SRX.L Regulatory News (SRX)

30 August 2011 SRX:AIM

Maiden JORC Compliant rare earth resource on historical tailings confirms rare earth potential at Sierra Rutile

Sierra Rutile Limited is pleased to announce a JORC compliant indicated1 resource of 33,000 tonnes of historical high tension and magnetic tailings, with an average grade of 1.44% total rare earths oxides ("TREO").

The resource further confirms the rare earth mineralization contained within Sierra Rutile's existing mineral sands production streams, and thereby highlights the potential for the ongoing production of rare earths or rare earth-related products at Sierra Rutile.

John Sisay, Chief Executive Officer of Sierra Rutile, commented: "The results from our rare earths drilling and the associated independent analysis are very pleasing and have confirmed our decision to fast-track work in this area as part of our ongoing strategic review with Snowden Group. "

1Rare earth mineral resources have been definitively quantified to a JORC compliant indicated confidence level, with the exception of Gadolinium, which is quantified to the inferred confidence level, and represents 0.55% of contained TREO.

Background

Sierra Rutile's current products comprise industrial and standard-grade rutile, ilmenite and a zircon-rich concentrate. These minerals are separated using conventional processing methods, including electrostatic separation, which captures rutile, as a conductor, and magnetic separation, which captures ilmenite, a magnetic mineral.

The tailings from these separation processes comprise high-tension tailings from electrostatic separation, and magnetic tailings from magnetic separation. Sierra Rutile's zircon-rich concentrate is currently produced on a batch basis, by re-processing the high-tension tailings. Rare earth mineralization has been confirmed in both the high-tension and magnetic tailings.

As outlined in Figure 1 below, Sierra Rutile has identified 33,000 tonnes of rare earth mineralization in its historic high tension and magnetic tailings, at an average grade of 1.44% TREO (Total Rare Earth Oxides). Higher grades were identified in magnetic tailings, including 5,000 tonnes (part of the 33,000 tonnes above) in a particular area, at 2.85% TREO.

Ongoing production from existing facilities

Both high tension and magnetic tailings are a by-product of Sierra Rutile's ongoing operations. In 2010, 25,900 tonnes of high-tension tailings and 9,180 tonnes of magnetic tails were generated from Sierra Rutile's ongoing primary processes, i.e. excluding production from batch re-processing.

Using rare earth oxide prices as of 19 August 20112, the value of the basket of rare earths in the tailings, processed to oxide state, would be $236.7/kg ($236,700/t). Applying 2010 primary tailings production of 35,080 tonnes and a grade of 1.44% TREO, the in-situ value of rare earths produced in 2010 was $119.6 million.

Whilst significant separation and refining costs and wastage would be incurred in processing the tailings into a saleable rare earth product, and there is no guarantee that the prices of fully-processed rare earth oxides can be realized, Sierra Rutile is presented with a potential value opportunity in rare earths, whereby a revenue stream could be captured from existing production streams.

Figure 1 - Rare Earths Resource Summary1

1Rare earth mineral resources have been definitively quantified to a JORC compliant indicated confidence level, and represents 0.55% of contained TREO.

2Average distribution across both high tension and magnetic tailings.

In determining the rare earths resource statement, 232 holes were drilled, and 327 samples were analysed in compliance with JORC guidelines. An independent laboratory, SGS Lakefield Research, provided quality assurance on the analyses.

Furthermore, initial work undertaken by the Company at two key future potential mining areas, Gangama and Gbeni, suggests that similar concentrations of monazite, the rare-earth bearing mineral present within the high tension tailings resource, is also contained in these areas. Accordingly, there is scope for production of rare earths in future mining areas.

ENDS

The information in this report has been reviewed and approved for release by Mr Mark Button, NHDip, MMRM, Pr.Sci.Nat., SACNASP who has 25 years‟ experience in mineral commodities, of which 15 years is specific to mineral resource estimation, and who is the full-time Director Mineral Resource Development of SRL. Mr Button has sufficient experience in relation to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Button has consented to inclusion of this information in the form and context in which it appears.

An "Ore Reserve‟ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

A "Mineral Resource‟ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth‟s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.

A "Measured Mineral Resource‟ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity.

An "Indicated Mineral Resource‟ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.

An "Inferred Mineral Resource‟ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.

For further information:

Sierra Rutile Limited

John Sisay, Chief Executive Officer

Telephone: +44 (0) 20 7321 0000

Collins Stewart Europe Limited

Nominated Adviser and Joint Broker

John Prior

Telephone: +44 (0) 20 7523 8350

Aura Financial

Andy Mills / Harry Cameron

Telephone: +44 (0) 20 7321 0000

Sierra Rutile Limited

Sierra Rutile Limited is a mining company with operations in the Republic of Sierra Leone. The Group is one of the country's largest private sector employer and produces rutile, zircon and ilmenite for use in industrial applications. The Group's operations have historically accounted for over 65 per cent of the exports of Sierra Leone. The Company changed its name to Sierra Rutile Limited on 24 February 2011.