IMS & Production Report

23 October 2012

International Ferro Metals Limited

("IFL" or the "Company")

Interim Management Statement to 23 October 2012 and

Production Report for the three months to 30 September 2012

Highlights:

·; Ferrochrome ("FeCr") production of 57,949 tonnes for the quarter up 83% on the quarter to 30 September 2011

·; FeCr sales of 54,003 tonnes for the quarter, up 29% on the quarter to 30 September 2011

·; Sky Chrome mining operations produced a record 190,000 tonnes run-of-mine ore for the quarter, up 54% on previous quarter

·; Co-generation plant produced a record of 19.5GWh of electricity for the quarter, 8.4% of total electricity requirement

·; UG2 Chrome Recovery Plant ("CRP") delivered 43,400 tonnes in the quarter, 1,600 tonnes below contractual commitment as a result of the unprotected strikes in the platinum sector

·; 64% of targeted production cost savings achieved for the quarter; up from 40% for FY2012

·; Net borrowings increased from ZAR308 million at 30 June 2012 to ZAR390 million at 30 September 2012, as expected

·; Capex was ZAR16.4 million for the quarter

·; Zero fatality track record maintained and further significant improvement in overall safety performance

Post period end:

·; Benchmark European FeCr price decreased by 15¢ to US$1.10/lb for the quarter ending 31 December 2012

·; UG2 CRP at Anglo Platinum shut down on 12 September due to unprotected strikes and no UG2 has been received so far in October

Commenting on the update, Chief Executive Chris Jordaan said:

"This quarter was a record breaking quarter for IFL. We achieved record chrome ore production from the Sky Chrome mine, we generated a record 8.4% of our electricity requirements from the Cogen plant, and ferrochrome production from the smelters is the second best quarter ever and would have been a record if we adjust for the peak hour power reductions due to high winter tariffs. We continue to focus on bringing costs down and we have achieved 64% of our targeted cost reduction.

"Overall, we are delighted by the progress made over the quarter - our costs continue to come down and our production continues to improve, which puts the Company in good stead for the future."

Stainless steel and ferrochrome markets

The stainless steel market slowed significantly during the third calendar quarter of 2012 as a production overhang exerted pressure on prices and industry profitability. This indirectly affected ferrochrome demand and prices.

The European Benchmark Price of FeCr decreased in the last two quarters of calendar 2012 from 135¢/lb in Q2 to 125¢/lb in Q3 and 110¢/lb in Q4. This is mainly due to softening market demand resulting from continued negative sentiment from the Eurozone debt crisis, which also negatively impacted the Asia-Pacific region as reported GDP growth in China dropped below 8%.

Ferrochrome prices in China, which are dominated by domestic supply, had a significant impact on global ferrochrome spot price trends. Both stainless steel and ferrochrome markets remained depressed throughout the third quarter, which resulted in an increasing disconnect between the European Benchmark Price and the spot market, and ultimately led to the 12% decrease in the Q4 2012 benchmark price. 

Health and Safety, and the Environment ("HSE")

The Company had no fatalities during the quarter and remains fatality free since inception, representing 22.9 million fatality free man hours. This equates to 2.87 million fatality free shifts as at 31 September 2012, an improvement on the last period of 21.2 million hours. The 12 month moving average lost time injury frequency improved from 4.36 at 30 September 2011 to 3.57 at 30 September 2012 as a result of a further visible leadership and focus on adherence to critical risk controls. IFL is pleased with its fatality free track record and the progress made in safety performance, and is committed to maintaining these high standards in the future.

No environmental incidents were reported in the period under review. 

Mining

Run-of-mine ore production for the quarter to 30 September 2012 decreased to 243,600 tonnes from 293,400 tonnes in the prior quarter. The ramp up at Sky Chrome progressed to plan and has consistently exceeded 70,000 tonnes per month of run-of-mine ore since August 2012 (August production was 73,000 tonnes as previously reported).

As expected, the Lesedi open pit reached its end of life in July 2012 and therefore did not produce any ore in August or September. As such, production for the quarter was 13,000 tonnes compared with 87,000 tonnes in the corresponding period last year. Production from the Lesedi underground mine also declined over the quarter (from 82,000 tonnes to 40,000 tonnes) as JIC, the Company's underground mining contractor at Lesedi, dismissed approximately 50% of its workforce in July. The Lesedi underground mine produced 14,000 tonnes run-of-mine during August as announced on 11 September 2012. IFL is currently evaluating underground mining options at Lesedi to ensure optimised production. The temporary drop in production at Lesedi is not expected to have a material impact on the Company's performance given the ramp up of its open pit operations at Sky Chrome.

The ramp-up of Sky Chrome has more than adequately replaced the production lost from the Lesedi open pit and has made up for most of the production lost from the Lesedi underground operation. The Company has a number of available options to replace any potential shortfall of ore production going forward.

Recoveries for the quarter from the ore beneficiation plant averaged 55% compared with 62% in the previous quarter. The recoveries were negatively influenced in the period under review due to lower grade weathered material from Sky Chrome. It is expected that recovery rates should stay at these levels until such time as Sky Chrome has mined through the weathered material, which is expected in the next 12 months. The recoveries were enhanced by the ore concentrate recovery plant which produced 11,700 tonnes, up 12% on the previous quarter.

Smelting

Production for the quarter was 57,949 tonnes compared with 18,505 tonnes for the previous quarter. This was in line with management expectations due to the start-up in June 2012, which went without delays and full load was achieved in the second half of June. During the expensive peak winter tariff hours the furnaces were operated at reduced load resulting in an estimated 6.4% reduction in furnace production during July and August.

Management actively continued to pursue operational improvements, and these have had noticeable benefits over the quarter. Reductant feed ratio optimization continued through the quarter, resulting in record anthracite usage for the quarter. This contributes to further reduction in cost. Furnace stability also improved, resulting in improved ore and energy efficiencies. Stable gas plant performance resulted in improvements in the fuel supply to the co-generation plant and the sinter plant. These positive effects improved co-generation output and lowered sinter production cost, which further contributed to the reduced smelting cost. Further improvement in the smelting performance is expected going forward.  

Co-generation plant

For the quarter under review, the Cogen plant reached a new record and generated 19.5GWh of electricity which represents 8.4% of the Company's total electricity requirement for the quarter, compared to 3.7GWh for the previous quarter which had only one production month. The output of the plant is directly related to the stability and performance of the furnaces. At steady-state production from the smelter, the Cogen plant should provide the Company with 11% of its total electricity requirements. 

UG2 Plant

The UG2 Chrome Re-Treatment Plant ("CRP") at Anglo Platinum's Waterval operations in Rustenburg delivered its full contractual volumes in July and August. However, the CRP plant was shut down on 12 September 2012 due to strike action at Anglo Platinum and only 13,400 tonnes UG2 was received for September. Under the supply agreement, IFL has the right to receive the first 15,000 tonnes of metallurgical concentrate production per month from the UG2 CRP plant which has a design capacity of about 50,000 tonnes per month of concentrate. The CRP is still not in operation and as a result, IFL has not received any UG2 in October as of yet.

The Company has sufficient supplies of ore from its own operations and other sources and is therefore not reliant on UG2 as supply to its own operations. 

Sales and inventory

IFL sold a total of 54,003 tonnes of ferrochrome during the quarter compared to 14,396 tonnes in the preceding quarter, with the majority of sales to the European and US markets. The low sales volume in the previous quarter was as a result of the furnaces being shut down under the Eskom electricity buy-back programme. Ferrochrome inventory increased to 14,795 tonnes at 30 September 2012 from 10,849 tonnes at 30 June 2012. Chrome ore sales were substantially lower at 46,000 tonnes during the quarter compared to 128,000 tonnes in the previous quarter. This was due to ore being consumed in the smelter as both furnaces operated throughout the period under review.

Ferrochrome sales for the next quarter are expected to be higher, in line with higher expected production and inventory is expected to reduce. Ore sales are expected to remain stable at these levels. 

Production costs

This was another strong cost reduction quarter. Ferrochrome production cost came in at ZAR6.58/lb Cr. July and August are winter tariff months when electricity costs are on average 75% higher than during summer months. The Company is targeting a cost reduction of 12% (ZAR0.76/lb) on FY2011 production cost of ZAR6.25/lb.

Adjusting for changes in unit electricity and reductant costs, this quarter's production cost was ZAR5.77/lb compared with ZAR5.95/lb for FY2012. This represents 64% (ZAR0.49/lb) of the targeted cost reduction.

The cost reduction was mainly as a result of increased anthracite consumption, improved electricity consumption, higher electricity co-generation and higher production volumes. There was an increase in ore cost but this is expected to reduce when Sky Chrome beneficiation recoveries improve and targeted levels of UG2 is consumed in the smelting process. 

Cash

The Company's net borrowings increased to ZAR390 million at 30 September 2012 from ZAR308 million at 30 June 2012, in line with previous guidance. The increase of ZAR82 million is attributable to ZAR70 million utilised in working capital, ZAR20 million utilised in investing (including ZAR16.4 million of capex) and ZAR12 million utilised in financing activities, offset by ZAR20m cash generated from operations. Net borrowings are expected to increase to about ZAR420 million over the next two quarters after which it is expected to steadily decrease. This expected increase in borrowings is mainly due to a forecast increase in working capital and the pricing environment over the next quarter.

Outlook

Fifty two furnaces were shut down in South Africa during the Eskom buy-back arrangement according to CRU. This was mostly continued during the winter tariff periods. Although not all, a number of furnaces originally shut down have now been restarted in South Africa as the Eskom buy-back arrangement ended in May 2012 and with the winter tariff period ending on 31 August 2012. This has increased alloy supply. While IFL has been relatively unaffected, ongoing illegal strikes in the platinum industry have reduced UG2 supply which has resulted in some improvement in ore prices. These two opposing forces are expected to continue throughout quarter four. It is therefore expected that spot prices will remain relatively constant throughout quarter four.

The International Monetary Fund's latest global economicgrowth forecast released in October shows a gradual strengthening of activity from the low base of early 2012. Global growth is projected at 3.3% and 3.6% in 2012 and 2013 respectively. Financial easing and recent announcements of large scale projects by the Chinese Government may stimulate demand toward the end of the quarter and an increase in spot prices may be expected. Ore demand is expected to remain buoyant throughout the quarter as supply is reduced.

IFL notes the discussions around the South African chrome ore export duty and would welcome the introduction of this levy; the Company will monitor this situation closely for any further developments.

Analyst / investor Conference call

Management will discuss these results in a conference call with the investment community on Tuesday 23 October at 09.00am (UK time). Dial in details are below:

Dial-in: +44 (0) 1452 561 263

Conf ID: 54168545

- ENDS-

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

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 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.