IFL.L Regulatory News (IFL)

29 January 2015

International Ferro Metals Limited

("IFL" or the "Company")

Production Report for the three months to 31 December 2014

Highlights:

· Ferrochrome ("FeCr") production of 49,800 tonnes ("t") for the quarter, up 3% on the previous quarter

· FeCr sales of 53,517t for the quarter, up 11% on the previous quarter

· Net borrowings increased to ZAR451 million at 31 December 2014 from ZAR434 million at 30 September 2014

· Lesedi underground mining operations ramping up in line with the revised, accelerated schedule

· Rooderand mine production on schedule, producing 8,400t RoM in the quarter

· Co-generation plant scheduled to re-start in Q2 calendar 2015 following re-design

Post period:

· European Benchmark Price decreased by 7¢ to US$1.08 per pound for the quarter ending 31 March 2015

· Due diligence on Pacific Carbon expected to be completed in February 2015

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

"Despite headwinds, production improved on the previous quarter and we have made progress on a number of fronts, including further mechanisation on the MG2 seam at Lesedi, the commencement of mining at Chrometco's Rooderand mine and the completion of the bankable feasibility study for the proposed new 60MW DC furnace. Although the Section 54 notice, which was lifted in November, negatively impacted production volumes and costs, the second quarter introduced more stable operating conditions, which we anticipate to continue into the third quarter.

Although the European Benchmark price has declined over the last quarter and for calendar Q1 2015, we expect that the combination of low utilisation of production facilities in China, resulting in China needing to procure additional ferrochrome from other sources, and rising cost pressures in South Africa, will have a positive impact on prices in the short to medium-term. Coupled with this, we expect price relief as China competes globally for a non-expanding chrome ore basket."

Stainless steel and ferrochrome markets

The US and European economies experienced muted growth during the quarter whilst a growing negative sentiment dominated markets in China. Global stainless steel production for 2014 is estimated to surpass 40 million tonnes, which represents annual growth of approximately 7%. Chinese stainless steel production is estimated to have increased by approximately 13% in calendar 2014. This contributed approximately 52% of global production and as a consequence sustained its flow into European markets. Stainless steel spot prices in Europe came under pressure due to the differential in competitive ferrochrome input costs in China compared to imported ferrochrome costs in Europe.

Provisional data shows that internal ferrochrome stocks reduced in China as demand exceeded local production and imports. This is also evident in Chinese ferrochrome prices that seemed to have bottomed out in November 2014 and a marginal improvement was sustained through December 2014. Chrome ore stocks in China also reduced significantly. According to FerroAlloyNet, port stocks closed at 1.2 million tonnes at the end of November, which represents less than one and a half months' consumption in China.

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

The Company had no fatalities during the quarter and remains fatality free since inception, representing 28.6 million fatality free man-hours which equate to 3.6 million fatality free shifts as at 31 December 2014. During the quarter, 4 lost time injuries occurred and the 12 month moving average lost time injury frequency increased from 1.35 at 31 December 2013 to 3.12 at 31 December 2014. The Company continues to focus on improving safety performance which is evident in the total recordable injury rate. The 12 month moving average total recordable injury rate improved from 28.75 at 31 December 2013 to 24.95 at 31 December 2014. The total recordable injury rate declined by 15% year on year, despite the restart of Lesedi underground mine.

Mining

As reported previously the Lesedi mining plan was revised to accelerate the ramp-up schedule. This was successfully implemented and the MG2 seam was accessed during the quarter. In order to increase production, the Lesedi mine will introduce further mechanisation on the MG2 seam through drilling and roof bolting equipment. This equipment should be commissioned in Q1 of the 2015 calendar year. Lesedi mine production increased 93% quarter on quarter. The mine is expected to produce in excess of 55,000t run-of-mine in Q1 and 80,000t in Q2 of the 2015 calendar year. The mine should provide IFL with cost effective higher grade ore from the MG1 and MG2 seams. All material is to be used in the smelter.

As previously announced, and in line with our stated strategy of flexible and optimal ore sourcing, the Company has temporarily suspended the extraction of ore at Sky Chrome for the current financial year while continuing to process existing stockpiles. The decrease in recovery rate to 52% this quarter, compared with 55% in the previous quarter, was due to the increased feed of low grade recycled beneficiation plant waste, which helped to reduce costs.

In line with expectations, and the Company's stated strategy to acquire higher-grade feed stock for the furnaces, mining commenced in November 2014 at Chrometco's Rooderand LG6 open pit mine. The first run of mine ore was transported to the Lesedi beneficiation plant in January 2015. The drilling programme was initially targeting 200kt of LG6 ore. The Company will now commence drilling at the remainder of the Rooderand mine property in order to increase the available ore.

Smelting

FeCr production for the quarter was 49,800t compared with 48,216t in the prior quarter, an increase of 3.3%. The impact of the DMR stoppage in November on ferrochrome production was a loss of between 4,000 and 4,500 tonnes. The second quarter introduced more stable operations with a marked improvement in production cost in December compared to the two previous months. This decrease in production cost is in line with expectation as ore from our own resources are balanced with maximum use of the Anglo Platinum UG2 ore supply. This was achieved amidst the previously announced Section 54 stoppage during November, which negatively impacted production volumes and costs.

DC furnace

A bankable feasibility study ("BFS") for a 60MW DC furnace was commissioned in April 2014 and it has now been completed. The feasibility study is now being evaluated. As previously announced the DC furnace is expected to increase total ferrochrome capacity by about 42%, and at an estimated incremental cost of 12% below the current cost of production.

The Company is currently assessing appropriate and prudent financing options which will protect and enhance shareholder returns.

Co-generation plant

The plant remains shut down. A chiller unit, which should reduce the load on the engine components, is scheduled to be installed during March 2015. As previously announced, it is anticipated that the Cogen plant will be restarted in Q2 of calendar 2015. The expected cost for the chiller is ZAR18 million.

At full and stable furnace production, the Cogen plant should generate approximately 10% of the Company's total electricity requirements.

UG2 supply agreement

Under the supply agreement with Anglo Platinum, the Company received 49,400t of UG2 chrome concentrate during the quarter. The agreement is for Anglo Platinum to provide 15,000t per month of UG2 chrome concentrate. Due to the protracted strike action at Anglo Platinum from February to June 2014, a backlog of UG2 ore was created, which at 31 December 2014 was approximately 91,000t.

Anglo Platinum is obliged to make up any shortfalls from future production, at a rate of 5,000 tonnes per month. As Anglo Platinum makes up the shortfall, the Company will benefit from a higher supply of UG2 ore, which is a direct contributor to profitability.

Pacific Carbon acquisition

On 1 October 2014, the Company made an offer to acquire the assets of Pacific Carbon and Modderriver Minerals subject to certain conditions. The offer was made in conjunction with Portnex International to acquire assets consisting of 6 retorts located on Kooragang Island in Newcastle, Australia. The retorts are used to produce intermediate or retort coke which is used in ferroalloy and steel production. The due diligence was extended to finalise the results of test work performed on the available coal supply. Results are expected in February 2015.

Sales and inventory

FeCr sales for the quarter to 31 December 2014 were up 11% at 53,517t, compared with 48,183t for the previous quarter. As previously guided, a higher ratio of FeCr fines sales during the quarter decreased the realised price achieved during the quarter. The sales mix covered most regions and represented a good fit to global consumption patterns on the back of IFL's diversification strategy.

FeCr inventory reduced from 15,289t at the end of September to 11,729t at 31 December 2014. Stocks are expected to continue to average between 10,000t and 15,000t going forward to allow for flexibility and room to react to short term demand and price opportunities.

Chrome ore sold during the quarter amounted to 82,000t. This was in excess of the guidance provided of 60,000t as buffer stocks generated in lieu of the platinum strike were worked down.

Costs

FeCr production cost for the quarter was ZAR7.82 per pound, down 8% on the previous quarter's ZAR8.50 per pound.

FeCr production cost for October was approximately ZAR8.01 per pound. This was higher than expected due to the silicon carbide trials. November production cost was negatively impacted by the Section 54 stoppage, as the furnaces consumed considerably more electricity during ramp up. November FeCr production cost was approximately R8.35 per pound. During December 2014 production cost decreased to approximately R7.23 per pound.

FeCr production cost for the first half of FY2015 was R8.15 per pound, in line with previous guidance. FeCr production cost is expected to decrease as ore from own resources are balanced with maximum use of the Anglo Platinum UG2 supply, and increased production from stable operations is realised. The company expects to improve self-sufficiency of ore supply by June 2015 and both Rooderand and Lesedi are expected to produce at a cost below that of buy-in ore.

Cash

Net borrowings increased to ZAR451 million at 31 December 2014 from ZAR434 million at 30 September 2014. Net borrowings are expected to range between ZAR450 million to ZAR490 million until June 2015, as a result of the lower Benchmark price for Q1 of calendar 2015 and the expected annual Eskom increase of approximately 13% on 1 April 2015.

Outlook

The outlook for the ferrochrome industry is largely dependent on stainless steel demand and the distribution of global production. Although there is uncertainty in the short term, we believe that there are supportive underlying long term supply and demand fundamentals to the ferrochrome industry. Prices in China have a significant impact on price trends outside the country. This has been evident in the recent settlement of the benchmark price in response to a widening gap between European and Chinese prices.

Approximately 70% of China's ferrochrome requirements are supplied from internal production. However, this ratio would be difficult to sustain unless the profitability for local producers is restored. Ferrochrome prices in China improved by approximately 1.5¢ per pound during the quarter. This, however, has not had any significant impact on increased utilisation of capacity in China. Internal production is therefore expected to remain depressed until prices increase. Imported alloy is mostly procured from South African producers. With the expected Eskom price increases on 1 April 2015, cost pressure is expected to increase ferrochrome prices. This is expected to spill over to Europe as well as positively affecting expectations on the European Benchmark Price.

The availability of chrome ore will be challenged in the medium to longer term as producers in China will have to compete globally for a non-expanding ore basket to meet their expansion targets. The cost pressures are mounting in the ferrochrome industry and current output will be hampered unless there is some price relief.

Analyst / investor Conference call

Management will discuss these results during a conference call with the investment community today, Thursday 29 January 2015, at 08.30am (London). Dial in details are below:

Dial in: +44 (0) 1452 580733

Pin code: 71822128

- 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.