AMI.L Regulatory News (AMI)

20 December 2013

African Minerals Limited

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

Announcement regarding related party transactions

African Minerals, the developer and operator of the Tonkolili iron ore mine in Sierra Leone, announces that the Company and its subsidiaries today entered into various arrangements that constitute related party transactions. This announcement is now being made to comply with AIM Rule 13.

Highlights

· Following agreement with our partner, SISG Iron and Steel Group ("SISG"), to optimise the project's near term expansion plans rather than proceeding immediately to production of 35 million tonnes per annum ("Mtpa"), the Company has amended SISG's discounted offtake entitlement so that it is linked to the project's annual capacity. Under the amended terms, deliveries will be 6.5Mtpa in 2014 increasing to 7Mtpa at a project capacity of 25Mtpa and then increasing pro rata up to 10Mtpa at a capacity of 35Mtpa.

· Separately, the Company has entered into arrangements with Pan African Minerals Limited ("PAM") for use of PAM personnel and equipment for certain works.

Related Party Transactions

Amendment to Discounted Offtake Entitlements

The original terms of the SISG investment were based on a phased expansion of the Tonkolili project to 35Mtpa production, at which level SISG's discounted offtake entitlement would be 10Mtpa. However, the discounted offtake agreement did not specify as to how SISG's discounted offtake entitlement increased where changes were made in project phasing and production targets. Following the agreement to optimise the project's near term expansion plans, the Company and SISG have also agreed to amend SISG's discounted offtake entitlement in order to clarify that the entitlement is linked to the project's capacity as follows:

o From 1 January 2014: 6.5Mtpa;

o When capacity reaches 25Mtpa: 7Mtpa;

o When capacity exceeds 25Mtpa: pro rata increase from 7Mtpa to 10Mtpa at a capacity of 35Mtpa.

The discount per tonne under this agreement remains unchanged.

SISG is a related party within the meaning of the AIM Rules by virtue of its significant shareholding in the project companies of AML, and therefore the amendment constitutes a related party transaction pursuant to AIM Rule 13.

The directors of the Company (other than Mr Cui Jurong, being the SISG representative) consider, having consulted with Jefferies, the Company's nominated adviser, that the terms of the amendment are fair and reasonable insofar as its shareholders are concerned.

Professional and other service arrangements with PAM

The Company, through its subsidiaries, has entered into two agreements with PAM for the provision of:

· Personnel to manage infrastructure works, charged at personnel cost plus a 10% administrative fee. The monthly cost is estimated at $360,000 for an expected 4 month period. Actual costs will vary according to usage of the team, and duration; and

· Vehicles, geophysical equipment and personnel for use in the drilling program for the DSO expansion, charged on a monthly rates basis. The cost is estimated at $370,000, for an estimated 3 months, though actual costs will vary depending on duration, and equipment provided.

PAM is a company in which Frank Timis is a majority shareholder, as such PAM is a related party within the meaning of the AIM Rules and these arrangements constitute related party transactions pursuant to AIM Rule 13.

The directors of the Company (other than Frank Timis, Gibril Bangura and Murray John who are directors of and/or, hold an interest in, PAM) consider, having consulted with Jefferies, the Company's nominated adviser, that the terms of these arrangements are fair and reasonable insofar as its shareholders are concerned.

Contacts:

African Minerals Limited

+44 20 3435 7600

Mike Jones

FTI Consulting

+44 20 7831 3113

Ben Brewerton / Oliver Winters

Jefferies

44 20 7029 8000

Nick Adams / Alex Collins

About African Minerals

African Minerals operates the Tonkolili Iron Ore Project (the "Project") in Sierra Leone, with a JORC compliant resource of 12.8Bnt. The Project, which currently has a 60+ year mine-life, is being developed in a number of staged expansions. The current Project operations are expected to produce 20 million tonnes of iron ore per annum at full capacity, with this run-rate of production having first been achieved in June 2013.

The next stage of Project expansion, Phase 2, now contemplates the production of an increased tonnage of high grade hematite concentrate with the first saprolite plant expected to enter production in 2016.

The Company has also developed significant port and rail infrastructure to support the operation of the Project, via its subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in which the Government of Sierra Leone ("GoSL") has a 10% free carried interest.

The Project companies are currently owned 75% by AML, and 25% by SISG Iron and Steel Group ("SISG"), except for ARPS, which is currently owned 75% by AML and 25% by SISG, with the GoSL having the right to a 10% free carried interest from AML.

www.african-minerals.com