Revised MoU for $1.5bn SISG Investment

3 May 2011

African Minerals Limited

("AML" or "the Company")

Revised Memorandum of Understanding for $1.5bn Shandong Iron & Steel Group Investment

African Minerals Limited (AIM:AMI) is pleased to announce that it has signed a revised Memorandum of Understanding ("MoU") with Shandong Iron & Steel Group Co Limited ("Shandong" or "SISG") in respect of Shandong's proposed US$1.5Bn investment in AML's Tonkolili iron ore project and related infrastructure (together "the Project"). The legally binding and exclusive MoU, which requires final contractual documentation to be prepared, supersedes all previous agreements with Shandong and reflects the considerable progress made at the Company since discussions between AML and SISG began in July 2010.

Highlights of revised MoU

·; SISG will invest US$1.5Bn ("the Investment") in return for 25% of the subsidiaries holding the Project.

·; The consideration will be paid in full on closing and is payable either in cash or by demand bank guarantee.

·; Closing of SISG's investment will be conditional on receipt of, amongst other things, necessary governmental and regulatory approvals.

·; The funds from the Investment will be used by the Company to accelerate  the development of the mine operation at Tonkolili and for construction of the related infrastructure in Sierra Leone.

·; SISG will have the right to appoint a minimum of two out of five directors to the board of each project company and one director to the board of AML.

·; SISG has an option to acquire up to 25% of annual iron ore production from each of the 3 production phases, by reference to the benchmark prices.

·; The MoU envisages a separate iron ore off-take agreement for a total of 2Mtpa of Phase I production, and an incremental 8Mtpa after Phase II is commissioned, at a discount to benchmark prices. From the date of commencement of production of Phase III, the separate off-takeagreement includes 5Mtpa hematite fines and 5Mtpa magnetite concentrate , save that when there are no more hematite fines for production in the Project, SISG shall receive 10Mtpa magnetite concentrate for the remainder of the life of the Project, at a discount to benchmark prices.

·; SISG may also elect to receive iron ore in lieu of its share of any dividends declared from the mining operations of the Project of an amount calculated by reference to the benchmark prices for the accountable period.

·; The MoU envisages that the funding for Phase III of the Tonkolili Project will be debt finance but, to the extent that shareholder funding is required, the MoU provides for this to be through shareholder loans pro rata between the Parties.

·; Both AML and SISG's rights as shareholders will be protected in the event of an offer to acquire either party's full interest in the Project.

Commenting on the MoU, Frank Timis, Executive Chairman of African Minerals said: 

"We are delighted to have further developed our relationship towards a formal partnership with one of the world's largest steel mills. Upon completion, Shandong's proposed strategic investment would provide us with the financial strength to accelerate the development of the Tonkolili Project and the agreement also provides a buyer for a significant proportion of our iron ore product.

"The investment by Shandong would give us the ability to pay down the current debt, and to commit to our Phase II expansion at an earlier stage thereby providing significant benefits to the Company, its shareholders, SISG, and the Government and People of Sierra Leone."

Further progress has been made by SISG towards completing its due diligence, and this process is substantially complete. The exclusivity period with SISG runs to the end of May 2011 and the parties are working to finalise the agreements by that time. Assuming agreement is reached, the parties will then submit them for regulatory approval. However, there can be no certainty that any final agreement will be reached. A further announcement will be made in due course, as and when appropriate.

Ends

Enquiries:

African Minerals Limited +44 20 7104 2280

Mike Jones

Canaccord Genuity Limited +44 20 7050 6500

Robert Finlay / Guy Blakeney

Aura Financial +44 20 7321 0000

Michael Oke / Andy Mills 

Notes to Editors

About AML:

African Minerals is developing the wholly owned Tonkolili iron ore project in Sierra Leone, with a JORC compliant resource of 12.8Bnt. The project, which currently has a 60+ year mine-life, is being developed in 3 phases. Phase I of the project is fully funded and at full capacity is expected to produce  12 million tonnes of iron ore per annum once it ramps up from initial production in Q4 2011. Phases II and III are expected to boost production incrementally by 23Mtpa and 45Mtpa respectively. African Minerals and its contractors currently employ approximately 3,600 people in Sierra Leone, 78% of whom are Sierra Leonean nationals.

The Company is also developing significant port and rail infrastructure to support the development of the project, via African Rail and Port Services ("ARPS"), in which the Government of Sierra Leone has a 10% interest.

African Minerals is registered in Bermuda and is listed on the AIM market of the London Stock Exchange.

About SISG:

Shandong Iron & Steel Group Co., Ltd (SISG) is one of the largest iron and steel groups in China specialising in the smelting, processing and sale of steel and related commodities. It is currently the world's ninth largest steel group.