Q2 Trading Statement

Sierra Rutile Limited

Sierra Rutile Provides Q2 2014 Operational Update

London, UK, 8 July 2014: Sierra Rutile Limited (AIM: SRX) ("Sierra Rutile") is pleased to provide an operational update on the second quarter of 2014 ("Q2").

Highlights

· Production for the quarter:

- 27,842 tonnes of rutile in Q2, a 3% increase on Q2 2013 production; and

- 8,410 tonnes of ilmenite in Q2, a 12% decrease on Q2 2013 production. 

· Continued improvement in operating cost efficiency during H1 2014, resulted in a 24% reduction in operating cash cost per tonne1 relative to H1 2013. 

· Sales in Q2 were ahead of production volumes resulting in a reduction in inventory levels. 

· Received confirmation of formal credit approval from Nedbank Limited for the extension of the existing US$20 million working capital facility.

Production

Sierra Rutile produced 27,842 tonnes of rutile, 8,410 tonnes of ilmenite and 488 tonnes of zircon concentrate in Q2.

During the quarter rutile production sourced from tailings was lower than planned due to higher than expected non-valuable heavy minerals in the tailings concentrate. This resulted in a modest underperformance against planned rutile volumes in H1 2014. Production for H2 2014 is expected to be higher than H1 2014, as mining operations transition to higher grade zones, concentrate blend ratios are optimised and recoveries improve following the completion of the planned upgrade of the mineral separation plant, and the company expects to meet full-year forecasts.

Cost efficiency

Sierra Rutile continues to achieve significant results with regard to operating cost efficiency, with total operating cash cost per tonne declining to US$609/ tonne during H1 2014, relative to US$799/ tonne H1 20133. This was despite lower than expected production.

Through the on-going, company-wide cost reduction programme and increased production in H2 2014, Sierra Rutile expects to see continued reduction in unit costs through the remainder of the year.

Expansion projects

The upgrade to the mineral separation plant continues on track for completion during H2 2014. The upgrade will increase the capacity of the mineral separation plant to over 200ktpa while also increasing the process recoveries, improving the power and fuel economies and it will also increase Sierra Rutile's ability to process higher volumes of high-grade tailings located adjacent to the existing mineral separation plant.

The Board continues to monitor market conditions in contemplating the appropriate time to develop the Gangama Dry Mining project.

Financing

As at 30 June 2014, Sierra Rutile had a cash balance of US$10.8 million.

During the quarter, Sierra Rutile received confirmation of formal credit approval from Nedbank Limited for the extension of the US$20 million working capital facility. The facility, as approved, would have a tenor of two years, carry an interest rate of LIBOR plus 5.00% and will be secured against the assets of Sierra Rutile. Sierra Rutile and Nedbank Limited continue to progress the documentation for this facility which is expected to close during Q3.

Sales

Sales in Q2 were ahead of production volumes resulting in a reduction in inventory levels.

Sierra Rutile continues to see structural improvements in the sector as pigment plant capacity utilisation rates improve, TiO2 pigment inventory levels trend toward historical norms and pigment prices stablise. Furthermore, reports suggest that end-consumers hold little, if any, surplus stock and, as a result, any increase in pigment consumption is expected to flow through to increased TiO2 production and feedstock demand.

Environmental, Health & Safety

Sierra Rutile notes recent news reports indicating a number of cases of Ebola fever in the eastern region of Sierra Leone. The Company continues to monitor the situation closely but notes that it has not had any incidents of the disease among its workforce and is not aware of any occurrences in the communities surrounding the mine.

Commenting on the Q2 performance, CEO John Sisay said:

"I am pleased with the operating performance for the quarter with continued improvements in operating efficiency and sales. The unit operating costs were encouraging, despite production in the quarter coming in at a slightly lower level than expected. The planned transition of the mine plan to higher-grade areas during the second half of the year will result in an increased production rates and further reductions in unit costs."

ENDS

For Further Information:

Notes to Editors

About Sierra Rutile Limited

Sierra Rutile produces titanium feedstock industrial minerals (primarily rutile, with some associated ilmenite), as well as smaller quantities of zircon. Sierra Rutile's mine, located in the south west of Sierra Leone, is one of the largest natural rutile deposits in the world, with a JORC-Compliant Mineral Resource for measured, indicated and inferred resources for the Sierra Rutile mine of over 911 million tonnes (as at 30 September 2013).

www.sierra-rutile.com

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