AMI.L Regulatory News (AMI)

1 Sep 2008 11:18



For immediate release

1 September2008

African Minerals Limited

("African Minerals" or "the Company")

Strategic Agreement

African Minerals Limited (AIM:AMI), the mineral exploration company with significant interests in Sierra Leone, West Africa, is pleased to announce that it has entered into a binding Term Sheet with Cape Lambert Iron Ore Limited in respect of the Company's iron ore project at Marampa, Sierra Leone (the "Marampa Project").

Cape Lambert Iron Ore Limited ("CLIO") (ASX: CFE, AIM: CLIO) is an Australian iron ore exploration and development company, which recently sold its namesake iron ore project located in the coastal Pilbara region of Western Australia to the China Metallurgical Group Corporation for AUD$400 million. CLIO also has other mineral holdings located within the highly prospective Cleaverville geological formation in Western Australia. Further information about CLIO and its projects can be found at http://www.capelam.com.au

Under the Term Sheet the Company will acquire and retain 44,000,000 fully-paid ordinary shares in CLIO (the "CLIO Shares"), representing approximately 10% of the issued share capital of CLIO, in return for which CLIO will be issued new shares in Marampa Iron Ore Limited ("Marampa" - the Company's Bermuda registered, wholly-owned subsidiary which holds the Company's mineral interests in the Marampa Project), representing 30% of the total share capital in Marampa. CLIO will also invest US$25 million in cash to fund a definitive feasibility study of the Marampa Project, in accordance with a monthly calling schedule to be agreed by the parties on or before 30 September 2008. If the feasibility study costs more than US$25 million, CLIO and African Minerals will contribute to the excess cost pro rata to their respective shareholdings in Marampa.

CLIO has also been granted an exclusive option to invest further in the Marampa Project by acquiring from the Company the outstanding shares in Marampa, resulting in Marampa becoming a wholly-owned subsidiary of CLIO, at a price of US$200 million, less the aggregate of (i) US$25 million and (ii) the value of the CLIO Shares as at the date of closing of the transaction. The option may be exercised at any time during the feasibility study period and for a period of three months immediately after its finalisation.

The parties have agreed to use reasonable endeavours to enter into formal legal documentation relating to the transaction by 30 September 2008 (or such later date as they may agree).

The transaction is subject to fulfilment of the following conditions:

The CLIO Shares issued to Marampa will not be entitled to participate in the capital reduction or dividend announced by CLIO on 18 August 2008 and proposed to be paid to shareholders in CLIO in or around September or October 2008.

Marampa Project and Infrastructure

Marampa is located near the township of Lunsar in Sierra Leone, West Africa. It is defined by Exploration Licence EXPL 09/06, which covers an area of approximately 319km2 and completely encloses (but excludes) the former DELCO, open cut mining operation. DELCO identified the prospectivity of the Marampa area during the early 20th Century, and from 1933, exported iron ore from Marampa until mine closure in 1975 due to depressed commodity prices.

Marampa is connected to an existing deep water port, ship loader and stockpile area at Pepel by approximately 80km of rail infrastructure. Through an existing Memorandum of Understanding between the Government of Sierra Leone and African Minerals, the Company has the right to access and operate this infrastructure. The existing rail and port infrastructure requires refurbishment and upgrading but offers substantial time and cost savings relative to a greenfields project.

Iron mineralisation at Marampa consists of specular hematite schists, which feature variable iron grades in the range of 25% to 35% Fe. Historically, the specular hematite schists have been upgraded to saleable Fe concentrates using simple crushing, coarse grinding and gravity separation. Sampling by CLIO of historical concentrate stockpiles at Pepel (produced from tailings dredging operations) returned grades of approximately 63% Fe, 7% SiO2 and 0.9% Al2O3.

The Marampa Exploration Licence covers the northern and southern strike extensions of the former DELCO mining area. Until 2006 no systematic evaluation of these extensions had been undertaken over the past 30 years to assess their potential for extraction of iron ore.

African Minerals commenced exploration on EXPL 09/06 in 2006 with structural mapping, and ground gravity geophysical surveys in 2007. Interpretation of existing airborne magnetic datasets and the newly acquired gravity surveys was completed in mid-2007 by Australian based geophysical consultant, Resource Potentials. The interpretation defined a number of anomalous gravity drill targets, which were interpreted to correlate with hematite mineralisation extending from the former DELCO mining area into contiguous and adjacent EXPL 09/06. Four NQ diamond holes have been drilled by African Minerals on the southern gravity anomalies, for a total advance of 941 metres.

Disseminated to sub-massive specular hematite mineralisation was intersected with iron grades ranging from approximately 23% to 30% Fe over broad, continuous intervals (please refer to the Company's AIM RNS announcement dated 25 July 2008 for full details). These results confirmed the southern extension of the specular hematite mineralisation from the former DELCO mining area.

As part of its due diligence investigations, CLIO prepared a bulk, composite sample from diamond core from three of the four reconnaissance drill holes for metallurgical test work. A representative sub-sample from the bulk sample was tested at independent laboratory, AMDEL Ltd to assess the potential to upgrade the hematite mineralisation to a saleable product. Summary results, which showed the Fe mineralisation could be upgraded to a premium product (+65% Fe & ≤2% SiO2), are shown in Table 1 below.

Based on this early test work, CLIO anticipates a simple, low risk processing flow sheet comprising crushing, coarse grinding and gravity separation consistent with the earlier DELCO operations.

Given its anticipated premium quality, mine product would be strategically positioned to supply the European market.

Excellent prospect and regional scale prospectivity exists with the formation that hosts the former DELCO mining area and the defined southern and northern gravity anomalies mapped over 20km within Exploration Licence EXPL 09/06

African Minerals is conducting a comprehensive ongoing exploration program to assess the extent of known mineralisation, and, to test the prospectivity of the greater lease area for new discoveries.

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

 "We look forward to having Cape Lambert as an investor in the Marampa Project. They bring with them substantial experience and expertise in the iron ore industry, as shown by the recent sale of their major iron ore project to the China Metallurgical Group Corporation, realising substantial value for Cape Lambert's shareholders.

These technical results support our belief that the Marampa Project has the potential for significant iron mineralisation and production. Cape Lambert's investment in the project strongly endorses that potential."

Table 1: Metallurgical Test Results

NOTES

Some statements in this news release are forward looking and consequently involve uncertainties and risks that could cause actual results to differ materially from those anticipated from initial indications. Such forward looking statements include comments regarding exploration work. 

The Metallurgical information in this report is based on information compiled by GV Ariti who is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Ariti has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Ariti consents to the inclusion in this report of the matters based on his information in the form and the context in which it appears.

The Exploration information in this report is based on information compiled by K Bischoff who is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Bischoff has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Bischoff consents to the inclusion in this report of the matters based on his information in the form and the context in which it appears.

It should be noted that there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. The grades of the drill holes presently reported may not necessarily reflect the ultimate grade of the potential target.

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