related party transactions with Shandong

 11 September 2013

African Minerals Limited

Announcement regarding related party transactions with Shandong

African Minerals Limited (the "Company") announces that, on 10 September 2013, the Company and its subsidiaries (the "Group") entered into various arrangements that constituted related party transactions. This announcement is now being made to comply with AIM Rule 13.

The Company has settled claims raised by Shandong Iron & Steel Group Co., Ltd. ("Shandong") under the investment documents for its $1.5 billion equity investment in the Tonkolili project companies (the "Investment Agreements"), announced on 30 March 2012.

Key points

· The Company settles all warranty breaches and production guarantees under the Shandong investment agreements for $42.3 million, in addition to the amount which are already provided for in the Group's 2012 Accounts and which have subsequently been paid

· Balance of claims to be paid by project companies, with appropriate gross up, at times to be agreed between the parties

Background

As announced on 30 March 2012, the Investment Agreements required delivery of 2 million tonnes of iron ore to Shandong in 2012 and contain guarantees that during 2012 the project subsidiaries would sell 10 million tonnes of iron ore and reach a production rate of 12 million tonnes per annum. The Investment Agreements also contain warranties by the Company about the business and finances of the project companies as at the closing of the transaction.

Although the project has now demonstrated achievement of its target 20 million tonnes per annum export run rate as announced on 18 June 2013, production in 2012 did not meet the production guarantees and offtake obligations given to Shandong. In accordance with the provisions of the Investment Agreements and applicable law, Shandong is to be compensated for these shortfalls, and for certain warranty breaches claimed following its post-closing audit.

These arrangements are in full and final settlement of all production guarantees and warranty claims under the Shandong subscription agreement, with the exception of the warranties relating to environment and tax which have a longer limitation period.

Agreed liabilities in settlement of claims

The parties have agreed the following amounts as the Company's liability to Shandong calculated in accordance with the provisions of the Investment Agreements and applicable law:

Production guarantees and offtake obligation

· $35.5 million for failure to achieve 10 million tonnes production in 2012

· $9.8 million for failure to achieve a 12 million tonne production rate by the end of 2012

The parties have also agreed an amount of $3.7 million as the project companies' liability for failure to meet the 2012 offtake obligation.

Warranty breaches

· $32.5 million for warranty breaches plus $8.5 million per year for 2014 through 2016 and $5.3 million per year from 2017 through 2031

· Up to $4.5 million to the extent the fuel impairment explained in the Group's 2012 Accounts is not removed and/or reduced

The aggregate liability for 2012 was $39.2 million, comprised of the $35.5 million and $3.7 million, which was fully provided for in the Group's 2012 Accounts and which was subsequently paid. The aggregate liability for 2013 is $42.3 million, comprised of $9.8 million and $32.5 million.

Payment to be made by project companies

The parties have agreed that the project companies will settle the above liabilities therefore requiring a one-third gross up to account for Shandong's 25% shareholding (except for the $3.7 million for the 2012 offtake obligation). The following amounts are therefore payable by the project companies:

Production guarantees and offtake obligation

· $47.4 million for failure to achieve 10 million tonne production in 2012, which was fully provided for in the Group's 2012 Accounts

· $13.0 million for failure to achieve a 12 million tonne production rate by the end of 2012

· $3.7 million from the project companies for failure to meet the 2012 offtake obligation, which was fully provided for in the Group's 2012 Accounts

Warranty breaches

· $43.3 million for warranty breaches plus $11.4 million per year for 2014 through 2016 and $7.0 million per year from 2017 through 2031

· Up to $6.0 million to the extent the fuel impairment explained in the Group's 2012 Accounts is not removed and/or reduced

Taking account of the $51.1 million provisions already included in the Group's 2012 accounts, the net charge to the Group's 2013 Accounts will be $56.2 million (excluding any compensation for the fuel impairment). Shandong has agreed that this balance will be released from the project companies' restricted funds and left in the project as a shareholder loan. The loan will incur interest at 1% per annum in 2013 and 2% per annum in 2014 and is repayable at times and amounts to be agreed between the parties.

Related party transaction

Shandong is a related party within the meaning of the AIM Rules by virtue of its significant shareholding in the project companies, and therefore these arrangements constitute related party transactions pursuant to AIM Rule 13.

The directors of the Company (other than Mr Cui Jurong, being a Shandong representative) consider, having consulted with Jefferies International Limited, the Company's nominated adviser, that the terms of the settlement arrangements are fair and reasonable insofar as its shareholders are concerned.

Executive Chairman, Frank Timis, commented:

"Shandong has been, and continues to be, a very supportive partner. The partners have together agreed that the additional $42.3m, due now by AML, over and above that which was already fully provided for, will be carried by the project, with appropriate gross up. Leaving these funds with the project provides additional liquidity, and demonstrates the continuing support that Shandong has provided, which we greatly appreciate."

Contacts:African Minerals Limited+44 20 3435 7600Mike JonesJefferiesInternational Limited+44 20 7029 8000Nick Adams / Alex Collins