IFL.L Regulatory News (IFL)

7 November 2013

International Ferro Metals Limited

("IFL" or the "Company")

Interim Management Statement to 7 November 2013 and

Production Report for the three months to 30 September 2013

Highlights:

· Ferrochrome ("FeCr") production up 47% on the previous quarter to 57,849 tonnes ("t"), the fourth highest quarterly production, with both furnaces operating during the quarter under review

· FeCr sales of 52,249t, which reflects the higher commitment of sales in Q2FY14

· Strong focus on cost reduction programme and effective use of mining assets to deliver:

o 88% of targeted production cost savings achieved for the quarter

o FeCr stockpile of 15,550t as at 30 September 2013, up from 9,950t in the previous quarter

o Co-gen plant produced 15.1GWh of electricity for the quarter, the second highest achievement since commissioning

o Chrome ore recovery increased from 43% to 59% quarter on quarter

· Lower than expected increase in net borrowings from ZAR362 million at 30 June 2013 to ZAR393 million at 30 September 2013

· Zero fatality track record maintained; continued improvement in overall safety performance

· Operations (excluding working capital) cash generative for the quarter

· Production costs continue to allow company to be cost competitive with global ferrochrome producers

Post period end:

· European Benchmark Price for Q4 of calendar 2013 remained constant at US$1.125/lb

Commenting on the operational update, Chief Executive Chris Jordaan said:

"Building on our announcement at the full year, IFL has performed strongly this quarter, demonstrating the Company's progress and turnaround generating cash throughout the winter tariff period."

He added: "Ferrochrome production was up 47%, and further improvements on availability and utilisation of capacity are expected to further boost production in the coming quarters. Both furnaces continue to achieve operational stability and perform extremely well. Achieving 88% of our cost reduction target, augmented by further initiatives to reduce cost over the coming months, means the Company continues to be cost competitive with the global ferrochrome producers."

Stainless steel and ferrochrome markets

The global economic environment showed a small improvement across all regions during the third calendar quarter. This constrained the stainless steel industry and demand for its raw materials. Spot prices for ferrochrome in China softened by another 1-2% during the quarter and settled between 85-86¢/lb chrome in the latter part of Q3. The spot market in Europe and the USA followed a similar downward trend early in the quarter, but showed an improvement in response to reduced high carbon ferrochrome inventory by mid-September. The weaker Rand against the U.S. dollar continued to help South African producers be competitive with other global ferrochrome producers.

These price levels are challenging margins around the world and will make it particularly difficult for Chinese producers who are exposed to electricity availability and costs during winter. In addition, a slight improvement in chrome ore prices was evident due to a tightening market towards the end of Q3, which should support higher ferrochrome production cost in China and should lead to higher ferrochrome prices. Chinese ferrochrome producers' ore cost makes up for at least 50% of the total production cost. Given the Company's relative cost position to the Chinese, it is expected that the Company will remain competitive in the Chinese market which, in recent years, has been setting the base spot price for ferrochrome.

Health and Safety, and the Environment ("HSE")

The Company had no fatalities during the quarter and remains fatality free since inception, representing 25,497,825 fatality free man-hours which equates to 3,187,228 fatality free shifts as at 30 September 2013. During the quarter, there were no lost time injuries and the 12 month moving average lost time injury frequency improved further from 3.31 at 30 September 2012 to 1.24 at 30 September 2013.The Company continues to focus on HSE and to continually improve training. Total recordable injuries reduced by 15% year on year.

The Company completed external recertification audits on the integrated management system and is proud to note that TÜV Rheinland, the global certification company, has awarded full recertification for ISO 14001, ISO 9001 and ISO 18001.

No significant environmental or health incidents were reported in the quarter.

Mining

The Lesedi underground mine review is on track and the findings of the review are expected to be announced in January 2014. The Company maintains sufficient ore supply for the two furnaces from a combination of stockpiles, the UG2 supply agreement, the buying-in of inexpensive ores which are readily available in the market and production from Sky Chrome.

As reported previously, ore prices have recently come under further pressure and as such, IFL is using this opportunity to reduce ore input cost to provide the best low cost solution for the Company's operations. This has meant that the Company has mined less from Sky Chrome and took advantage of other cheaper sources of supply. Production at Sky Chrome was approximately 40,000t for the quarter, above previous guidance of 30,000t. The revised mine plan has been implemented successfully. The overall recovery increased from 43% to 59%. Further optimisation is underway, including a revised spiral design which, among other modifications, adds a further spiral circuit. This was commissioned in October 2013. It is expected that this modification will align the beneficiation plant to a wider distribution of coarse and fine product, which is anticipated to improve the flexibility of the plant to cater for Sky Chrome, Lesedi and other chrome ores.

PGM rights in Sky Chrome chrome ore seams

Platinum Group Metals (PGMs) reside in the Middle Group ("MG") chrome ore seams that the Company mines. These PGMs can be recovered from the tailings of the chrome ore beneficiation plant. In 2012, Phoenix Platinum Mining, a subsidiary of Pan African Resources (PAR), commissioned a Chrome Tailings Retreatment Plant, treating historical and current tailings arising from the Lesedi beneficiation plant to recover the PGM's. Phoenix Platinum Mining acquired the full share of the PGM rights to the Lesedi Mine in 2011 when it acquired IFL's 25% Net Profit Interest ("NPI") in the PGM rights.

As previously reported, Sky Chrome has been awarded the rights to the PGMs in the MG chrome ore seams by the Department of Mineral Resources ("DMR"). The Company has an 80% share in Sky Chrome (20% belongs to the Bapo Ba Mogale Tribe). IFL is evaluating options to recover the PGMs from the chrome ore seams and the Sky Chrome tailings.

Smelting

FeCr production for the quarter was 57,849t, compared with 39,454t the prior quarter, an increase of 47%. This is an exceptional performance achieved as a result of improved electricity consumption, increased alloy recovery from slag as well as stable operations at full load. Further improvements made to availability and utilisation of capacity is expected to further boost production in the coming quarters. An asset management improvement programme is well underway and in particular, will focus on effective and efficient maintenance work management as well as elimination of top order failures causing down time.

Co-generation plant

The cogen plant generated 15.1GWh, an increase of 23% on the previous quarter, when 12.3GWh of electricity was generated. This represents the second highest amount of power generation since inception of the plant. It represents 7.1% of the Company's total electricity requirement, compared with 8.3% in the previous quarter, during which one of the furnaces was shut down for two months as it participated in the Eskom electricity buy-back programme. Initiatives are underway to improve gas utilisation so as to achieve the 11% targeted generation.

UG2 supply agreement

IFL's supply agreement with Anglo Platinum was established in 2010 to provide 15,000t per month of low cost UG2 chrome concentrate until 2020. This beneficial agreement delivers UG2 at a cost significantly below the Company's in-house cost of concentrate production.

The supply of UG2 accounted for 34,300t, during the quarter, compared to the contractual 45,000t per quarter, due to the renewed strike action at Anglo Platinum. Anglo Platinum is obliged under the agreement to make up any shortfalls and as previously shown, it is expected that this shortfall will be made up in the coming months.

Sales and inventory

FeCr sales for the quarter to 30 September 2013 were up 39% to 52,249t, compared with 37,665t for the previous quarter. The increase in sales was a result of the higher production volumes during the quarter. Approximately one third of the sales were channelled into regions outside Europe and the USA as IFL started to regain its strategic sales position in Asia, mainly driven by its cost competitiveness.

FeCr inventory was 15,550t at 30 September 2013, up from 9,950t at 30 June 2013. The planned build-up was as a result of committed sales for the next quarter. Stocks are expected to reduce to about 10,000 tonnes over the next quarter

Ore sales for the quarter reduced substantially to only 23,000t from 95,000t in the previous quarter, due to higher internal requirements with both furnaces back in operation.

Cost reduction programme

Ferrochrome production cost for the quarter achieved 88% of the stated cost reduction target, with both furnaces running for the full quarter. The Company is targeting total cost reductions of ZAR0.76/lb on FY2011 production cost of ZAR6.25/lb. These targets strip out changes in unit electricity and reductant prices, which are outside management's control and affect all other South African producers. On an adjusted basis, this quarter's production cost was an impressive at ZAR5.58/lb, compared with ZAR5.56/lb for the previous quarter.

The unadjusted production cost for the quarter was ZAR6.43/lb, up ZAR0.20/lb from the prior quarter's ZAR6.23/lb, notwithstanding the quarter having two electricity winter months, compared to one in the prior quarter. The prior quarter also saw the benefit of an increased ratio of alloy recovery production relative to furnace production. The Company remains on track to achieve the full targeted cost reductions

Cash

The Company's net borrowings increased by ZAR31 million toZAR393 million at 30 September 2013 from net borrowings of ZAR362 million at 30 June 2013, which was lower than previously guided.

Cash from operations (before working capital changes) generated ZAR64 million, working capital utilised ZAR68 million (about ZAR50 million due to increased FeCr inventory), financing activities utilised ZAR14 million and investing activities utilised ZAR12 million.

Operations are expected to remain cash generative and net borrowings are expected to reduce significantly from January 2014 onwards.

The Bank of China loan facility was rolled forward for another year to 25 September 2014.

Outlook

Chinese supply and demand fundamentals remain under pressure; however, there is little room for further price reductions due to inflationary cost pressures for both ores and ferrochrome.

Continued cost pressures on Chinese smelters are expected to increase ferrochrome production cost in China which should lead to upward pressure on ferrochrome prices. The Company expects to remain competitive on ferrochrome cost of production.

In this environment, the outlook for IFL is positive: the Company's smelting operations are working at full load and are stable, and the cost reduction programme has put the Company further down the cost curve, resulting in a business that generates cash even at these depressed price levels.

The recent achievements in operational performance improve the Company's ability to respond to appropriate opportunities for growth.

Analyst / investor Conference call

Management will discuss these results in a conference call with the investment community today, Thursday 7 November 2013, at 08.30am (GMT). Dial in details are below:

Dial in: +44 (0) 1452 555 566

Pin code: 22899468

- ENDS-

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

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 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.