IFL.L Regulatory News (IFL)

30 September 2013

International Ferro Metals Limited

("IFL" or the "Company")

Financial Results for the year to 30 June 2013

Highlights

Financial highlights

· Strong turnaround in H2 performance through realised operational efficiencies and strengthening ZAR FeCr prices

· Ferrochrome sales of 184kt, up 10% compared to 2012 (168kt), with 79kt in H2

· EBITDA of ZAR26m (FY2012: ZAR63m), with ZAR71m generated in H2

· Loss before tax of ZAR126m (FY2012: ZAR72m), more than 95% attributable to H1

· Operating margin of 1% for the year; -5% in H1 but +7% in H2

Operational highlights

· 90% of targeted cost cutting achieved during Q4, moving IFL even further down the South African cost curve and enabling it to compete with Chinese producers

· One furnace shut down from mid-February to the end of May as part of Eskom energy buy-back

· Successful furnace electrode paste replacement programme

· Further progress in diversifying customer base

· Board investigating further cost cutting initiatives for the current financial year

Post period highlights

· Updated Resource & Reserve Statement

o Total resource increased by 64% to 206Mt

o Total reserves increased by 6% to 92Mt

· Awarded Platinum Group Metals (PGM) rights for Sky Chrome Mine chrome seams

· Cost reduction targets achieved

Chris Jordaan, Chief Executive Officer of IFL commented:

"The 2013 financial year was one of two halves. Following market and operational challenges in the first half, which IFL tackled vigorously, the second half was much stronger, with the Company continuing to make significant progress with its cost reduction programme as well as increasing revenues from our strengthened sales and marketing operations.

We successfully demonstrated that IFL can respond to challenges effectively whilst simultaneously making significant headway with our operations, positioning the Company further down the cost curve. This has made the Company even more competitive within the global ferrochrome market, importantly against Chinese producers.

With our diversified customer portfolio and efficient operations, we remain confident that the progress made in the second half will continue; this is supported by the post period performance. The upgrade made to our resources and reserves reconfirms our capabilities of being a long-term ore supplier and places IFL in a good position to return to profitability."

There will be a presentation to analysts of the full year results today, Monday 30 September 2012 at 9am (UK time) at 16 Lincoln's Inn Fields, London WC2A 3ED. The presentation slides will be available on the Company's website from 8.30am, and a recording will be available afterwards at www.ifml.com.

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

International Ferro Metals Limited

Chris Jordaan, Chief Executive Officer

Mob: +27 (0) 82 653 1463

Brunswick Group

Carole Cable / Kate Boothman-Meier

Tel: +44 (0) 20 7404 5959

Numis Securities Limited

James Black / Stuart Skinner / John Prior

Tel: +44 (0) 20 7260 1000

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 their 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.

CHAIRMAN'S REVIEW

Overview

The headwinds which have been blowing against the South African ferrochrome industry over the last few years continued in full force during the period under review. China's well publicised strategy of rebalancing its economy to place greater emphasis on consumption, while eminently sensible, inevitably produced a slowdown in the growth of capital works investment; an event that softened the demand for stainless steel, the destination for 90% of ferrochrome production. At the same time, Chinese smelters, which have recently become a major factor in the ferrochrome industry, continued to increase supply of alloy. Prices for the product reacted negatively in China, but also in other markets.

In South Africa, pressure on the revenue line was exacerbated by aggressive increases in electricity costs. Eskom, the South African supplier, increased its charges by 8.0%, following a rise of 16% the previous year. As ferrochrome production requires a considerable energy input, this aggravated the challenges facing South African producers. Fortunately, however, the steepness in the rising cost gradient is moderating; National Energy Regulator of South Africa (NERSA) has approved an increase of 8% per annum over the next five years.

Reaction

In view of the state of the industry and electricity charges, the only rational response for the Company has been to reduce its operating costs. IFL was among the first to react to the changing industry environment two years ago, and the Company continues its drive to the bottom of the cost curve. Stripping out electricity and reductant charges (which are outside its control), it reduced production costs by 1.4% over the year. This meant that those costs not only did not rise with inflation (about 6% in South Africa), but enjoyed a slight decline. This, combined with earlier measures, should place the Company in the lowest cost quartile in South Africa. Management is working on further savings and is confident that in the current financial year, the Company will move even further down the cost curve. The work becomes more difficult as the more obvious places to reach are harvested; nevertheless, dedication to the task and innovative thinking are continuing to bear fruit. This achievement has placed the Company in a competitive position vis-a-vis Chinese producers.

The programme of partially substituting anthracite for coke, which is very expensive, is working to reduce smelting costs further. Also, the co-generation plant, which generates power by using off-gases from the furnaces, is proving its mettle. It produced 10% of electricity requirements during April and May 2013, and the target of 11% is within reach.

The average power consumption of the furnaces for the next financial year is expected to be lower. The reason for this is that the furnaces suffered recurring electrode breaks during the year under review. With an electrode break, more electricity is required to grow the electrodes. The cause of the problem lay in the poor quality of the electrode paste obtained from the supplier. This has now been adequately addressed and for the past several months, the electrodes have operated without a break.

Eskom buy-back

In the course of the year reviewed, Eskom approached all South African ferrochrome producers with a proposal for them to voluntarily shut down production. The Company participated in the buy-back agreement from 15 February to 31 May with Eskom's overarching purpose being to alleviate pressure on power supply. Given it was financially favourable, the Company decided to participate and shut down one furnace for the three and a half months, and received payment therefor.

Financial result

Notwithstanding success in cutting costs, the Company suffered a loss before tax for the financial year of ZAR126 million, considerably more than the loss of ZAR72 million for the previous year. While disappointing, this outturn should be viewed in the perspective that the second half of the year showed a considerable turn around. Operating margin improved from minus 5% in the first half to plus 7% in the second half.

Outlook for the stainless steel and ferrochrome industries

Economic conditions in China, which is the world's largest stainless steel producer, seem to be stabilising, as the measures taken by the Central Government are producing effect. This situation has increased confidence in the generally accepted forecast that global stainless steel production will grow at a compound rate of 5.5% over the next five years. If that prognosis is correct, significant additional ferrochrome supply will be required, much of which will need to come from South Africa, which currently produces over 40% of world supply.

Health and safety

This is an area to which the Company pays particular attention, as the welfare of our workers is of paramount concern. The Health, Safety and Environment Committee, comprising four Board members and chaired by the Chairman, which was established last year, is pleased to report that the Lost Time Injury Frequency Rate (LTIF) has reduced by an average of 50% per annum over the past two years (with no fatalities) This implies that the Company's workplace is one of the safest in the South African mining industry.

Conclusion

The difficulties the Company has faced over the last few years, as expected, have had a deleterious effect financially; but they have also had another. They have stimulated a vigorous determination in our management and work force to overcome adversity. In large measure, that determination is turning the tide of fortune. We accordingly look forward to the year ahead with confidence that, despite a continuation of unfavourable conditions in the ferrochrome market, a return to profitability in the current financial year is reasonably likely to be achieved. Any improvement in industry conditions, which could well occur, would make that task easier.

CHIEF EXECUTIVE'S REVIEW

Overview

During the 2013 financial year, IFL successfully increased its competitive position in the global FeCr market. Importantly IFL is now producing ferrochrome at or below the production cost of Chinese producers. Significant strides have been made to help strengthen the long term sustainability of the Company, with a further reduction in costs being made to improve competitiveness and allow IFL to be cash generative, even at current depressed prices.

IFL continues its drive to optimise access to global markets, and the Company has built a customer base across all major regions, including initiatives in India this year. The first steps in the Company's diversification strategy were taken this year, when it was awarded the Platinum Group Metals (PGM) rights in the chrome ore seams of Sky Chrome.

The Company also reconfirmed its capability of being a long-term sustainable ore supplier, with the update of its resource and reserve statement, which resulted in a significant increase in resources. Chrome ore reserves are now sufficient to supply the current operations for 75 years. The operational challenges experienced with the furnace electrodes were successfully resolved, while another significant improvement in safety performance was seen.

The first half was a difficult period both for the industry and for IFL as the industry experienced a three year low in prices towards the latter part of this period. This industry wide issue was exacerbated at IFL by operational challenges related to the furnace electrodes and the Company posted a loss before tax of ZAR121 million in the first half of the year.

An improvement in the rand FeCr benchmark price and the significant operational success achieved in the second half resulted in a small loss before tax of ZAR5 million for H2. The operational stability achieved in the latter part of the year enabled the Company to achieve 50% of the cost reduction target for the full year, with 90% of that target achieved the fourth quarter.

Despite the Company posting a full-year loss before tax of ZAR126 million, the success achieved in the second half, which has continued in the post reporting period, clearly demonstrates our ability to generate profits and cash now that costs have been reduced to near target levels and we have secured a well-diversified customer portfolio.

Strategy

Two years ago, the Company set out specific targets to help achieve its strategy of being a low cost producer of chrome ore and alloy related products. The projects and initiatives that were identified have mostly been implemented, with 90% of targeted cost reductions achieved in Q4 of the 2013 financial year. The Company is evaluating new opportunities to reduce costs, expand the product offering and further diversify its markets.

The initiatives and projects have significantly contributed to positioning IFL in the lower quartile of the cost curve in South Africa, as well as allowing the Company to compete more effectively with Chinese producers. The Company will continue to explore and develop growth opportunities, to attain a diversified portfolio of long life, low cost assets.

Operations

Following termination of the then existing underground mining contract at Lesedi in December 2012, the Lesedi underground mine plan is currently under review with different scenarios being evaluated. An optimised mine plan is expected to be concluded during calendar 2013. The Company does however have sufficient lower cost ore available from other sources and therefore production from the Lesedi underground mine is not an immediate priority. Production at the Sky Chrome mine was also reduced in line with demand as the Company participated in the Eskom energy buy-back agreement. Production was affected as mining operations intersected a pothole (an area within the seam devoid of mineralisation) in the MG2 seam which reduced beneficiation recovery rates. A comprehensive drilling programme to define the extent of the pothole has been completed and the mine plan is being updated to optimise recovery rates, which is expected to be completed within the next month.

One furnace was shut down from mid-February to the end of May 2013, and was successfully restarted in June. The Company has more than enough ore from current mining operations, stockpiles, UG2 supply and low cost buy-in opportunities to satisfy its demand.

Cost reduction projects

Cost competitiveness is pivotal for the long term sustainability and profitability of the Company. Overall, the cost reduction achieved for the full year was 50% of our target, with the last quarter being 90% of the target; this has been surpassed and in excess of 100% of the cost reduction target was achieved for the two months post period end.

Further to this, the organisational structure has been redesigned and the revised structure implemented. A number of initiatives have resulted in reduced maintenance cost and further reductant optimisation, and power efficiency improvements are expected in the coming year.

Power supply

During the second half of the year, Eskom initiated another energy buy-back programme. The Company elected to shut down one furnace from mid-February to end of May 2013, a total of 3.5 furnace-months; this is in comparison to having shut down both furnaces in the previous year for a total of 5 furnace-months. It is worth noting that Eskom's buy-back programme has ensured that there have been no forced power outages since 2008 and this is expected to continue.

Commissioning of the first module of Eskom's Medupi power station has reportedly been delayed towards mid-2014. The Company expects Eskom to utilise the voluntary demand market participation in the coming year and the Company expects to participate in this. Participation should not have a material effect on the Company's power supply as maintenance work will be planned to coincide with participation times.

During 2012, Eskom applied to the National Energy Regulator of South Africa (NERSA) for its third multi-year price determination of 16% per annum for five years, starting in April 2013. In February 2013, NERSA approved an 8% per annum increase which was broadly supported by South African industry.

Resource and Reserve Statement

The Company announced an updated Resource and Reserve Statement subsequent to the financial year end.

The total resource has increased significantly by 64% from 125 million tonnes to 206 million tonnes and the average chrome oxide (Cr2O3) grade has increased from 34.49% to 37.57%. In addition, the total reserves have increased by approximately 6% from 87 million tonnes to 92 million tonnes, with the average Cr2O3 grade having reduced marginally from 28.11% to 27.85%.

The improvements in resource grade and tonnages largely reflect the re-modelling of the resources at Sky Chrome and the Lesedi Mine as well as the conversion and the addition of inferred resources at Sky Chrome Mine.

In addition to this, the Company has been awarded the rights to the PGM's in the Middle Group (MG) chrome seams at its Sky Chrome mine. The Resource Statement for the PGM's has been completed and resulted in an estimated inferred resource of 1.34g/t of PGM's in the 181 million tonnes of total chrome ore resource at Sky Chrome. The Company is currently considering various options to realise value from the PGMs.

Sales & Marketing

The Company achieved ferrochrome sales of 184,390 tonnes for the year to 30 June 2013, an increase of 10%, compared to 167,644 tonnes in the prior year. The increase in sales was primarily due to increased FeCr production. Inventories were maintained at around the target level of 10,000 tonnes with year-end stock at 9,950 tonnes. IFL has been successful in gaining a diversified customer base across all major regions with new sales initiatives being achieved in India this year.

Ore sales for the year reduced to 271,000 tonnes, 21% lower than the preceding year's 345,000 tonnes. The lower ore sales were a result of a tighter supply and a consumption balance that the Company is targeting; ore sales should reduce further in the coming year.

Sustainability

The Company continuously strives to strengthen its long-term sustainability through its zero harm strategy, and it remains a fundamental part of its overall strategy. The Company has a zero fatality rate and remains focussed on the continued improvement of its health and safety standards.

Testimony to the success of this approach is a significant reduction in the number of injuries this year, a trend that started in the previous year. IFL's integrated sustainable development management system has earned re-certification in terms of ISO 14001:2004, ISO 9001:2008 and OHSAS 18001:2007 during the year.

Health & Safety

Since inception, the Company has maintained a zero fatality rate and improved its record to almost 25 million fatality-free man-hours, equating to 3.1 million fatality-free shifts. Lost-time injuries reduced from 13 in the prior year to four this year. The current year's lost time injury frequency rate ("LTIF") is 1.46, down from 3.06 in the prior year, a 52% improvement.

The LTIF improvement was achieved due to management's relentless focus on safety. Safety management structures with clearly articulated roles and responsibilities, simple processes and systems of risk assessment, incident reporting and investigation continue to be successfully implemented. Stringent corrective actions were introduced and meticulously implemented. These actions allow management to focus on leading practices so as to pro-actively influence safety performance. One example of this is management spending more time in the field and carrying out specific risk assessments.

Environmental impact

The Company has always focused on running environmentally sustainable operations and has continued to demonstrate this over the period.

Mining operations inevitably impact the natural environment. However, IFL aims to minimise these impacts by rehabilitating the areas it disturbs during operational activity and preserving the long-term health and viability of the environment around its mines and operations. As a bare minimum, the Company is committed to meeting environmental legislative requirements through responsible and progressive approaches to environmental management, impact mitigation and rehabilitation. To this end, rehabilitation of Lesedi open pit mine is progressing to plan. Sky Chrome Mine will, once fully developed, have an optimised material movement process flow so as to minimise the remaining rehabilitation once the open cut is depleted.

The co-generation plant, which harnesses furnace off-gases to generate electricity, is classified as a Clean Development Mechanism Project under the Kyoto Protocol. The co-generation operation has been significantly improved and delivered in excess of 6.4% of our total electricity needs for the year. This shows our progress as we move towards our target of 11%.

Black economic empowerment

In April 2009, the Company lodged its proposed BEE transaction with the then South African Department of Minerals and Energy (now the Department of Mineral Resources ("DMR")), as the final element of its previously submitted application to convert its Old Order Mining Right into a New Order Mining Right under the South African Mineral and Petroleum Resources Development Act.

On 14 July 2012, the DMR granted the conversion of the Old Order Mining Right to a New Order Mining Right. However, since the submission of the proposed BEE transaction to the DMR in 2009, there have been legislative changes, and developments within IFMSA which have presented an opportunity for the Company to implement a more simplified BEE transaction. The Company has therefore not executed the conversion and expects to re-submit its revised application to the DMR before 31 December 2013.

Co-generation plant

The cogen plant produced 46GWh of electricity, or 6.4% of the Company's total electricity requirement, compared with 28GWh or 4.5% of total requirement in the prior year.

During the first quarter, a record quarterly generation of 8.4% of total was achieved, along with a decrease in production being seen during the second and third quarters as a result of the electrode breaks in the former and taphole maintenance work in the latter quarter. During the fourth quarter, the plant generated 8.3% of total requirement, its second highest percentage production, notwithstanding the furnace load reductions during peak electricity winter tariff hours during June. These load reductions reduced cogen production by an estimated 15-20% due to the variability in gas caused by the variability in smelting.

The cogen plant is targeted to produce about 11% of total electricity requirement at full furnace production.

UG2 Plant

Construction of the UG2 Chrome Re-Treatment Plant ("CRP") at Anglo Platinum's Waterval operations in Rustenburg was successfully completed in the second half of the prior year.

Under the supply agreement, IFL has the right to receive the first 15,000 tonnes of metallurgical concentrate production per month from the plant which has a design capacity of about 50,000 tonnes per month.

The plant was shut down from mid-September to late December 2012, due to strike action at Anglo Platinum. Under the supply agreement, Anglo Platinum is required to make up any losses in tonnage incurred at a rate of an additional 5,000 tonnes per month from subsequent production. The back-log was fully caught up by 30 June 2013.

Ferrochrome Market Update

In 2012, global stainless steel production increased by approximately 5.2% to an estimated 35.4 million tonnes, according to the ISSF. China accounted for 45% of global production compared to Europe and the United States which produced 29%, combined.

The financial year experienced major swings in ferrochrome prices. This was in response to an initial oversupply as demand dwindled in the second quarter of the financial year, which saw the benchmark price drop to a three year low of US$1.10/lb Cr. This was due to the reduced economic growth and negative sentiment towards growth expectations of China. The electricity buy-back participation of a number of South African FeCr producers in the third and fourth quarter reduced alloy supply, resulting in increased alloy prices, with the European Benchmark price settling at US$1.27/lb in the fourth quarter of the financial year.

Outlook

Although real demand for stainless steel in North America grew steadily during the first quarter of calendar 2013, it has not yet been translated into higher production requirements due to adequate inventory levels. China's real demand for stainless steel is also showing a steady increase, but at a slower rate than before, with new alloy capacity increases in China and Europe dampening stainless steel prices. In addition, stainless steel demand remained subdued in Europe throughout the financial year.

Global economic growth is expected to increase slightly to 3.5% in 2013, from 3.2% in 2012, and to reach 4% in 2014, as the constraints on economic activity start to ease, according to the International Monetary Fund. Economic growth in China is widely anticipated to recover in the coming year.

Growth in stainless steel demand is expected to continue at a rate of approximately 5.5% over the next five years according to the consultancy, CRU Group, which will require approximately 2.4 million tonnes of additional ferrochrome. The pace of stainless steel production, which largely tracks economic growth, is very different in the various regions of the world. Capacity growth is shifting from traditional producing regions in the West to Asia, with China leading the growth.

The Company has robustly demonstrated that it can successfully respond to challenges, both operationally and from a market perspective. The Company has made significant strides in reducing costs and continuously develops new cost reduction initiatives. In the immediate future, the Company will focus in particular on the optimisation of mining activities, reductant mixes and marketing costs. The flexibility that a diversified customer base brings should not be underestimated. Alloy is selectively placed and negotiations are appropriately timed in a manner to yield maximum returns under the current market conditions.

Given the positive long-term growth outlook of the ferrochrome market and the Company's improved position on the cost curve, and ability to compete favourably with Chinese FeCr producers, we are confident of returning to profitability during the next financial year.

FINANCIAL REVIEW

Overview

The Company saw a strong turnaround in results during the second half of the year as realised Rand ferrochrome prices rebounded and production costs reduced further.

Profitability and sales

Operating margin for the year was 1%, which improved from negative 5% in H1 to positive 7% in H2. The first half saw a ZAR46 million EBITDA loss which turned to positive ZAR71 million for the second half, resulting in EBITDA for the year of ZAR26 million, compared with ZAR63 million in the prior year.

The Company made a loss before tax of ZAR126 million for the year against a loss of ZAR72 million for the prior year. The first half generated a loss of ZAR121 million, mainly due to a resurgence of the Eurozone crisis, which resulted in low realised ferrochrome prices. The second half saw an improvement in realised Rand ferrochrome prices, together with a further reduction in production cost, which saw the loss narrow significantly to ZAR5 million.

The average European Benchmark ferrochrome price for the year was 118.6¢/lb, down 3.2% on the prior year's 122.5¢/lb. On average, the Rand depreciated by about 13% against the U.S. dollar.

Ore sales reduced to 271,000 tonnes, generating revenue of ZAR138 million against prior year sales of 345,000 tonnes, as the Company moved towards a tighter internal supply and demand balance. Ore sales for the 2014 financial year are planned to be reduced significantly.

Ferrochrome sales revenue increased by 11% to ZAR1.45 billion on the back of a 10% increase in ferrochrome sales volumes to 184,390 tonnes, which was in line with the year's production.

The Company has decided not to recognise an increase in the deferred tax asset balance as at the end of the prior year until it returns to profitability. This has resulted in a reversal of the deferred tax credit recognised in the first half. The deferred tax asset results from unclaimed calculated tax losses available for offset against future profits.

The Company made a loss per share of 22.96 SA cents in the year against a prior year loss of 9.37 SA cents.

Production costs

FY2013 was further testimony of the Company's success in reducing costs, with 50% of the targeted reduction achieved. Ferrochrome production cost in H1 was ZAR6.48/lb and ZAR6.26/lb in H2 for a full-year cost of ZAR6.39/lb. This compares very favourably with the prior year's ZAR6.13/lb and FY2011's ZAR6.25/lb, when adjusting for changes in electricity and reductant unit costs.

The Company is targeting total cost reductions of ZAR0.76/lb on FY2011 production cost of ZAR6.25/lb, which strip out uncontrollable cost changes in unit electricity and reductant prices affecting all South African producers. Adjusting for changes in electricity and reductant prices, production cost for the year was ZAR5.87/lb, which is ZAR0.38/lb below the FY2011 cost of ZAR6.25/lb, and represents 50% of the targeted ZAR0.76/lb saving. In the final quarter of the year, 90% of the targeted cost saving was achieved.

FY2013's adjusted production cost of ZAR5.87/lb is 1.4% below that of FY2012's adjusted production cost of ZAR5.95/lb, compared to South African consumer inflation of about 6%, further testimony that the Company is successful in reducing costs.

The table below shows the detailed cost breakdown:

* adjusted for changes in unit reductant and electricity prices

Production cost analysis:

· Ore costs have increased at an annual rate of 8.1% from ZAR1.71/lb in FY2011 to ZAR1.99/lb, which is in line with mining inflation in South Africa. Costs are expected to reduce as beneficiation plant recoveries improve after the initial shallow mining phase of the Sky Chrome open-pit, as unweathered fresh ore is extracted at deeper levels. The buy-in of inexpensive ores, which are available in the market, should further reduce costs and extend the life of the Sky Chrome mine.

· Reductant costs have decreased significantly due to the high levels of anthracite consumption achieved, which have exceeded the initial targeted level. The Company is also evaluating new initiatives to further reduce reductant costs.

· Electricity costs have decreased due to slight improvements in consumption efficiency and increased electricity co-generation. The Company still expects a significant improvement in consumption efficiency as production stabilises. Efficiencies were impacted during the year by the electrode paste issue in the first quarter, and the start-up after the taphole repairs and electricity buy-back programme.

· Operating costs have increased by an annual 6.5% since FY2011, which is in line with general inflation in South Africa.

· Fixed costs per unit decreased significantly as a result of cost control, higher production volumes and increased cheaper metal recovery volumes.

Other income and expenses

Administrative and other expenses increased by 13% to ZAR114 million, mainly due to an impairment charge of ZAR20 million on the replacement of furnace linings during the year. Other income comprised ZAR94 million received from the electricity buy-back agreement (2012: ZAR164 million). Unabsorbed fixed costs of ZAR87 million (2012: ZAR127 million) was charged directly to the income statement during periods when furnaces were not in production.

Capital expenditure

Capital expenditure of ZAR79 million for the year was significantly below the prior year's ZAR181 million as most of the capital programme has been completed. Capital expenditure mainly comprised of ZAR32 million for furnace linings, ZAR21 million for Sky Chrome, ZAR18 million for engineering projects and ZAR8 million for the Lesedi underground mining development. Capital expenditure is estimated at below ZAR50 million for FY2014.

Cash

The Company's net borrowings increased by ZAR54 million over the year to ZAR362 million at 30 June 2013, from ZAR308 million at 30 June 2012. Net borrowings peaked at ZAR436 million, at 31 December 2012. For the year, operations generated ZAR67 million, working capital generated ZAR19 million, investing activities utilised ZAR91 million and financing activities utilised ZAR50 million. Net borrowings are expected to peak at around ZAR420 million by the end of August 2013 as the winter electricity tariff period comes to an end, before steadily decreasing. The Company's current interest bearing debt to equity is at a conservative 25%, and is expected to reduce after H1 of the next financial year.

The Bank of China loan facility was rolled forward for another year to 25 September 2014 at an interest rate of JIBAR + 3.85%.

Dividends

The Board of Directors resolved not to declare a dividend for the year ended 30 June 2013.

The above income statement should be read in conjunction with the notes to the financial statements set out on pages 52-102.

The above statement of comprehensive income should be read in conjunction with the notes to the financial statements.

The above statement of changes in equity should be read in conjunction with the notes to the financial statements.

The above statement of financial position should be read in conjunction with the notes to the financial statements.

The above statements of cash flows should be read in conjunction with the notes to the financial statements.

1. CORPORATE INFORMATION

International Ferro Metals Limited ("the Parent") is a Company limited by shares incorporated in Australia whose shares are publicly traded on the London Stock Exchange, as of 1 September 2007. The Company previously traded on the Alternative Investment Market of the London Stock Exchange.

The financial report for the year ended 30 June 2013 was issued in accordance with a resolution of Directors on 30 September 2013.

The principle activities of the Company are described on page 12.

2. ACCOUNTING POLICIES

Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value.

The financial report is presented in South African Rand and all values are rounded to the nearest thousand Rand (ZAR'000) unless otherwise stated.

Comparative information is reclassified where appropriate to enhance comparability.

Going concern

As at 30 June 2013, the Group had net current liabilities of ZAR218 million including the Bank of China working capital facility. At year end, the Company has drawn down ZAR500 million on the Bank of China working capital facility which was due to be repaid on 25 September 2013. The facility was renewed on 25 September 2013 for another year, to be repaid now on 25 September 2014. The Group made a loss of R129 million for the year and a loss of R53 million for the year ended 30 June 2012, primarily due to depressed ferrochrome prices. The Board is confident that the Company has additional avenues of funding available to it which could be used with forecasted operating cash flows to repay this facility on its contractual repayment date in 2014, on the assumption that realised ferrochrome prices don't deteriorate. For this reason, after making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, and hence, continues to adopt the going concern basis in preparing the accounts.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In the process of applying the Group's accounting policies, management has made certain judgements. Please refer to the Annual Financial Statements for details.

4. SEGMENT INFORMATION

Identification of reportable segments.

The group has determined operating segments based on the information provided to the Board of Directors (Chief Operating Decision Maker).

The group operates predominately in one business segment, being the mining and processing of chromite in South Africa and sale of ferrochrome. There is no material difference between the financial information presented to the Chief Operating Decision Maker and the financial information presented in this report.

Sales revenue by geographic location

Revenue obtained from external customers is attributed to individual countries based on the location of the customer.

Major customers

The group received 71% (2012: 85%) of its external revenue from its China and European customers. During 2013 the group received 51% (2012:54%) of its external revenue from CMC Cometals and 20% (2012:31%) from JISCO.

There are no additional customers which account for more than 10% of the group's external revenues.

5. SALES REVENUE

a) Fair value adjustments represent re-valuations performed on ferrochrome sales contracts for which the price is linked to future fluctuations in the published ferrochrome price until the day of consumption by the end customer (also refer to note 3(j)).

b) Other sales relate to chrome ore sales.

6. OTHER INCOME

a) Other income for the current financial year mainly consists of R94,136 received from the electricity buy-back agreement with Eskom. Under the agreement, Eskom purchased the electricity that would have been consumed by the furnaces at a financially beneficial rate to the Company.

Other income for the prior year of ZAR164,194 relates to income received from the electricity buy-back agreement with Eskom. The balance of other income of ZAR5,736 mainly relates to electricity services provided to Samancor and insurance premium refunds received.

7. ADMINISTRATIVE AND OTHER EXPENSES

a) Impairment of assets of ZAR20,267 relates to the scrapping of the furnace linings on replacement.

8. REMUNERATION OF KEY MANAGEMENT PERSONNEL

a) Details of Key Management Personnel

Please refer to page 29 for details of Key Management Personnel.

b) Remuneration of Key Management Personnel

* Other fees represent costs for any additional work undertaken for the Company and retention fees paid.

** Superannuation represents payments made in respect of a defined contribution pension scheme.

c) Option holdings of key management personnel (consolidated)

Please refer to the Annual Financial Statements for details.

9. STAFF COSTS (EXCLUDING REMUNERATION OF KEY MANAGEMENT PERSONNEL)

* Superannuation represents payments made in respect of a defined contribution pension scheme.

** Termination payment relate to the organisational restructuring during the year.

*** Other costs relate to retention bonus provisions.

10. SHARE BASED PAYMENT (EXPENSE)/INCOME

Refer to note 31 for further details on the phantom option plan and share option plan.

11. FINANCING INCOME AND COSTS

12. INCOME TAX

Calculated taxation losses

The Group has recognised a net deferred tax asset of ZAR233 million as it is probable this will be fully utilised in future, as the Group expects to generate future taxable profits based on current forecasts. IFML has unrecognised tax losses of ZAR220 million (2012:ZAR198 million) in relation to the parent entity. IFMSA has unrecognized tax losses of ZAR100 million (2012: nil). IFMSA Holdings has unrecognized tax losses of ZAR9 million (2012: nil).

13. EARNINGS PER SHARE

a) Due to the reported loss per share, the additional rights issued are anti-dilutive and hence have not been incorporated in the calculation of diluted earnings per share and the calculation of average weighted number of ordinary shares.

14. DIVIDENDS PAID AND PROPOSED

The Board of Directors resolved not to declare a dividend for the year ended 30 June 2013 (2012: nil).

15. CASH AND CASH EQUIVALENTS

16. TRADE AND OTHER RECEIVABLES

a) Trade debtors relate to the sale of ferrochrome and chrome ore. Payment terms are thirty days from date of final invoice.

b) Tax refunds relate to the relevant Goods and Services Tax and Value Added Tax refunds owing in Australia and South Africa.

c) Other debtors mainly relate to foreign exchange contract debtor of ZAR1,934. Refer to note 33(i)

Details of the terms and conditions of receivables are discussed in detail under note 33.

The carrying value of trade and other receivables is assumed to approximate the fair value due to the short term nature of the trade and other receivables.

17. PREPAYMENTS

18. INVENTORIES

Cost of sales reflects the amount of inventory expensed for the year.

19. FINANCIAL INVESTMENTS

a) These financial assets consist of investment portfolios which are managed by various financial institutions in favour of a rehabilitation. The funds can only be applied to relevant rehabilitation expenditure. These financial assets are classified at fair value through profit and loss.

The fair value of these financial instruments has been estimated by the financial institutions using a variety of valuation techniques. These financial instruments are classified as a level 2 in the fair value hierarchy as their fair values have been estimated using inputs other than quoted prices that are observable for the assets, either directly or indirectly.

20. PROPERTY, PLANT & EQUIPMENT

a) Mineral rights and reserves of ZAR61 million relating to the Sky Chrome deposit is held in Purity Metals Holdings Limited ("Purity"), a wholly owned subsidiary of the Group.

b) Capital work in progress relates to capital costs incurred for the expansion of the Group's associated infrastructure.

c) The adjustment to plant & equipment relate to reallocation of capital work in progress to the various assets and the adjustment to the decommissioning asset.

Property, mineral rights and plant and equipment of IFMSA have been pledged as security for the working capital facility provided by Bank of China. (Refer to note 25 for further details). The carrying value of this Plant, property and equipment at 30 June 2013 is ZAR1.95 billion (2012: ZAR2.02 billion).

21. INTANGIBLE ASSETS

a) Licence fees relate to the fees paid for the use of patented technology.

b) The UG2 Chrome Retreatment Plant ("CRP") at RPM's Waterval operations in Rustenburg has been producing the contractual 15,000 tonnes per month since April 2012. The supply agreement entitles IFM to receive 15,000 tonnes per month of chrome concentrate until November 2020.

22. OTHER NON-CURRENT ASSETS

a) Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to the Department of Minerals Resources for environmental rehabilitation and cash set aside for foreign exchange contracts by Bank of China.

23. TRADE AND OTHER PAYABLES

a) Refer to note 35.

b) Other creditors and accruals represent advance debtor payments and pre-finance from the UG2 forward sale agreement.

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

24. PROVISIONS