Sierra Rutile Provides Production and Sales Update

Sierra Rutile Provides Production and Sales Update

London, UK, 20 December 2011: Sierra Rutile Limited (AIM:SRX) ("SRL" or the "Company") is pleased to provide an update on 2011 and 2012 production guidance and to announce execution of its first 2012 sales contracts.

Highlights:

·; 2011 rutile and ilmenite production to meet expectations with zircon production to beat expectations.

·; 2012 rutile production guidance of approximately 80,000 tonnes, an increase of 20 per cent on 2011.

·; First quarter 2012 sales contracts signed at an average price of $2,530/tonne.

·; Last sale of Q1 production contracted at $2,700/tonne.

·; Production expansion projects progressing on plan.

2011 Production

2011 rutile production is expected to be approximately 66,000 tonnes. This is in line with SRL's previous announcements where 2011 production was forecast to be approximately the same as 2010 production.

To date, production in H2 2011 has been significantly higher than in H1 2011 (27,149 tonnes in H1 versus approximately 39,000 tonnes forecast for H2) as a result of the dredge operating in a higher grade area of the Lanti deposit and from reduced dredge downtime as the effects of planned catch-up maintenance have been realised.

2011 zircon production for the year will be 8,496 tonnes. This volume has already been produced and sold and no further shipments are planned for 2011. Production is in excess of the 7,500 tonnes originally forecast, as SRL was able to make one more production run and shipment than previously planned. 2011 zircon production has been higher than previous years due to the ability to reprocess additional tailings in the mineral separation plant in H1 2011 when rutile throughput was limited.

The Company continues to forecast approximately 15,000 tonnes of ilmenite production for 2011.

2012 Production Guidance

2012 rutile production is expected to be approximately 80,000 tonnes, a substantial increase of 20 per cent. on the previous year. This increased production is the product of the essential maintenance and refurbishment of existing assets that has been ongoing through 2011, combined with an expected continuation of the high in-situ resource grades experienced in H2 2011. The 80,000 tonne 2012 guidance includes the impact of a planned three-week maintenance shutdown on the dredge in Q2.

The impact of catch-up maintenance and refurbishments is expected to result in further production increases from existing assets during 2012 and into 2013. To date, $11.2 million of the approved $14.1 million 2011 capital expenditure budget has been spent. The remainder is expected to be spent in the remainder of 2011 and into 2012, contributing to a 2012 capital expenditure budget for existing assets of $14.6 million (this excludes expenditure on longer-term production expansion projects, outlined below). Once essential catch-up maintenance is completed, SRL estimates that its annual maintenance capital expenditure will reduce to a rate of approximately $6 million per annum on existing assets.

SRL currently does not plan to produce any zircon in 2012 as the mineral separation plant's availability will be fully dedicated to the production of SRL's core rutile product and associated ilmenite. As previously announced, SRL will continue to assess the future potential of on-stream production of a zircon product.

2012 ilmenite production is expected to be approximately 18,000 tonnes, corresponding to the increased rutile production.

All 2012 production will come from the existing dredge or existing inventory, with no production forecast in 2012 from the production expansion projects announced on 24 October 2011 (outlined below).

2012 sales contracts and market update

SRL is pleased to announce that it has executed contracts for the sale of 21,000 tonnes of standard-grade rutile. All contracts are for Q1 2012 delivery, completing SRL's sales for the quarter.

The contracts have a weighted-average price of $2,530/tonne, with the most recent priced at $2,700/tonne. The weighted-average price achieved represents a 285% premium to SRL's weighted-average price of $658/tonne for 2011 sales of standard-grade rutile.

SRL has no further contracts in place for 2012 for any product and has fulfilled all contracts for 2010 and 2011, meaning all SRL's residual production is uncontracted. This leaves 74% of SRL's forecast rutile production for 2012 not under contract (as well as 100% of ilmenite production).

SRL believes that the market fundamentals remain strong for both rutile and ilmenite. Short-to-medium term TiO2 supply constraints and high barriers to entry make rutile markets particularly attractive, as demand will continue to outstrip supply for 2012 and into 2013, supporting prices well in excess of 2011. As SRL was able to fulfill all lower-priced legacy contracts in 2011, and is largely uncontracted for 2012, it is extremely well positioned to capitalize on continued price strength.

SRL notes that it does not normally comment on contract prices outside of general annual and interim reports (other than where they would represent material price sensitive information), however, in the context of current global economic concerns and volatile business and investor confidence levels, SRL considers it appropriate, in this instance, to provide this pricing information.

Production expansion projects and financing

On 24 October 2011, SRL approved the immediate implementation of two production expansion projects; dry mining of part of the Lanti deposit ("Dry Mining") and the reprocessing of the Mogbwemo tailings ("Mogbwemo Tailings").

In relation to Dry Mining, the concentrator unit has been ordered and requests for tender for the earth-moving contract have been released. On Mogbwemo Tailings, detailed engineering is underway on the concentrator unit, with requests for tender for supply of the concentrator unit and the dredge expected to be released in Q1 2012. Both projects remain on track as previously announced on 24 October 2011, with production commencing in 2013 and full capacity being reached in 2014.

SRL also previously announced that a feasibility study would be conducted into the construction of a new, large-scale, second dredge ("New Dredge Feasibility Study"). Subsequent to the project's approval, SRL has appointed Paradigm Project Management (Pty.) Ltd. as owner's representatives to oversee the execution of the project. A request for tender for the feasibility study will be released prior to the end of 2011, with the selection of consultants expected to take place in Q1 2012.

Total expenditure for 2012 on Dry Mining, Mogbwemo Tailings and the New Dredge Feasibility Study is expected to be around $45 million.

SRL will continue to assess the need for external financing and, if required, alternative sources of such financing, as the timing of capital expenditures and production deliveries are finalized in early 2012. SRL will do this against the current backdrop of the continued improvements to the rutile price environment.

ENDS

For further information:

Sierra Rutile Limited

John Sisay, Chief Executive Officer

Telephone: +44 (0) 20 7321 0000

Collins Stewart Europe Limited

Nominated Adviser and Joint Broker

John Prior / Adam Miller

Telephone: +44 (0) 20 7523 8350

Aura Financial

Andy Mills / Harry Cameron

Telephone: +44 (0) 20 7321 0000

Sierra Rutile Limited

Sierra Rutile Limited is a mining company with operations in the Republic of Sierra Leone. The Group is one of the country's largest private sector employers and produces rutile, zircon and ilmenite for use in industrial applications. The Company changed its name to Sierra Rutile Limited on 24 February 2011.