Pathfinder Minerals Regulatory News (PFP)

Pathfinder Minerals Plc

("Pathfinder" or "the Company")

Proposed acquisition of IM Minerals Limited

Proposed Placing to raise £525,000

Application for admission of the Enlarged Share Capital to AIM

Approval of waiver of obligations under Rule 9 of the City Code on Takeovers and Mergers

Pursuant to the announcement made by the Company on 22 December 2010, the Board of Pathfinder Minerals Plc is pleased to announce that it will today send a circular to Shareholders seeking their approval to, inter alia, acquire the remaining issued share capital of IM Minerals Limited, a company in which it acquired a minority stake on 26 November 2009.

The circular constitutes an Admission Document for the purposes of the AIM Rules and therefore, subject to the approval of the Resolutions at a General Meeting which has been convened for 18 January 2011, it is expected that the Company's shares will be admitted to trading on 19 January 2011.

Set out below is a summary and extracts of the information contained in the Admission Document. The full document is available from the offices of Daniel Stewart & Company plc, Becket House, 36 Old Jewry, London, EC2R 8DD.

For further information please contact:

Pathfinder Minerals Plc

Nicholas Trew, Chairman Tel: 020 7834 0321

Daniel Stewart & Company Plc

Oliver Rigby/James Thomas Tel: 020 7776 6550

Key dates

Placing Statistics

Introduction

On 26 November 2009, the Company entered into an investment agreement with IM Minerals, a company whose subsidiaries hold licences to mine heavy minerals sands in Mozambique, to acquire 80,000 ordinary shares in IM representing 4.67 per cent. of the then issued share capital. The Board are pleased to announce that today they have entered into the Acquisition Agreement with the Vendors to acquire the remaining issued share capital of IM.

Further details in respect of IM are set out in this announcement and the Admission Document. Pursuant to the terms of the Acquisition Agreement, the consideration payable to the shareholders of IM will be satisfied by the allotment and issue by the Company to the Vendors of the Consideration Shares. The Acquisition constitutes a reverse takeover under the AIM Rules and is therefore subject to shareholder approval.

Under the provisions of the Takeover Code certain Vendors are considered to be acting in concert (the "Concert Party"). On Admission of the Consideration Shares, the Concert Party will hold 614,770,649 Ordinary Shares representing a maximum of 75.95 per cent. of the Enlarged Share Capital. Ordinarily, the issue and allotment of the Consideration Shares to the Concert Party would trigger an obligation on the Concert Party to make a general offer to Shareholders for the entire issued share capital of the Company pursuant to Rule 9 of the Code. Under Rule 9 of the Code, when a person acquires an interest in shares which (when taken together with shares in which he and persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company subject to the Code, such person (or persons acting in concert) would usually be required to make a general offer to shareholders.

The Panel has agreed, however, to waive the obligation of the Concert Party to make a general offer, subject to the Independent Shareholders voting in favour of a resolution to approve the Waiver by the Panel. The purchase of IM's share capital is also therefore subject to the Independent Shareholders voting in favour of the resolution to approve the Waiver. Further details of the Concert Party are included in the Admission Document.

The resolutions on which the Shareholders will be asked to vote are:

·; Resolution 1 is an ordinary resolution to approve the Acquisition;

·; Resolution 2 is an ordinary resolution to approve the waiver of the obligation under Rule 9 of the Takeover Code by the Panel in respect of the issue of the Consideration Shares to members of the Concert Party. Resolution 2 will be voted on by a poll of Independent Shareholders;

·; Resolution 3 is an ordinary resolution to authorise the Directors under section 551 of the 2006 Act to issue Ordinary Shares up to a limit of the authorised but unissued share capital of the Company;

·; Resolution 4 is an ordinary resolution to approve the purchase by the Company of 280,782 ordinary shares of 1p each in IM Minerals from Nicholas Trew, a director of the Company;

·; Resolution 5 is an ordinary resolution to approve the purchase by the Company of 150,370 ordinary shares of 1p each in IM Minerals from John McKeon, a proposed director of the Company and the purchase by the Company of 239,500 ordinary shares of 1p each in IM Minerals from Old Church Street Holdings Limited, a company connected with John McKeon;

·; Resolution 6 is an ordinary resolution to approve the purchase by the Company of 288,732 ordinary shares of 1p each in IM Minerals from Gordon Dickie, a proposed director of the Company;

·; Resolution 7 is an ordinary resolution to approve the purchase by the Company of 319,715 ordinary shares of 1p each in IM Minerals from WB Nominees Limited and St Hill IoM Limited, each as nominees of Hill Street Investments Plc and 41,000 ordinary shares of 1p each in IM Minerals from Silk Route Resources Limited, Hornbuckle Mitchell Trustees Limited and Tim Baldwin as trustees of the Private Pension - TE Baldwin and John Baldwin and Margaret Baldwin as trustees of the CM Edwards Trust all of which are connected with Tim Baldwin a proposed director of the Company; and

·; Resolution 8 is a special resolution to authorise the Directors under section 570 of the 2006 Act to issue Ordinary Shares for cash up to a limit of the authorised but unissued share capital of the Company on a non pre-emptive basis.

Application will be made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. Subject to the passing of the Resolutions, Admission is expected to become effective and trading in the Ordinary Shares to commence on 19 January 2011.

Background to and Reasons for the Acquisition

On 27 November 2009 the Company sent a circular setting out an Investing Policy to be approved by its shareholders. Pathfinder's proposed strategy was to acquire mainly significant minority interests in both listed and unlisted companies and/or assets which the Directors believe represented opportunities to create shareholder value, specifically within the natural resource sectors, with a focus on Central Asia and Sub-Saharan Africa. The focus would be on metals and mature resource situations with both established resources and the ability to increase these through additional exploration and bring them into production.

IM Minerals holds an extraction licence for a potential titanium dioxide ore resource in Mozambique ("Naburi Licence"), as well as an exploration licence over land nearby the Naburi Licence, also believed to contain a potential titanium dioxide ore resource ("Moebase Licence"). Past exploration drilling has outlined significant mineral resources of heavy minerals sands on the two licensed sites, totalling approximately 72 millions tonnes of contained heavy minerals. Accordingly, the proposed acquisition of the remaining share capital of IM Minerals fits in with the Company's strategy.

Principal Terms of the Acquisition

On 26 November 2009, Pathfinder invested £200,000 in IM Minerals for which Pathfinder received 80,000 new ordinary shares of 1p each in the capital of IM, representing (at the time) 4.67 per cent. of the issued share capital of IM.

On 30 December 2010 the Company entered into the Acquisition Agreement with the Vendors to acquire the balance of the issued share capital of IM Minerals. Under the terms of the Acquisition Agreement, the Company has agreed to pay a consideration of £34,606,444.68 to be satisfied by the issue and allotment on Completion of the Consideration Shares by the Company to the Vendors credited as fully paid up at an agreed price of 4.75p per Consideration Share. Certain of the Vendors in management positions have given warranties regarding IM and its subsidiaries. The Acquisition is conditional, inter alia, on the passing of the Resolutions and Admission.

The Consideration Shares will represent 90.01 per cent. of the Enlarged Share Capital and will, when issued, rank pari passu in all respects with the other Ordinary Shares then in issue, including all rights to all dividends and other distributions declared, made or paid following Admission.

Further details of the Acquisition Agreement are set out in the Admission Document.

Existing Directors, Proposed Directors, Senior Management and Local Partners

Brief biographical details of the Existing Directors and the Proposed Directors are set out below.

Existing Directors

Nicholas "Nick" Trew, aged 55, Executive Director, Proposed Chief Executive Officer

From 1978 to 1989 Nick worked as an energy insurance broker for Sedgwick Offshore Resources Limited, which at that time was the largest and most successful energy broker in the world and is today part of Marsh Insurance Group. Nick then left to co-found Heath Oil and Gas Limited with four other directors from Sedgwick Offshore Resources. At Heath Oil & Gas, Nick headed up the oil and gas construction broking team and, amongst other successes, was responsible for the insurance placing of the Troll Natural Gas Platform in the North Sea; the largest construction ever moved by man.

After 20 years as a Lloyds Broker, Nick formed International Mercantile Group Limited ("IMG") in 1998 with Gordon Dickie. IMG arranges insurance, engineering and financing services for various worldwide infrastructure, factory and energy projects.

James Normand, aged 56, Finance Director

James qualified as a Chartered Accountant in 1978, having trained with Spicer and Pegler (now part of Deloitte). Following a secondment (from 1985 to 1987) to 3i plc, James specialised for the next 15 years in the provision of advice to management buy-out and buy-in teams and on corporate acquisitions, disposals and capital raisings.

Since 2002, James has filled management and finance officer roles for a number of different

commercial and charitable organisations.

In an unremunerated extra-curricular capacity, James is active in the governance of the Anglican Diocese of London, being Chairman of the Chelsea Deanery Synod and a member of the Bishop of London's Council.

Mark Edmonds, aged 50, Non-Executive Director

Mark spent 27 years in BBC TV which culminated in him working in a specialist team co-ordinating programme delivery mechanics for major Network TV transmission output delivered by Post Production Resources Group. In 2006 he joined the ASNU Corporation and was instrumental in the R&D and Management of a subsidiary division within the ASNU Corporation's business.

In November 2009 Mark became the Communications Director of RAM Investment Group Plc.

Proposed Directors

John McKeon, aged 51, Proposed Non-Executive Chairman

John has spent over fifteen years in stock broking, corporate finance, property and project finance. He has been a lead manager of private equity and institutional dealing teams successfully raising funds for several Official List, AIM and internationally listed companies. In addition to being a founder director of Circle Oil plc in 2003 and acting as an executive director until 2008, John has experience in international mergers and acquisitions, debt re-structuring and corporate advisory services. John also acted as a principal in the management buy-out of $600 million worth of European infrastructure assets, formerly part of Metro Media Fibre Networks Inc; and in the subsequent reverse take-over by a listed Singaporean group.

Gordon Dickie, aged 63, Proposed Non-Executive Director

Gordon is a qualified engineer who has worked on projects across a number of industries in the Middle East, Central Asian and, more recently, Africa. Having worked in a variety of management roles in engineering and computing companies, Gordon joined British Leyland International Plc in 1976, where he worked across the Middle East and was heavily involved in Military Sales in conjunction with the Ministry of Defence, Export Sales Organisation. In 1980 Gordon was a founding director of London & International Mercantile Ltd ("LIM"), an international investment banking company which focused on the C.I.S. states, Eastern Europe, the Far East and South-East Asia. Whilst at LIM he focused on engineering and infrastructure projects such as airports and power plants. Gordon was a founding director of IMG with Nick Trew in 1998.

Timothy "Tim" Baldwin, aged 46, Proposed Non-Executive Director

Tim is currently executive chairman of RAM Investment Group Plc, a listed digital media and

technology group, and chairman of Hill Street Investments Plc, an investment holding group which will have a substantial shareholding in the enlarged Pathfinder Minerals Plc. Tim also has some minor roles as director in other unlisted companies.

Tim has extensive experience in UK AIM companies as both an advisor to listed AIM companies and as a board director. He has extensive knowledge in the mining sector having been involved in the due diligence and marketing of many listed mining companies. Tim is a trained investment analyst.

Board Changes

On Admission, Nick Trew will be appointed as Chief Executive Officer, James Normand will remain in his existing role as Finance Director, Mark Edmonds will resign as a director, John McKeon will be appointed as Non-Executive Chairman and Gordon Dickie and Tim Baldwin will be appointed as Non-Executive Directors.

Senior Management and Local Partners

Jacinto Veloso

Major-General Jacinto Soares Veloso has held government posts as Minister of State Security, General Director of the Intelligence Services, Minister of Economic Affairs and Minister of International Cooperation. General Veloso was Chairman of the Government Commission that negotiated the M'Komati Accord of "good neighbourliness and non-aggression" with the Republic of South Africa in 1984.

Diogo Cavaco

Diogo José Henriques Cavaco has worked in a variety of industries from civil engineering to commercial law and is the Chairman of CMDN. Before this he was working as a consultant in the fields of company management and commercial law. From 1993 to 1997 Diogo was the managing director of Eurojardim, a company involved in the construction and maintenance of golf courses and green areas. Prior to this, he was the managing director of two specialist drilling companies, Sondagens Cavaco (1986 to 1993), and ALGARDRIL, Sondagens International, Ltd (1983 to 1986). Diogo has also managed a variety of water supply projects in Europe and Africa. He has a Masters Degree in Law, a Post Graduate degree in Stock Exchange Law and a Post Graduate degree in Electronic Media in Society, all from the Classic University of Lisbon. He is also currently undertaking a Masters Degree in Entrepreneurial Law and Corporate Governance at the ISCTEM in association with the New University of Lisbon.

Admission

Application will be made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. Subject to the passing of the Resolutions, Admission is expected to become effective and dealings in the issued Ordinary Shares are expected to commence on 19 January 2011. The New Ordinary Shares will rank pari passu in all respects with the Ordinary Shares including the right to receive all dividends and other distributions declared paid or made after the date of issue.

Lock-ins and Orderly Market Restrictions

The Directors and the Concert Party have undertaken to the Company and Daniel Stewart in the Placing Agreement and, in the case of Diogo Cavaco and JV Consultores, in separate lock-in agreements, subject to certain exceptions in accordance with the AIM Rules for Companies (including the ability to accept a take-over offer for the Company and to give an irrevocable undertaking to accept a take-over offer for the Company), not to dispose of or transfer any Ordinary Shares in which they are interested for a period of 12 months from Admission. The Directors and the Concert Party have also undertaken in the Placing Agreement and, in the case of Diogo Cavaco and JV Consultores, in separate lock-in agreements, to the Company and to Daniel Stewart, only to dispose of their shares in the Company through the Company's broker following the expiry of the first year of the lock-in period for a period of 12 months. Further details of such lock-in undertakings are contained in the Admission Document.

Dividend Policy

As soon as the Company has distributable reserves, the Directors intend to declare a dividend subject to capital commitments and consideration of whether to reinvest the profits into the business for further development.

Placing and Warrant Placing

The Company is proposing to raise approximately £525,000 (before expenses) pursuant to the Placing by the issue of 11,052,632 New Ordinary Shares at the Placing Price. In addition, the Warrants have been conditionally assigned to the Warrant Placee pursuant to the Assignment Agreement. The Warrant Placee has agreed to exercise the Warrants conditional upon completion of the Assignment Agreement and Admission, which will result in the Company issuing and allotting 20,266,665 new Ordinary Shares. The exercise of the Warrants will raise approximately £304,000 (before expenses) for the Company. The Placing Shares and the Exercised Warrant Shares will represent approximately 3.87 per cent. of the Enlarged Issued Share Capital.

Included within the Warrants which have been conditionally assigned to the Warrant Placee are 3,333,333 warrants which were originally granted to Nick Trew's Private Pension and will therefore treated as a director dealing under the AIM Rules.

The aggregate proceeds of the Placing and the Warrant Placing will be used to fund the investment needs of the Enlarged Group and the future working capital requirements of the Enlarged Group.

Pursuant to its obligations under the Placing Agreement, Daniel Stewart has conditionally placed the Placing Shares at the Placing Price and the Warrants at the Exercise Price with investors. The Placing and the Warrant Placing have not been underwritten by Daniel Stewart or any other person.

The Placing Agreement is conditional, inter alia, upon Admission having taken place by not later than 8:00 a.m. on 19 January or such later time and date, being not later than 28 February, as the Company and Daniel Stewart may agree. The Placing Agreement contains provisions entitling Daniel Stewart to terminate the Placing Agreement at any time prior to Admission in certain circumstances. If this right is exercised the Placing and the Warrant Placing will lapse. Further details of the Placing Agreement are set out in the Admission Document.

The Placing Shares and the Exercised Warrant Shares will rank pari passu with the existing Ordinary Shares in issue in all respects including the right to receive all dividends declared or paid on the ordinary share capital of the Company on or after Admission.

On Admission the Company will have 809,406,498 Ordinary Shares in issue and a market capitalisation of approximately £38.4 million at the Placing Price. Application has been made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings will commence on 19 January 2011.

Following Admission the Company will be seeking additional funding in order to complete a

pre-feasibility study.

The Takeover Code

The Proposals give rise to certain considerations under the Takeover Code. Brief details of Rule 9 of the Takeover Code are described below. The Takeover Code is issued and administered by the Panel. The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, inter alia, a listed or unlisted public company with its place of central management and control in the United Kingdom. The Company is such a company and its shareholders are entitled to the protection afforded by the Takeover Code.

Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code is normally required to make a general offer to all the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of the company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if a further interest in shares is acquired by any such person, or any person acting in concert with him.

An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

For the purposes of the Takeover Code, a concert party arises where persons acting in concert pursuant to an agreement or understanding (whether formal or informal) actively co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company.

Control for the purposes of the Takeover Code is defined as an interest, or interests, in shares carrying in aggregate 30 per cent. or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control.

The Panel has determined that for the purposes of Rule 9 of the Code a concert party exists between Diogo Cavaco, Gordon Dickie, John McKeon, JV Consultores (beneficially owned by Jacinto Veloso and his family members), Nicholas Trew and Tim Baldwin. Further details of the Concert Party are set out in the Admission Document. Pursuant to the Acquisition Agreement, the Concert Party will, upon Completion, be issued and allotted with an aggregate of 605,620,650 Concert Party Consideration Shares and will hold in aggregate 614,770,649 Ordinary Shares, representing 75.95 per cent. of the Enlarged Share Capital of the Company. Set out below is the current interest of each member of the Concert Party in the Company's share capital as at the date of this announcement and as it will be immediately after the issue of the Consideration Shares under the terms of the Acquisition Agreement.

Shareholders should be aware that members of the Concert Party may, for so long as they between them hold over 50 per cent. of the voting rights of the Company and for so long as they continue to be treated as acting in concert, increase their aggregate shareholding at a later date without incurring any further obligation under Rule 9 to make a general offer, although individual members of the Concert Party will not be able to increase their percentage shareholding through a Rule 9 threshold without Panel consent.

Unless the Waiver is approved by the Independent Shareholders, the issue to members of the Concert Party of the Concert Party Consideration Shares would give rise to an obligation on the Concert Party to make a general offer to all Shareholders under Rule 9. Members of the Concert Party will not be entitled to vote on these resolutions.

The Independent Directors believe that the Acquisition, and the issue of the Concert Party Consideration Shares to members of the Concert Party is in the best interests of the Company and its shareholders as a whole. However, the Independent Directors would not consider the Acquisition to be in the best interests of the Company and its Shareholders as a whole in circumstances which would lead the Concert Party or any member of it becoming obliged to make a general offer to acquire all of the Ordinary Shares not held by the Concert Party or such member. The members of the Concert Party are only prepared to complete, as Vendors, the sale of the ordinary shares in IM owned by them under the Acquisition Agreement on the basis that they will not be obliged to make such an offer on issue and allotment to them of the Concert Party Consideration Shares. It is for this reason that the Independent Directors have decided to seek from the Panel the Waiver from the obligation on the Concert Party (or any member of it) to make a general offer under Rule 9 of the Code as a result of the issue to them of the Concert Party Consideration Shares.

The Panel has agreed, subject to the Waiver Resolution being passed on a poll by the Independent Shareholders, to grant the Waiver. For the avoidance of doubt, the Waiver applies only in respect of increases in the holding of Ordinary Shares of the Concert Party and members of the Concert Party resulting solely from the issue to them of the Concert Party Consideration Shares.

Intentions of the Concert Party

Should the Proposals be approved by Shareholders the Company will no longer act as an investment company and will commence trading as a mining company. The members of the Concert Party have also confirmed that the existing employment rights, including pension rights (where relevant), of all employees of the Enlarged Group will be maintained.

Corporate Governance

The Board is responsible for establishing the strategic direction of the Company, monitoring the Enlarged Group's trading performance and appraising and executing development and acquisition opportunities. The Company holds regular Board meetings, at which financial and other reports, including working capital reports and acquisition opportunities, are considered and, where appropriate, voted on.

Details of the Board's beneficial interests in Ordinary Shares and options, both immediately prior to and following Admission, are set out in the Admission Document. The Directors understand their obligation to comply with Rule 21 of the AIM Rules relating to directors' dealings and will take all reasonable steps to ensure compliance by any employees of the Company to whom Rule 21 applies. The Company has, in addition, adopted the Share Dealing Code.

The Directors support high standards of corporate governance and, following Admission, the Board intends to comply with the provisions of the QCA Guidelines so far as is reasonably practicable and appropriate taking into account the Company's size.

Board committees

It is intended that an audit committee, comprising John McKeon and Tim Baldwin, will operate with effect from Admission. The audit committee will determine the application of the financial reporting and internal control principles, including reviewing the effectiveness of the Company's financial reporting, internal control and risk management procedures and the scope, quality and results of the external audit. It is intended that the audit committee will be chaired by John McKeon and will meet at least twice a year.

It is intended that a remuneration committee, comprising John McKeon and Tim Baldwin, will operate with effect from Admission. It will review the performance of the executive directors and will set their remuneration, determine the payment of bonuses to executive directors and consider bonus and option grants. No member of the Board will be permitted to participate in discussions or decisions concerning his own remuneration. It is intended that the remuneration committee will be chaired by John McKeon and will meet at least twice a year.

Management Incentives

The Directors intend to set up a share option scheme to incentivise management following Admission. The scheme will be limited to a maximum of 10 per cent. of the issued share capital of the Company from time to time.

Related Party Transaction

The Acquisition also constitutes a related party transaction under the AIM Rules for Companies and as such the Independent Directors, having consulted with Daniel Stewart, the Company's Nominated Adviser, consider the acquisition to be reasonable and in the best interest of Shareholders.

General Meeting

Set out in the Admission Document is a notice convening the General Meeting to be held at the offices of Daniel Stewart at Beckett House, 36 Old Jewry, London EC2R 8DD at noon on 18 January 2011.

Action to be taken

Shareholders will receive a Form of Proxy for use at the GM with the Admission Document. Whether or not you intend to be present at the GM, you are requested to complete, sign and return your Form of Proxy to the Company's registrars, Capita Registrars, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible but, in any event, so as to arrive no later than noon on 16 January 2011 or 48 hours before any adjourned meeting. The completion and return of a Form of Proxy will not preclude you from attending the meeting and voting in person should you wish to do so.

Recommendation

The Independent Directors, who have been so advised by Daniel Stewart, consider the Proposals, including the waiver of the obligation on the Concert Party under Rule 9 of the Code, to be fair and reasonable and in the best interests of the Company and its Shareholders as a whole and therefore recommend the Shareholders to vote in favour of the Resolutions to be proposed at the GM, In giving its advice, Daniel Stewart has taken into account the Directors' and Proposed Directors' commercial assessments.

In addition certain Shareholders have irrevocably undertaken to vote in favour of the Resolutions in respect of 18,066,666 Ordinary Shares held by them (representing 36.48 per cent. of the Existing Ordinary Shares). Further details of the irrevocable undertakings can be found in the Admission Document.

Yours faithfully

James Normand

Senior Independent Director

INFORMATION ON IM MINERALS LIMITED

Executive Summary

IM Minerals was founded in 2008 and its current directors are Nicholas Trew, Gordon Dickie, Tim Baldwin and John McKeon. By October 2009 IM had acquired a 75 per cent. interest, and in August 2010 the remaining 24.99 per cent., in the share capital of Companhia Mineira de Naburi S.A.R.L., a Mozambique-registered company that holds an extraction licence ("Naburi Licence") for a potential TiO2 (titanium dioxide) ore resource in Mozambique. The 0.01 per cent. of CMDN not owned by IM Minerals is owned by local interest; 0.005 per cent. by J.V. Consultores Internacionais, Limitada, a company owned by General Jacinto Veloso, and 0.005 per cent. by Diogo Cavaco.

In 2009, IM funded CMDN to acquire BHP Billiton Jersey Limited's Mozambique exploration company Sociedade Geral de Mineracao de Mozambique S.A.R.L. ("Genbique"), which held an exploration licence over land nearby that is covered by CMDN's licence. In late 2009, CMDN successfully reapplied for a new exploration licence on the former BHP Billiton licensed acreage ("Moebase Licence"). Genbique is 99.8 per cent. owned by CMDN. The 0.2 per cent. not owned by CMDN is owned by local interest; 0.1 per cent. by J.V. Consultores Internacionais, Limitada, a company owned by General Jacinto Veloso, and

0.1 per cent. by Diogo Cavaco.

The Company is seeking Admission to AIM to provide it with access to capital markets to further develop its Mozambique asset and in due course to raise funding for a pre-feasibility study to be conducted by Scott Wilson Limited.

CMDN holds two licences as detailed in the group structure chart above. The Exploration and Research Licence 73L was re-registered to CMDN on 20 November 2009 and the Mining Concession 760C was transferred to CMDN on the same day. In December 2010, the 73L licence was renewed by the government of Mozambique and expires on 30 June 2011. The 760C licence expires in 2029.

CMDN is the majority shareholder of Genbique, which was formerly owned by BHP Billiton Jersey Limited. Both CMDN and Genbique are companies incorporated in Mozambique. Both General Veloso and Diogo Cavaco are on the CMDN board of directors.

The Group's Assets

Location

The Naburi Licence and Moebase Licence are over land located on and near the Indian Ocean coast of Mozambique, some 1,100km northeast of the capital city Maputo. Past exploration drilling has outlined significant mineral resources of heavy minerals sands on the two licences, totalling approximately 2 billion tonnes with an average heavy minerals content of 3.55 per cent., giving a total of approximately 72 million tonnes of contained heavy minerals. The coastal deposits on IM's Moebase Licence are geologically similar to heavy mineral sands being mined and processed at the Kenmare Moma mine 50km to the northeast.

Heavy Mineral Sands

Heavy mineral sands generally include all those minerals with a specific gravity typically greater than 2.9. The more valuable components of a heavy mineral sands deposit include the titanium oxide minerals ilmenite and rutile, zircon (zirconium silicate), garnets, monazite and xenotime. Heavy mineral sands deposits are typically concentrated in beach deposits, which may be of paleo or modern age. Modern beach deposits are formed as exposed beach placers feed sand to coastal dune systems which accumulate as foredunes along the coastline.

History

Initial exploration on the property was undertaken by Edlow Resources Ltd. ("Edlow") when it obtained the concession in 1988. Reconnaissance drilling was conducted in 1989, followed by exploration drilling using reverse circulation equipment on a 1000m by 100m grid. Edlow completed 427 reverse circulation holes totalling 6,519m for resource evaluation on the Moebase (288 holes, 4,690m) and Molocue (139, 1,829m) deposits. Edlow commissioned Mineral Deposits Ltd to conduct a prefeasibility study for the development of the Moebase deposits in 1991. This study was based on an historical Indicated Resource of 239.9MM tonnes grading 5.17 per cent. heavy minerals.

Genmin, the minerals subsidiary of Gencor (subsequently BHP Billiton) entered into an option agreement with Edlow and the Mozambique Ministry of Mines ("Mirem") in June 1993 to advance the project through to full feasibility and development. Gencor initiated a program of detailed exploration, beginning with photogeological interpretation of the deposit area. This was followed by reconnaissance exploration, hand auger and power auger drilling and sampling on a wide drill spacing. Extensive reverse circulation resource evaluation drilling was undertaken, with most of the Gencor exploration work being conducted over the 1994 - 1998 period. Gencor established a spiral concentrate pilot plant at the Moebase site in 1995 for preparation of large bulk samples of heavy mineral concentrates for subsequent metallurgical test work.

A prefeasibility study was completed in 1995 and a full feasibility study including environmental assessment was authorised in 1996 and completed in 1998. The focus of the prefeasibility and feasibility study work was on production of a chloride grade titanium slag from the ilmenite. Iron would be sold as a co-product from the slag operation. Rutile and zircon would be sold as mineral concentrates. The project as structured did not prove economically feasible and BHP Billiton placed the project on a care and maintenance basis in 2004.

No further exploration or test work was carried out between 2004 and IM's acquisition of CMDN and Genbique and the associated Moebase Licence and Naburi Licence.

Mineral Resource

On 22 December 2010, IM Minerals received from Scott Wilson a competent person's report on its subsidiary's combined licences. The mineral resources body attributed to the licences is detailed in the table below:

Key Strengths

The Directors believe that the Enlarged Group will have the following key strengths:

·; A highly experienced management team;

·; A valuable asset with significant longevity;

·; Products where demand is anticipated to outstrip supply, driving up prices; and

·; Well connected, successful local businessmen as key partners in the Enlarged Group's subsidiary, CMDN.

Profile of the Global Titanium and Heavy Minerals Industry

The following section provides details of the industries for the various components of heavy

mineral sands.

Titanium Dioxide

Titanium dioxide, also known as titanium (IV) oxide or titania, is the naturally occurring oxide of titanium, chemical formula TiO2.

Global demand fell during the global economic crisis, but showed signs of recovery in the latter half of 2009, and the Company expect a rebuilding of inventories to occur in 2010. Furthermore, in 2009 global feedstock demand was estimated at 5.8 million tonnes of TiO2 units. Kenmare Resources, a fellow TiO2 producer, believes that "all in all, the feedstock supply industry is not well positioned to respond to increasing demand. We believe that this will result in an increasing shortage of titanium feedstocks from 2012 onwards with consequent upward pressure in prices." TiO2 demand growth is anticipated to be highest in rapidly developing regions; by 2015, the Asia-Pacific region is expected to account for 41 per

cent. of pigment demand, up from 22 per cent. in 1990. Future demand is expected to continue to track the long term trend line growth of approximately 3 per cent. per annum.

Reviewing the Asian market for TiO2, ICIS pricing noted in August 2010 that "Asian titanium dioxide (TiO2) prices increased by 1-4 per cent. from $2,535-2,600/tonne CFR (cost and freight) Asia in mid-May to $2,550-2,700/tonne CFR Asia in end-July on the back of tightening supplies in the region. According to producers, global TiO2 production capacity had lagged behind the rebound in demand in recent months, creating supply tightness in Asia that could last for a while. Hence, unless there are new investments for new capacities, the current situation could persist indefinitely, sources said."

From a supply perspective, it should be noted that several major titanium feedstock producers are expected to decrease their future production; Exxaro announced its decision not to proceed with Fairbreeze deposit, effectively ending KZN Sands operation in 2012; Rio Tinto is facing a significant rise in operational costs in South Africa; and Illuka closed three mines in 2009.

Many existing operations are reaching full capacity and have limited scope for expansion. There are also a limited number of known new sources which can produce a significant yield. Both of these factors mean that even with a 50 per cent. price increase, annual supply growth may not meet historical demand growth (~3.5 per cent. per annum) and it is anticipated that by 2015 there will be a shortfall of over 1 million tonnes of TiO2.

Ilmenite

Ilmenite is widely used in the production of paint, paper, plastic, textiles, rubber and pharmaceutical production. Total world ilmenite production, expressed in terms of contained TiO2, is in excess of 4.5 million tonnes per year. Based on information published by MOL Senegal S.A.R.L. (a wholly owned subsidiary of Mineral Deposits Limited, a company listed on the Australian Securities Exchange), the Directors believe that the Chinese market is growing strongly and has historically been more flexible in the area of product quality.

Zircon

Zircon is a mineral belonging to the group of nesosilicates. Its chemical name is zirconium silicate and its corresponding chemical formula is ZrSiO4. Zircons are commercially mined for the metal zirconium and are used in structure repairs, sealing and coatings.

Global zircon demand has been growing at approximately 3 per cent. per annum. Globally, existing zircon inventories are struggling to meet demand. Between 2009 and 2015 industry demand growth is projected at 4 per cent. per annum.

Rutile

Rutile is a mineral composed primarily of TiO2 and is the most common natural form of TiO2. Synthetic rutile is produced from lower grade ilmenites. It is increasingly being used as the raw material of choice in the production of titanium metal, and for welding rod fluxes. The higher per tonne cost of rutile in 2009 from 2008 is offset by its higher "value in use." Whilst growth in most rutile markets in the second half of 2009 was smaller than the second half of 2008, it is in short supply in the medium term. As a result of sustained demand, it is forecast that rutile prices will rise in the next year.

Future Trading and Prospects

Following Admission the Company will be seeking additional funding in order to complete a pre-feasibility study. The Company intends to engage Scott Wilson to produce this study and to allow the reserve and resources of the project to be reported under the JORC code. For this study Scott Wilson would:

·; provide supervision of the planned confirmatory drilling programme, resulting in the preparation of a mineral reserve and mineral resource model and estimate;

·; develop mine development and ore production plans;

·; review the reasonableness of the mineral processing components undertaken by the process consultant, Mineral Technologies Limited;

·; design the mine infrastructure and associated facilities required for the project development;

·; review the reasonableness of the metallurgical components undertaken by the process consultant, Outotec (Frankfurt) Research Centre;

·; review the reasonableness of the historic Environmental Impact Study and undertake a Social Impact Study;

·; develop a project capital cost estimate that will incorporate estimates developed for each area of the project;

·; develop an operating cost estimate that will incorporate estimates developed for each area of the project;

·; prepare a project execution plan, including the sequence of activities to take the project to the next level of engineering and development, including the permitting stages; and

·; prepare a summary of potential technical risks and positive opportunities that may impact the project viability.

Operationally, a plan of works is underway to upgrade the base camp in Mozambique to facilitate the start up of the feasibility activity with the intention that development will follow. The Company may also look at other opportunities in Mozambique given its strong local partners.