AMI.L Regulatory News (AMI)

For immediate release 

16 July 2010

African Minerals Limited

("African Minerals", "AML" or "the Company")

Agreement with Cape Lambert Resources Limited regarding the Marampa/Pepel Infrastructure

African Minerals Limited (AIM:AMI), the mineral exploration and development company with significant iron ore interests in Sierra Leone, West Africa, is pleased to announce that it has entered into a binding Term Sheet with Cape Lambert Resources Limited (ASX:CFE) ("Cape Lambert") in respect of the development of the Marampa rail and Pepel Port infrastructure (the "Marampa/Pepel Infrastructure Project") that will service CFE's planned iron ore mine at Marampa (the "Transaction"). The Term Sheet is consistent with the terms under which the AML disposed of its interest in Marampa Iron Ore Limited to CFE, as previously announced on 25 November 2009 and 25 January 2010.

Key Points:

·; CFE will fund 33% of the construction costs of the Marampa/Pepel Infrastructure Project in return for a 33% interest in the Marampa/Pepel infrastructure.

·; AML will provide CFE with infrastructure capacity (excluding rolling stock) for 2 mtpa production from Marampa, through Pepel Port, on commercial terms to be agreed between the parties.

·; CFE's contribution to the construction costs of the Marampa/Pepel Infrastructure will be fixed at US$45M; 10% discount to apply if CFE pre-pays these costs.

·; Once the Tagrin Port and Tonkolili-Tagrin rail infrastructure for the Tonkolili iron ore mine is operational, CFE will have an option to match any third party's offer, if received, to purchase the balance of the Marampa/Pepel Infrastructure, on arm's length terms to be agreed between AML and CFE.

·; Transaction is subject to completion of formal legal documentation, obtaining necessary regulatory consent and consent of the Government of Sierra Leone.

·; The Government of Sierra Leone's reserved rights to infrastructure remain unaffected by the Transaction.

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

"We welcome the participation of Cape Lambert. Their US$45M investment in refurbishing the Pepel to Marampa railway and Pepel Port provides funding for a small but important part of the overall infrastructure. It also allows the Company to focus its financial and technical resources on delivering the major project to develop the Tonkolili iron ore mine and the Tagrin infrastructure through to production. The transaction demonstrates that third parties are able to access the infrastructure, in accordance with the Company's 99 year lease agreement with the Government of Sierra Leone."

Enquiries:

Background to and details of the Transaction

CFE's Marampa iron ore project (the "Marampa Project") is connected to the port, stockpiling and ship loading facility located at Pepel via the Marampa railway in Sierra Leone.

In 2008 and 2009, AML entered into various agreements with CFE and Marampa under which CFE acquired 100% of the shares in Marampa, the owner of the Marampa Project. In particular, under the agreement between CFE, AML and Marampa dated 1 October 2008, AML agreed to grant access rights to the Marampa/Pepel Infrastructure Facilities to CFE and/or rights to subscribe for shares in the capital of the Marampa/Pepel Infrastructure Facilities operator on terms to be agreed between CFE and AML on a commercial basis.

Under the transaction with CFE ("Transaction"), the share capital of ARPS will be divided into two classes of shares - Class A Shares and Class B Shares. The Class A Shares will have no voting rights and will only have rights to the Marampa/Pepel Infrastructure Project. The Class B Shares will have full voting rights and the rights and entitlement to all other assets and rights belonging to ARPS, including the Tagrin port Infrastructure and the Tonkolili to Tagrin railway.

In exchange for a 33% interest in the ARPS Class A Shares, CFE will fund 33% of the estimated costs associated with construction of the Marampa/Pepel Infrastructure Project, this 33% currently being estimated to be US$45M.

If at any time CFE fails to pay its 33% of the infrastructure costs associated with the Marampa/Pepel Infrastructure Project then its percentage of Class A Shares in ARPS will be reduced accordingly. 

Payment of the 33% of the infrastructure costs will be made by CFE in one of two ways. Either:

(i) By CFE in advance and within 30 days of Closing of the Transaction, in which case CFE will be entitled to a discount of 10% against the infrastructure costs; or

(ii) Pro-rata against an agreed schedule of payments over a 12 month period, in which case no such discount will apply.

AML will also make available to CFE 2mtpa tonnes per annum capacity of the infrastructure (excluding rolling stock) associated with the Marampa/Pepel Infrastructure Project. The terms governing the use of the Marampa/Pepel infrastructure by CFE will be agreed on normal arm's length commercial terms between AML and CFE.

The rights that the Government of Sierra Leone has reserved in the Marampa/Pepel Infrastructure Project and the Tagrin Infrastructure Project through its 10% ownership of African Railway and Port Services (SL) Limited, the holder of the 99 year lease to the infrastructure, will remain unaffected by the Transaction.

In addition, once the Tagrin Infrastructure Project is operational, CFE will have an option to match any third party offer, if received, to purchase the balance of the Maramapa/Pepel Infrastructure Project held through the remaining ARPS A shares. The acquisition terms will again be determined on a commercial arm's length basis to be agreed when the option is exercised.

The Transaction is subject to the fulfillment of the following conditions:

(i) agreement of and the entering into of formal legal documentation relating to the access and ownership of the Marampa Infrastructure;

(ii) receipt of all necessary regulatory consents; and

(iii) consent of the Government of Sierra Leone.

The formal documentation will also set out the basis on which CFE is permitted to use the infrastructure associated with Marampa/Pepel Infrastructure Project.

 The long-stop date for completion of the transaction is 90 days after execution of the Term Sheet.

By virtue of its status as a substantial shareholder of an AML subsidiary within the last twelve months, CFE is currently deemed to be a related party for the purposes of AIM Rules. Upon signing of the formal legal documentation, therefore, the transaction may be deemed to be Related Party transaction for the purposes of the AIM Rules.