Response to Revised Offer

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN.

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the Revised Offer or the action you should take, you are recommended to seek your own independent financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

Sierra Rutile Limited ("Sierra Rutile" or the "Company")

Response to Revised Offer by Pala Minerals Limited

6 October 2011

Dear Shareholder,

Pala Minerals Limited ("Pala") announced, on 3 October 2011, that it was amending the terms of its mandatory cash offer for the entire issued share capital of the Company, originally announced on 7 September 2011, from its initial price of 25 pence per ordinary share (the "Original Offer") to a revised price of 30 pence per ordinary share (the "Revised Offer").

In addition, Pala has announced that shareholders will be able to sell their shares directly to Pala by private treaty at a price of 30 pence per ordinary share; disposals by private treaty will not be subject to the terms and conditions of the Revised Offer.

The independent Sub-Committee of the Company's Board (the "Sub-Committee" or the "Independent Directors") comprising John Sisay, Francois Colette, Charles Entrekin and Alex Kamara, who has been appointed its Chairman, have reviewed the Revised Offer in conjunction with the Company's independent advisers.

The Independent Directors note that the Revised Offer price represents a significant premium to both the closing middle market and volume weighted average prices of Sierra Rutile shares prior to the announcement of the Original Offer on 7 September. However, the Independent Directors, who have been so advised by Collins Stewart Europe Limited, continue to believe that the Revised Offer undervalues the future prospects of the Company and hence do not consider it appropriate to recommend the Revised Offer to shareholders. In providing advice to the Independent Directors, Collins Stewart Europe Limited has taken into account their commercial assessments.

The Sub-Committee recommends that shareholders remain mindful of the risks outlined in their response announcement of 14 September 2011. The Sub-Committee notes the share price performance of the Company's peers since the commencement of the Original Offer and highlights to shareholders the risk that the Company's share price does not remain at the level of the Original Offer, Revised Offer or the share price prior to the offers, should the Revised Offer lapse. 

The Revised Offer will lapse unless Pala has received acceptances in respect of 50% of the total issued share capital of Sierra Rutile, including Pala's current holding of approximately 38.5%, by 1.00 p.m. on 4 November 2011. As such, it should also be noted that the ability for shareholders to sell shares directly to Pala under private treaty, as outlined above, represents a certain method for shareholders to monetise their investments without remaining beholden to the acceptance conditionality of the Revised Offer. Shareholders should also note that any sale of shares to Pala under private treaty would be at a fixed price of 30 pence and such selling shareholders would not be eligible to benefit in the event there were any further increases to the price of the Revised Offer. 

As at 5.00 pm (London time) on 30 September 2011, Pala had received valid acceptances for the Original Offer in respect of 163,452 Sierra Rutile Shares, representing 0.03 per cent. of Sierra Rutile's total issued share capital.

As with the response to the Original Offer, the Independent Directors continue to have a strong relationship with Pala and look forward to working together to realise value for the Company going forwards.

Yours faithfully,

Alex Kamara

Non-Executive Director

For further information:

Overseas jurisdictions

The availability of the Revised Offer in, and the release, publication or distribution of this announcement in or into, jurisdictions other than the United Kingdom may be restricted by law. In particular, as described in the Offer announcement, the Revised Offer will not be made directly or indirectly into the United States, Canada, Australia or Japan. Therefore persons into whose possession this announcement comes who are not resident in the United Kingdom should inform themselves about, and observe, any applicable restrictions. Sierra Rutile Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

The Revised Offer will not be made, directly or indirectly, in or into, or by the use of the mails or any means of instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facilities of a national securities exchange of the United States, Canada, Australia or Japan. Accordingly, except as required by applicable law, copies of this announcement are not being, and may not be, mailed or otherwise forwarded, distributed or sent in, into or from the United States, Canada, Australia or Japan. Persons receiving this announcement (including without limitation nominees, trustees or custodians) must not forward, distribute or send it into the United States, Canada, Australia or Japan.