit costs associated with the integrated mining and ferrochrome smelting facility at Buffelsfontein and Sky Chrome. It is expected that these costs will be incurred at the end of the operations/mine life. Due to the long-term nature of the liability the greatest uncertainty in estimating the provision is the costs that will be ultimately incurred. The provision has been calculated using a pre-tax discount rate of 7.5%.

c) The Phantom Share Option scheme options are treated as "cash settled" share based payments in accordance with the accounting policy described in note 2(q).

25. INTEREST BEARING LOANS AND BORROWINGS

a) Working capital facility

The Company rolled forward the working capital facility agreement with Bank of China for an amount of R500 million. The term of the facility is 12 months and expires on 25 June 2013. The facility interest is charged at JIBAR rate plus 3.5%. The parent company, IFML, guarantees the facility on behalf of IFMSA. The entire balance sheet of IFMSA is pledged as collateral for the loan facility. Bank of China has the option to cancel the loan facility and call upon any balance outstanding in the event of a material deterioration in the financial position of IFMSA.

b) Finance leases

The weighted average effective interest rate on finance leases is 9.18%.

c) Other loans

The loan constitutes the 20% community participation of funding provided to Sky Chrome by IFM. The loan is interest free and payable on demand before earning distributions are made.

As at 30 June 2012, the Group had no undrawn loan facilities (2011: ZAR185 million), excluding debtors discounting facilities.

Fair value

The carrying values of each class of interest bearing loans and borrowings approximates their fair value.

26. CONTRIBUTED EQUITY

No Ordinary Shares were issued during the years ended 30 June 2012 and 30 June 2011.

Ordinary Shares

Ordinary Shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary Shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

Options

The Group has a share option scheme under which options to subscribe for the Company's shares have been granted to certain executives. See note 31 for further details.

JISCO Anti-Dilution Rights

JISCO has certain non-dilution rights under the Subscription Agreement, which apply if an Option is exercised, to require JISCO to be offered and issued Ordinary Shares at the same exercise price at which such Options are exercised to enable JISCO to maintain its guaranteed holding of 26.1% of the issued Ordinary Shares of the Company. These non-dilution rights are accounted for as a derivative liability. Since JISCO's shareholding is above 26.1%, under the Subscription Agreement, IFM is not obliged to offer JISCO shares in terms of the anti-dilution clause, unless the issue would dilute JISCO's ownership below 26.1% and therefore no derivative liability has been recognised at 30 June 2012 (2011: nil).

Capital Management

When managing capital, management's objective is to ensure the Group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the Group.

Capital is defined as total shareholders' equity which represented ZAR2.3 billion at 30 June 2012 (2011: ZAR2.4 billion).

The Board of Directors and Management regularly review the company's capital structure using a detailed cash flow model. They assess the adequacy of the capital structure against the major variables impacting the Group's profitability.

As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders or issue new shares to reduce debt. Should a strategic acquisition be assessed, management may issue further shares on the market.

The company has complied with all externally imposed capital requirements.

26. SHARE BASED PAYMENT RESERVE