Amara Mining Regulatory News (AMA)

30 January 2014 AIM:AMA

Amara Mining plc

("Amara" or "the Company")

RESULTS OF FIRST PHASE OF BAOMAHUN OPTIMISATION WORK

Amara Mining plc, the AIM-listed West African focused gold mining company, is pleased to announce the results of the first phase of optimisation work[i] for the July 2013 Feasibility Study ("FS") of the Baomahun Gold Project ("Baomahun") in Sierra Leone.

HIGHLIGHTS

· First phase of optimisation work focused on 'right-sizing' the plant to the deposit to reflect current market conditions and gold price outlook. The optimisation studies demonstrated that a 1 million tonne per annum ("Mtpa") plant would allow for:

o the selective mining of the deposit's higher grade core in a smaller open pit

o the longer term mine feed from underground sources to unlock the full potential of Baomahun's Mineral Resources

· Based upon this smaller scenario, there is a 40% reduction in the upfront capital cost to US$90 million and a 43% reduction in the total pre-production capital costs to US$143 million compared to the FS

· Average production in years 1-6 remains robust at 88,000 ounces per annum with total cash costs (including royalties) reduced by 11% to US$711 per ounce over the life of mine ("LOM")

· At a gold price of US$1,350 which was used for the FS, the open pit only scenario delivers a post-tax Internal Rate of Return ("IRR") consistent with the FS at 22% and a post-tax Net Present Value ("NPV") of US$80 million at a discount rate of 8%

· At a gold price of US$1,250, the post-tax IRR is 17% and the post-tax NPV is US$50 million at a discount rate of 8% for an open pit only scenario

· Baomahun's metrics are in line with other similar West African gold projects on an open pit only basis, however the underground opportunity transforms its economics

· Further optimisation of the FS is ongoing, including work on the transition from the open pit to the underground, negotiations with key suppliers to further reduce upfront capital costs and an evaluation of the opportunity for long-term, low cost power

Peter Spivey, Chief Executive Officer of Amara, commented:

"Despite the weaker gold price environment, it is clear that investors still expect to see robust returns from reduced upfront capital investment. Our initial optimisation of the Feasibility Study demonstrates that Baomahun offers this potential, particularly when the underground Mineral Resources are brought into the schedule. This extends the mine life significantly, improves the capital efficiency of the project and lifts the average grade, benefitting all stakeholders. Amara is now focused on demonstrating that this can be done in a low risk way by using the operating cash flow from open pit production to develop the higher grade underground component of the project. We are pleased that the latest studies have confirmed that there is potential to further optimise the project, allowing us to achieve the higher return hurdle before taking a development decision."

US$900/oz Open Pit

The first phase of optimisation work explored a smaller open pit and plant scenario. A gold price of US$900/oz was used for pit optimisations and consequently the mine plan is focused on the higher grade core of the deposit. The US$900/oz pit shell contains 9.6Mt of ore at an average headgrade of 2.17g/t for 670,029 ounces of gold, using a cut-off grade of 0.6g/t.

This smaller open pit is capable of feeding a 1Mtpa plant for 10 years, with average production of 88,000 ounces per annum in years 1-6 and average production over the LOM of 62,500 ounces assuming a recovery rate of 93.4%. Average LOM total cash costs are expected to be US$711/oz and all-in sustaining cash costs are expected to be US$975/oz.

The FS was based upon a gold price of US$1,350, which reflected the spot gold price at the time it was released, and at this price, the post-tax IRR of the optimised open pit only scenario is consistent at 22%, with a post-tax NPV of US$80 million. This IRR and NPV would support an open pit only development. In line with the current gold price, the optimisation work was based upon a gold price of US$1,250, which generates a post-tax IRR of 17% and a post-tax NPV of US$50 million, using an 8% discount rate. These metrics are in line with other similar gold projects in West Africa, although Baomahun's performance strengthens significantly when an underground component to the project is introduced.

Underground Opportunity

Due to the steeply dipping nature of the deposit, a significant proportion of the project's Mineral Resources are potentially amenable to underground mining techniques. This could provide longer term mine feed for the 1Mtpa plant, ensuring that the full potential of Baomahun's Mineral Resource is unlocked. The deposit remains open at depth, which further increases the opportunity for a stable, long-term producing gold mine in Sierra Leone.

Through the exploitation of Baomahun's underground as well as the open pit, there is the opportunity to extend production beyond the current 10 year LOM and boost production in year 7 onwards. This work has been conducted to the level of a desk top study. The inclusion of material from the underground potentially transforms Baomahun's economics, with the post-tax IRR increasing to 25% and the post-tax NPV to US$192 million at a US$1,250 gold price and an 8% discount rate[ii]. The LOM doubles to 20 years, with an average

production rate of 90,000 ounces per annum for the first 16 years.

Snowden Mining Industry Consultants Pty Limited completed an initial evaluation of the Mineral Resource below the open pit in Q3 2013 which concluded that the Baomahun mineralisation is well suited to underground mining via open stoping. The deposit demonstrates good along-strike continuity and widths typically in excess of 6 metres, which are expected to allow for bulk extraction. Amara is focused on adding value to the project through the advancement of the underground opportunity but there is no immediate need for further drilling to upgrade the deposit, and thus the underground opportunity can be further evaluated with little additional expenditure in the near term.

Due to the smaller pit shell, some of the material previously categorised as suitable for open-pit mining within a US$1,500 open pit will now be below the US$900 pit floor and thus could be mined as part of the underground opportunity.

Capital Costs

As a result of the first phase of optimisation work, the financing hurdle for the project on an open pit only basis has been reduced significantly.

The upfront capital cost has decreased by 40% to US$90 million, compared to US$151 milion in the FS. The total pre-production cost, which includes the cost of items that could be deferred through leasing (the mining fleet and power plant) and contingency of US$8 million, has decreased by 43% to US$143 million, compared to US$253 million in the FS. The payback period is five years.

It is not expected that exploiting the underground opportunity later in the project's life would increase the initial capital requirement for Baomahun as the capital required to develop the underground mine has the potential to be met from operational cash flow from the open pit.

Amara is continuing negotiations with alternate suppliers in an effort to further reduce expected capital costs. Also, like the FS, the optimisation work has been completed on the basis that mining operations will be undertaken on an owner-operator basis, although the Company is exploring opportunities to reduce upfront capital outlay through contractor mining.

Economic Sensitivity Analysis

The economic analysis utilises an average gold price of US$1,250 per ounce over the LOM. This data is presented with a sensitivity analysis which examines the project economics at different gold prices.

Discount rate and gold price sensitivity

Ongoing Optimisation Work

The next phase of work is focused on the optimal place in the orebody to transition between the open pit and the underground. The Mineral Resource model is being reviewed to ensure there is sufficient understanding of the underground opportunity and it is expected that this work will be completed during 2014. Management is focused on achieving a thorough understanding of the long-term opportunity for the project in order to deliver its full value for all stakeholders.

Fiscal stability negotiations are also continuing with the government of Sierra Leone. Baomahun will be a significant contributor to the country's tax base and both parties are committed to working together to achieve a fair outcome for all stakeholders, which will allow the project to be developed. The FS was based on a corporation tax rate of 25% and a sliding scale royalty ranging from 3% to 5% with no tax holiday.

In addition, Amara is continuing to progress plans for long-term, low cost power sources including a hydro-electric power ("HEP") scheme. A feasibility-level engineering study has been completed by Knight Piesold in Vancouver for a 24MW run-of-river HEP plant and discussions are on-going with the government with regards to progressing its financing and development. The resulting power costs, estimated at between US$0.05/kWh and US$0.10/kWh, would represent a significant reduction compared to the current cost of heavy fuel oil power generation estimated at US$0.23/kWh.

Management Conference Call

The management team of Amara will host a conference call for analysts and investors at 9:30am UK time today. Dial-in details are as follows:

Telephone number (toll free from UK): 0808 237 0030

Other parts of the world: +44 (0)203 139 4830

Participant PIN Code: 86183048#

Playback of the conference call will be available at http://www.amaramining.com/Investor-Relations/Webcasts shortly after the conclusion of the call.

For more information please contact:

About Amara Mining plc

Amara is a gold developer-producer with assets in West Africa. The Company generates cash flow through its Kalsaka/Sega gold mine in Burkina Faso. Amara remains focused on its objective of becoming a mid-tier producer through the development of its Baomahun project in Sierra Leone and its Yaoure project in Côte d'Ivoire. With its experience of bringing new mines into production and a project pipeline spanning four countries, Amara aims to further increase its production profile with highly prospective opportunities across all assets.

Bruce van Brunt is a "Qualified Person" within the definition of National Instrument 43-101 and he has approved the data in this news release. Mr van Brunt is Amara's General Manager of Technical Services and Business Development.

This report includes certain "forward-looking information" within the meaning of applicable Canadian securities legislation.

All statements other than statements of historical fact included in this report, including, without limitation, the positioning of the Company for future success, statements regarding exploration, drilling results, resource calculations and potential future production at Baomahun, and future capital plans and objectives of Amara, are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Amara's expectations include, among others, the risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined, as well as future price of gold. Although Amara has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Amara does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.

APPENDIX A

Key Initial Optimisation Parameters

The key parameters of the open pit only scenario are summarised in the following table:

Notes

1. Excluding the cost of the items that could be deferred by leasing (the mining fleet and power plant) and contingency

2. Includes the cost of the mining fleet, power plant and contingency