Sierra Rutile Provides Q3 2012 Operational Update

Sierra Rutile Limited

Sierra Rutile Provides Q3 2012 Operational Update

London, UK, 8 October 2012: Sierra Rutile Limited (AIM: SRX) ("SRL" or "the Company") is pleased to provide an operational update on developments during the third quarter of 2012 ("Q3" or "the Period").

Highlights:

·; Record quarterly production of both rutile and ilmenite:

- Rutile production of 26,381 tonnes, 4% greater than highest previous quarter in Q4 2006

- Ilmenite production of 5,315 tonnes

·; Year-to-date production of 68,991 tonnes of rutile and 15,630 tonnes of ilmenite, 52% and 49% respective increase on Q3YTD 2011 (45,346 tonnes and 10,470 tonnes respectively)

·; Full-year 2012 rutile production guidance increased to 85,000 to 90,000 tonnes of rutile

·; Dry mining construction nearing completion. Plant commissioning expected to commence in November

·; Extremely positive new dredge feasibility study completed, yielding

o US$472 million project pre-tax NPV10

o 68% pre-tax IRR

o 12-month project payback

o 27-year modelled project life, with significant scope for further extensions to the project life

Production

Q3 2012 production of 26,381 tonnes of rutile was a Company record for a quarter, 4% higher than the highest previous quarter in Q4 2006. Rutile production was also significantly above budget and 45% above the 18,197 tonnes produced in Q3 2011. Q3 ilmenite production was above budget and 23% above the 4,306 tonnes produced in Q3 2011.

SRL's production rates have been steadily increasing for some time due to the renewed investment in existing production assets. Q3 has seen a step change in production rates due to this cumulative investment, as well as the planned one-week shutdown completed in Q2 2012, where critical components on the existing dredge (D1) were overhauled or replaced.

Year-to-date production is now 68,991 tonnes of rutile and 15,630 tonnes of ilmenite, respectively 52% and 49% greater than at the end of Q3 2011. Production guidance for the full year has now been increased to 85,000 to 90,000 tonnes of rutile and corresponding ilmenite.

Expansion projects

The construction of the dry mining plant is expected to be completed during October, with plant commissioning from ore previously stockpiled at the new plant commencing in November. Commissioning is scheduled to continue during the remainder of Q4, and SRL remains confident that production will commence during 2012, thus ensuring that the project will be delivered ahead of schedule and on budget.

A significant proportion of the earth moving fleet has now arrived on site and is ready for use in production and mine preparation after the completion of plant commissioning.

As announced on 3 October 2012 the feasibility study (the "Study") into a new large dredge (D3) was completed, on-schedule, during the quarter. The Study reported an exceptional project pre-tax NPV10 of $472 million, an impressive pre-tax IRR of 68% and a payback period of just 12 months. SRL is now completing an owner's review and value optimization analysis and at the same time developing a project implementation plan.

Financing

As at 30 September 2012, SRL had $16.5 million of cash on hand, having spent, during the quarter, a further $18.1 million on capital expenditures and costs associated with the new dredge feasibility study. In addition, SRL also had an inventory of 31.6k tonnes of rutile at 30 September 2012.

Sales

During Q3 there has been softness in the titanium pigment market. This is typical of Q3, which is often the weakest quarter due to the seasonality of pigment demand, however, there has been underlying slower levels of demand growth than experienced in previous quarters resulting from reduced global growth. SRL remains positive, however, regarding the medium and long-term demand for its products, and expects to see strengthening of the market in 2013.

Commenting on the third quarter performance, CEO John Sisay said: "This has been a very exciting quarter; we have experienced a real breakout in production rates that highlight the effectiveness of our investment strategy over the last 18 months. Our dry mining project has been well executed and we remain on target for it to deliver product in 2012. We have also met our targets to produce a feasibility study into a new large dredge during the quarter, the results of which are outstanding.

While the current market is somewhat soft, we remain confident that the lack of significant new supply and long-term growth patterns will underpin a strong market for our products for years to come. This, of course, is in the context of the current prices, which remain multiples above where they were 12 months ago."

ENDS

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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 600 million tonnes (as at February 2011).

www.sierra-rutile.com