Update on Section 54 notice and Trading Update

26 November 2014

International Ferro Metals Limited

("IFL" or the "Company")

Update on Section 54 notice and Trading Update

International Ferro Metals Limited, the integrated ferrochrome producer, announces that further to the temporary suspension of production and the court hearing held two days ago that found in favour of the Company upholding the contractual settlement agreement reached with the South African Department of Mineral Resources ("DMR"), a presentation meeting held yesterday at the DMR resulted in the successful lifting of the Section 54 notice.

As previously announced the furnaces remain in operation and continue to ramp up with furnace 1 expected to reach normal production by 27 November, and furnace 2 expected to achieve similar levels of production by the end of November. An initial assessment of the impact on ferrochrome production is a loss of approximately 4,000 tonnes. As a result, production guidance for the first half of 2015 is in the range of 97,000 to 100,000 tonnes and for the full year 215,000 to 222,000 tonnes of ferrochrome. The loss in production due to the Section 54 notice will have subsequent impacts on both revenue and production costs, which are outlined in the update below.

Chris Jordaan, IFL's Chief Executive Officer said, "We are pleased that the Section 54 notice has been lifted and that the furnaces are well on their way to full production, but disappointed that the impact to the business in a time of weak ferrochrome prices will result in an increased operational loss for the current half of the year.

The events that have pushed us into a higher loss this half than originally anticipated, in addition to a lower ferrochrome pricing environment, namely lower volumes, a one off cost for reductant trials, and a higher fines to lump ratio resulting in higher discounts - are not expected to be repeated during the second half of the year. Moreover, with the introduction of LG6 ore in Q3 and MG1/MG2 ore in Q4 which will result in lower ore costs, we expect to see a significant improvement to profitability during these periods."

Stainless Steel and Ferro chrome markets

The US and European economies continued to stagnate during the past quarter whilst a growing negative sentiment dominated markets in China. The stainless steel market faced some challenges as the production overhang in Asia made some inroads into Western markets.

The depressed market conditions in China spilled over to other regions and both the spot and benchmark FeCr prices were negatively impacted. New capacity from South Africa also unsettled the market balance and weighed in on pricing.

The availability of chrome ore will be challenged in the medium to longer term as producers in China will have to compete globally for a non-expanding ore basket to meet their expansion targets. The cost pressures are mounting in the ferrochrome industry and current output will be hampered unless there is some price relief.

Low stocks, increased stainless steel production in China and further curtailment of FeCr production in the short term is expected to increase demand towards South African producers. This is expected to have an upward pressure on alloy prices as South African producers are operating at almost full capacity. This together with seasonal price hikes in Q1 of the calendar year sets the scene for an expected increase, however it is noted that this will be dampened by lower cash availability as well as latent capacity of marginal producers that could restart in China.

It has now become evident that prices in China have moved sideways for the first time in 5 months. Realised CIF prices averaged about 92 USc/lb in the first quarter of the financial year, however the Benchmark Price decreased by 4 USc/lb on 1 October. This bodes well for realising the bottom of the price cycle, which is evidenced by an increase in some of the major stainless steel producer's tender prices of between 0.625 USc/lb and 1.25 USc/lb in the last week. Further cost pressures are expected for South African producers as the next power price increase will be implemented on 1 April 2015. This increase is expected to be around 12%.

Revenue

The alloy price for FeCr has dropped over the last 9 months. The European Benchmark price reduced from 122U$c/lb in Q2 2014, to 119U$c /lb in Q3 and to 115U$c/lb in Q4. Discounts were also higher than expected. A higher ratio of FeCr fines sales during H1 FY15 has further increased discounts. Although the Rand depreciated against the U.S. Dollar, this has not been sufficient to offset the lower realised U.S. Dollar prices. However, the excess FeCr fines are expected to be sold by December 2014, and the sales profile should then reflect the natural arising of fines and lump product from January 2015.

Smelting

In addition to increased costs associated with the suspension of the smelters occasioned by the Section 54 notice, expenses applicable to the furnaces were negatively impacted in two other areas. Power prices increased with the winter tariffs charged by Eskom, which are 60% higher than in summer. Also, the Company ran a series of trials to assess the viability of using silicon carbide as an alternative reductant in the smelting process. This caused the Company to incur costs of approximately ZAR30 million. Whilst the trials demonstrated that using silicon carbide as an alternate reductant can reduce costs, it would require a significant capital investment to increase the pelletiser's capacity for these to be realised, so will not be considered at this current time.

Costs

Ferrochrome production cost for October was approximately ZAR8.01 per pound. This was higher than expected due to the silicon carbide trials. November production cost will be negatively impacted by the Section 54 stoppage, as the furnaces consume considerably more electricity during ramp up. November production cost is estimated at approximately ZAR8.50 per pound with overall production cost for the first half of FY2015 expected to be approximately ZAR8.15 per pound.

Ore cost remains the major cost focus area; higher UG2 usage and ore supply from Rooderand should reduce ore input cost. Rooderand Mine is expected to provide the Company with 20kt ROM LG6 ore as from January 2015. The Lesedi mine with its accelerated ramp-up should provide the much needed MG1 and MG2 reef ore and is ramping up according to plan. This is expected to improve self-sufficiency of ore supply by June 2015. Both these operations are expected to produce at a cost below that of buy-in ore.

Cash

Net borrowings increased to ZAR455 million at 31 October 2014 from net borrowings of ZAR434 million at 30 September 2014, mainly due to higher than expected production cost in October, due to the silicon carbide trials, capex and financing costs. Net borrowings are expected to range between ZAR475 million to ZAR490 million until February 2015. The Company is focussed on reducing working capital which has increased over the last quarter.

- ENDS-

For further information please visit www.ifml.com or contact:

About International Ferro Metals:

International Ferro Metals produces ferrochrome, the essential ingredient in stainless steel, from its integrated chromite mine and ferrochrome processing operations in South Africa. International Ferro Metals is listed on the London Stock Exchange under the symbol IFL.

Forward Looking Statements

This announcement contains certain forward looking statements which by nature, contain risk and uncertainty because they relate to future events and depend on circumstances that occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.