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Preliminary Results

2 Jun 2011 07:00

RNS Number : 7162H

Sierra Rutile Limited

02 June 2011

Sierra Rutile Limited

Preliminary Results

June 2, 2011: Sierra Rutile Limited ("Sierra Rutile" or "the Company") announces audited preliminary results for the year ended 31 December, 2010.

Highlights

·; Sales increased 11.7% to US$41.1 million in the year (2009: US$36.8 million).

·; US$9.2 million cash generated from operating activities (2009: US$1.8 million).

·; 6.8% increase in rutile production to 68,198 tonnes (2009: 63,864 tonnes).

·; 18,206 tonnes of ilmenite and 7,092 tonnes of zircon concentrate also produced in the year (2009: 15,161 tonnes of Ilmenite and 5,560 tonnes of zircon concentrate).

·; Production of rutile and ilmenite for 2011 to be in line with 2010, with significant increases expected in 2012.

·; Strategic review into expansion of production, and potential for rare earth production at Sierra Rutile progressing well, with conclusions expected in the fourth quarter of 2011.

·; Subsequent to the end of 2010, revised JORC-compliant resource statement released of over 600 million tonnes of rutile.

·; All forecast H1 2011 rutile production fully allocated, at on average a 20% increase over 2010 prices.

·; The strong mineral sands market is expected to continue for some time, as a result of supply constraints and increasing demand.

Commenting on the results, Sierra Rutile Chief Executive John Sisay said:

"2010 saw significant developments at the Company which have continued into 2011 and, despite significant challenges, much has been achieved. We have expanded our management team, adding the necessary skills and experience to both turn around our existing operations and to undertake the expansion projects we expect to embark upon during 2012. We are now well placed to complete the operational changes we require in the remainder of 2011, positioning us strongly for 2012."

Chairman's Statement

Sierra Rutile experienced a challenging 2010. Historical underinvestment in Sierra Rutile's assets resulted in production being severely constrained, and the dispute with the Government of Sierra Leone during the year was a major distraction for management. Despite this backdrop, during the latter part of 2010 many positive steps were made to put Sierra Rutile on the right track, including the initiation of a two-phase strategic review and initial capital expenditures to address much-needed maintenance requirements.

Corporate Social Responsibility

The health and safety of our workforce is the Company's first and foremost consideration in all we do. In 2010, the Company outperformed its target of a 25% reduction in lost time injuries by reducing lost time injuries by 64% compared to 2009.

Sierra Rutile is also committed to being a positive force in its community. Accordingly, the Company pursues a number of initiatives and partnerships, including the Sierra Rutile Foundation, which are designed to improve the lives and employment opportunities of the people living in the communities around our operation. The enrolment of the first students in the Sierra Rutile Technical Institute during 2010 represents a significant step in improving the long-term employment prospects for the people living around the Sierra Rutile mine.

Corporate Developments

During 2010, the Board of Sierra Rutile was strengthened considerably to provide the necessary blend of experience, skill and enthusiasm to drive Sierra Rutile to achieve its goals. Prior to my appointment as a Non-Executive Director, Walter Kansteiner stepped down as Non-Executive Chairman of the Company in June 2010 after spending over five years with the Company. Wayne Malouf was appointed Executive Chairman in August 2010 and became Non-Executive Chairman in January 2011 before leaving the Company in February 2011. I joined the Board in September 2010 as a Non-Executive Director, and was appointed Non-Executive Chairman in February 2011.

Additionally, during 2010, Rod Baker and Raju Jaddoo stepped down as Non-Executive Directors and Michael Brown, Charles Entrekin and Michael Barton joined the Board as Non-Executive Directors. In February 2011 Jean Lindberg Charles stepped down as an Executive Director.

In addition, during 2010 the dispute with the Government of Sierra Leone was settled and, subsequent to the year-end, Sierra Rutile's financial position was strengthened with a successful US$18 million capital raising, the proceeds of which were used to make an early repayment of Sierra Rutile's loan from the Government of Sierra Leone. Sierra Rutile now has no capital or interest payments to make on its loan from the Government of Sierra Leone until 2013, allowing it to focus entirely on operations during this crucial time of development.

Finally, during early 2011, the Company changed its name to Sierra Rutile Limited, to mark the Company's rebirth and as a sign of its commitment to its stakeholders in Sierra Leone. It was under the "Sierra Rutile" name that the Company operated as one of the world's largest producers of rutile for many years.

Operational Improvements

The most significant event for Sierra Rutile's operations during 2010 was the resumption of funding to the operations to allow essential capital investment, maintenance expenditure and re-stocking of critical spares. As a result, during the second half of 2011 we expect to see reduced downtime and increased availability of Sierra Rutile's production assets.

Subsequent to the end of 2010, Sierra Rutile also released an updated, JORC-compliant resource of over 600 million tonnes, confirming Sierra Rutile's as one of the largest natural rutile deposits in the world. Furthermore, Sierra Rutile also identified rare earth mineralization in its resources that are concentrated to an attractive grade during the rutile and production process.

Looking to the future

Sierra Rutile believes that the current strong mineral sands market will continue as the supply deficit increases, driven by continued global economic growth adding further demand for our products. At the same time, supply side fundamentals remain constrained in the short to medium term and barriers to entry remain high. As a result, the Company expects that rutile prices will continue to increase significantly as demand continues to outstrip supply in 2011 and 2012.

While 2011 will be a transition year for the Company, with production levels similar to 2010 as a whole, the Company expects to begin seeing the effects of the operational improvements and capital investments that commenced in the fourth quarter of 2010 during the second half of 2011. Indeed, the effect of the ongoing strategic review and capital expenditures, continuing throughout 2011, should position Sierra Rutile well for 2012 and onwards against a very positive backdrop for rutile, ilmenite and zircon prices.

For longer-term growth, the second stage of the strategic review has now commenced and is aimed at identifying the potential for the long-term expansion of production at Sierra Rutile. The Company has appointed a consortium of specialist consultants headed by Snowden Group, and including CPG Resources - Mineral Technologies and Titan Salvage, to conduct an extensive study into optimization and expansion options including: the rehabilitation of Dredge 2, completion of Dredge D3 or construction of a new dredge, supplementing production through dry mining high-grade ore pockets, re-mining of high-grade historic tailings, on-stream processing of zircon to a finished or semi-finished product, recovery and separation of rare earth oxides and upgrading the mineral separation plant to match increased production.

The studies are expected to be finalized in Q4 2011 and will provide a focus for prioritisation, development and engineering to the specific areas of the study. The Company has identified a number of areas within the study scope that it believes have the potential to provide near-term value and could be fast-tracked within the overall scope of the project.

The Company is also currently developing life of mine plans and revised five-year financial forecasts, as well as formalising governance policies and upgrading monitoring systems.

In conclusion, while there remains much to do, the board and management of Sierra Rutile are dedicated to realizing the full potential of the Company's world class asset. By combining our strong commitment to our workforce and local communities with a methodical approach to value creation, focused on sound planning and risk management, we believe we are laying the foundation for the delivery of long-term value for all our stakeholders.

Chief Executive Officer's Review 2010

Overview

2010 saw significant developments at the Company which have continued into 2011 and, despite significant challenges, much has been achieved. We have expanded our management team, adding the necessary skills and experience to both turn around our existing operations and to undertake the expansion projects we expect to embark upon during 2012. We are now well placed to complete the operational changes we require in the remainder of 2011, positioning us strongly for 2012.

Production

In 2010, the Company produced 68,198 tonnes of rutile compared to production of 63,864 tonnes of rutile in 2009, which was towards the upper end of the Company's August 2010 revised annual production target. The Company also produced 18,206 tonnes of ilmenite and 7,092 tonnes of zircon concentrate compared to 15,161 tonnes and 5,560 tonnes respectively in 2009.

The Company faced several operational problems during the first half of the year which had a significant negative impact on production levels. Dredge availability was reduced in H1 2010, as a result of a fire on Dredge 1, longer than anticipated downtime following a planned move of the Dredge 1 wet plant and problems with slimes in the dredge pond.

Additionally, a planned Dredge 1 move to a new part of the current ore body and associated pond lowering exercise will reduce the Company's ability to make up production in the remainder of 2011. As a result, we expect production of rutile and ilmenite for 2011 to be in line with 2010. Zircon production will also be lower in 2011 than 2010 due to the strategic decision to limit zircon production until the second stage of the strategic review is completed.

The Company has now addressed a significant number of the dredge availability and maintenance problems through a major capital expenditure programme following the recommendations of the first stage of the strategic review. Due to equipment delivery times and the significant nature of these works, however, they will not be fully implemented until the end of 2011 and their full benefit will not be realized until 2012. The Company expects production levels for rutile and Ilmenite in 2012 to be significantly above 2010 and anticipated production 2011 levels, as Sierra Rutile begins to realise the full benefit of the capital expenditure program on its existing operations.

Financials

Cash Position

The Company had a cash balance of US$28.3 million as at 31 December 2010 (US$25.9 million as at 31 December 2009). The US$25 million gross proceeds raised during 2009 remained largely undrawn as at the Balance Sheet date. Following the end of the period, the Company has begun deploying these funds for essential capital investment, maintenance expenditure and re-stocking of critical spares.

Turnover

Rutile and ilmenite sales of US$41.1 million in 2010 were above the US$36.8 million achieved in 2009, predominantly as a result of increased production and pricing levels. 2010 rutile and ilmenite sales were supplemented by the sale of US$2.7 million of zircon concentrate, which was not sold in significant quantities in 2009.

Cost of Sales

Cost of sales increased from US$38.4 million in 2009 to US$48.6 million in 2010 due to increased production levels, non-cash inventory adjustments and an increase in operating overheads. The increase in operating overheads was largely a result of costs associated with the outsourcing of security and the implementation of the Government of Sierra Leone's Goods and Services Tax which came into effect on 1 January 2010.

Administrative and marketing expenses

Administrative expenses went up by US$2.1 million from US$4.3 million in 2009 to US$6.4 million in 2010 predominantly due to ongoing costs associated with the capsize of Dredge D2 and merger and acquisition costs incurred during early stage discussions with a third party.

Exceptional items

In 2010 the Company recorded a net exceptional loss of US$3.1 million comprising of a one off US$4.7 million exceptional net gain from the resolution of the insurance claim relating to the capsize of Dredge D2 and a US$7.8 million loss on the write-down of the partially constructed dredge - D3.

The write down of the dredge comes as a result of the initial findings of the strategic review committee, which suggest that the original unified configuration of D3 is unlikely to present the economically or technically optimal solution for mining Sierra Rutile's near term reserves. Accordingly the capital spent on the dredge up until December 31, 2010 (US$9.9 million) has been written down to the amount which will likely be used going forwards (US$2.1 million) creating an exceptional loss of US$7.8 million.

As at June 1, 2011 the Company retains the majority of the $25 million of cash raised in November 2009, which was to be used to complete the construction of D3. The Company will now deploy this capital on projects that improve the performance of the existing dredge (D1) and to finance the outcome of the strategic review.

Finance Costs

The reduction in finance costs to US$0.3 million in 2010 from US$7.5 million in 2009 was as a result of the effect of favourable foreign exchange movements on the €35 million loan which created a US$4.5 million gain in 2010 compared to a US$3.8 million loss in 2009.

Marketing

In line with the rest of the industry, we have continued to see strong increased demand and increased prices for our products. In addition to the previously announced contract price increases between 19% and 25% for 22,000 tonnes of 2011 rutile production, the Company has recently concluded negotiations for a further 16,000 tonnes of 2011 standard grade rutile production at a 40% premium to 2010 prices. Sierra Rutile remains contracted to deliver in 2011 approximately 34,000 tonnes of standard grade rutile production against 2010 agreed delivery contracts.

The Company's forecast H1 2011 industrial grade rutile production has now been fully allocated, at on average a 20% increase over 2010 prices.

The Company has also achieved a 70% price increase over 2010 levels for a 6,000 tonne zircon concentrate shipment which was shipped in February.

Management Changes

In addition to the board changes, the Company has significantly strengthened its senior management team during 2010 and since the year-end.

Joseph Connolly was appointed Chief Financial Officer in March 2011. Joseph is a chartered accountant, having begun his career at Deloitte. Prior to joining Sierra Rutile, Joseph was Director of Business Development at Clipper Windpower plc. Jean Lindberg Charles, Sierra Rutile's former CFO has remained with the Company as Director Corporate Controls, a role charged with improving the financial and operational controls of Sierra Rutile's operations in Sierra Leone.

Andrew Taylor joins from DeBeers Consolidated Mines after a career of over 20 years with DeBeers and Anglo American in a variety of roles, notably in the areas of mining and processing. He has significant experience of operating in Africa, including managing the construction and commissioning of the Voorspoed Mine in South Africa from 2005 to 2010.

Mark Button, the Company's former Chief Operating Officer, has been appointed Director of Mineral Resource Development and will focus on strategic resource development as well as the optimal utilisation of the Company's reserves.

Sahr Wonday has been appointed the Director of Strategic Projects, charged with delivering the long-term production growth of Sierra Rutile through the second phase of the Strategic Review. Sahr has an enormous experience at the Company, having worked for Sierra Rutile Ltd in its various forms for 25 years.

The Company has also appointed Desmond Williams as Operations Manager. Desmond is a Sierra Leonean national with over 20 years of international mining experience having previously worked with SNC Lavelin and Worley Parsons. At SNC Lavelin Desmond held senior management positions on numerous international projects including the Bald Mountain Gold Project for Barrick Gold Corporation and the Kabanga Nickel Project. Previously, Desmond spent 10 years with Sierra Rutile between 1988 and 1998.

As part of the strengthening of the management team, Sierra Rutile has amended remuneration policies in order to align them more closely with the performance of Sierra Rutile through the implementation of a Key Performance Indicator ("KPI") driven bonus programme and to reward long-term commitment to Sierra Rutile through a revised share option scheme.

Outlook

As a result of the funding, management changes and concluding financial arrangements with the Government, Sierra Rutile is a revitalized company. The significant activity aimed at improving our current operating platform is matched by the aspiration inherent within the second phase of the Strategic Review. Our optimism for a much enhanced operation for the future is however tempered by the need to meaningfully utilize our revised financial and operating base.

SIERRA RUTILE LTD AND ITS SUBSIDIARIES
(Formerly known as Titanium Resources Group Ltd and its subsidiaries)

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - DECEMBER 31, 2010


	Note	2010	2009
ASSETS		USD'000	USD'000
Non-current assets
Property, plant and equipment	5	109,940	123,933
Intangible assets	6	13,180	13,243
Non-current receivables	9	727	753
		123,847	137,929

Current assets
Inventories	11	13,591	16,088
Trade and other receivables	12	13,661	16,806
Cash and cash equivalents	30(c)	28,373	25,902
		55,625	58,796

Total assets		179,472	196,725

EQUITY AND LIABILITIES
Capital and reserves
Share capital	13(a)	251,963	251,963
Revenue deficit		(123,343)	(130,995)
Owners' interest		128,620	120,968
Non-controlling interests		(18,064)	-
Total equity		110,556	120,968

LIABILITIES
Non-current liabilities
Borrowings	15	43,398	51,638
Retirement benefit obligations	16	729	659
Provisions for liabilities and charges	17	3,261	3,261
		47,388	55,558

Current liabilities
Trade and other payables	18	16,165	20,014
Current tax liabilities	19 (d)	275	175
Borrowings	15	5,088	10
		21,528	20,199
Total liabilities		68,916	75,757

Total equity and liabilities		179,472	196,725







The notes form an integral part of these financial statements.

SIERRA RUTILE LTD AND ITS SUBSIDIARIES
(Formerly known as Titanium Resources Group Ltd and its subsidiaries)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2010


	Note	2010	2009
		USD'000	USD'000

Sales	2 (o)/21	43,914	36,849

Cost of sales	22	(48,642)	(38,443)

Gross loss		(4,728)	(1,594)

Administrative and marketing expenses	22	(6,395)	(4,342)

Other income	24	171	2,187

		(10,952)	(3,749)

Exceptional items	25	(3,075)	3,698

Finance income/(costs)	26	256	(7,514)

Loss before taxation	20	(13,771)	(7,565)

Taxation	19 (a)	(159)	(302)

Loss for the year		(13,930)	(7,867)

Other comprehensive income		-	-
Total comprehensive income for the year		(13,930)	(7,867)

Loss attributable to:
Owners of the parent		(12,357)	(7,867)
Non-controlling interests		(1,573)	-
		(13,930)	(7,867)
Total comprehensive income attributable to:
Owners of the parent		(12,357)	(7,867)
Non-controlling interests		(1,573)	-
		(13,930)	(7,867)

Loss per share (USD)
- basic	28 (a)	(0.032)	(0.031)
- diluted	28 (b)	(0.024)	(0.031)

The notes form an integral part of these financial statements.

SIERRA RUTILE LTD AND ITS SUBSIDIARIES
(Formerly known as Titanium Resources Group Ltd and its subsidiaries)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2010


					Non
		Share	Revenue		controlling	Total
	Note	capital	deficit	Total	interests	equity
		USD'000	USD'000	USD'000	USD'000	USD'000

Balance at January 1, 2010		251,963	(130,995)	120,968	-	120,968
Total comprehensive income for the year		-	(12,357)	(12,357)	(1,573)	(13,930)
Movements		-	18,837	18,837	(16,491)	2,346
Gain on disposal of shares in subsidiary		-	1,172	1,172	-	1,172
At December 31, 2010		251,963	(123,343)	128,620	(18,064)	110,556


Balance at January 1, 2009		238,026	(123,128)	114,898	-	114,898
Total comprehensive income for the year		-	(7,867)	(7,867)	-	(7,867)
Adjustment for employee share options	13(a)	(11,282)	-	(11,282)	-	(11,282)
Issue of share capital	13(a)	25,219	-	25,219	-	25,219
At December 31, 2009		251,963	(130,995)	120,968	-	120,968

The notes form an integral part of these financial statements.

SIERRA RUTILE LTD AND ITS SUBSIDIARIES
(Formerly known as Titanium Resources Group Ltd and its subsidiaries)

CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, 2010


	Note	2010	2009
		USD'000	USD'000
Cash flows from operating activities
Cash generated from operations	30(a)	9,264	1,814
Interest received		71	16
Interest paid		(2,455)	(12)
Tax paid		(59)	(57)
Net cash from operating activities		6,821	1,761

Cash flows from investing activities
Purchase of property, plant and equipment	5	(3,986)	(8,658)
Proceeds from disposal of plant		-	30
Net cash used in investing activities		(3,986)	(8,628)

Cash flows from financing activities
Issue of ordinary shares	13(a)	-	25,219
Net cash from financing activities		-	25,219

Net increase in cash and cash equivalents		2,835	18,352

Movement in cash and cash equivalents
At January 1,		25,892	7,354
Increase		2,835	18,352
Effect of foreign exchange rate change		(459)	186
At December 31,	30(c)	28,268	25,892


The notes form an integral part of these financial statements.

SIERRA RUTILE LTD AND ITS SUBSIDIARIES

(Formerly known as Titanium Resources Group Ltd and its subsidiaries)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

GENERAL INFORMATION

Sierra Rutile Limited (formerly known as Titanium Resources Group Ltd) is a public limited liability

Company incorporated and domiciled in the British Virgin Islands. The address of its registered

office is at P.O.Box 4301, Trinity Chambers, Road Town, Tortola, British Virgin Islands. Throughout

the financial statements, SRX refers to Sierra Rutile Limited (formerly known as Titanium Resources

Group Ltd) and SRL refers to Sierra Rutile Limited (the Sierra Leone-based subsidiary).

These financial statements will be submitted for consideration and approval at the forthcoming Annual

Meeting of shareholders of the Company.

SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out

below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a)

Basis of preparation

The financial statements of Sierra Rutile Limited have been prepared in accordance with

International Financial Reporting Standards (IFRS). Where necessary, comparative figures have been

amended to conform with change in presentation in the current year. The financial statements are

prepared under the historical cost convention, except that available-for-sale investments are stated at

their fair value.

Standards, Amendments to published Standards and Interpretations effective in the reporting

period

IAS 27, 'Consolidated and Separate Financial Statements' (Revised 2008), requires the effects of all

transactions with non-controlling interests to be recorded in equity if there is no change in control and

these transactions will no longer result in goodwill or gains and losses. The revised standard also

specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair

value, and a gain or loss is recognised in profit or loss. This IAS will not have any impact on the

Group's financial statements.

IFRS 3, 'Business Combinations' (Revised 2008), continues to apply the acquisition method to business

combinations, with some significant changes. For example, all payments to purchase a business are to

be recorded at fair value at the acquisition date, with contingent payments classified as debt

subsequently remeasured through the statement of comprehensive income. There is a choice on an

acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree at fair value or

at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related

costs should be expensed. This IFRS will not have any impact on the Group's financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(a)	Basis of preparation (cont'd)

	Amendments to IAS 39, 'Eligible hedged items', prohibit designating inflation as a hedgeable
	component of a fixed rate debt. In a hedge of one-sided risk with options, it prohibits including time
	value in the hedged risk. The amendment is not expected to have any impact on the Group's
	financial statements.

	Amendments to IFRS 1 and IAS 27, 'Cost of an Investment in a Subsidiary', clarify that the cost of a
	subsidiary, jointly controlled entity or associate in a parent's separate financial statements, on transition
	to IFRS, is determined under IAS 27 or as a deemed cost. Dividends from a subsidiary, jointly
	controlled entity or associate are recognised as income. There is no longer a distinction between pre-
	acquisition and post-acquisition dividends. The cost of the investment of a new parent in a group (in a
	reorganisation meeting certain criteria) is measured at the carrying amount of its share of equity as
	shown in the separate financial statements of the previous parent. The amendment is not expected to
	have any impact on the Group's financial statements.

	IFRIC 17, 'Distributions of Non-cash Assets to Owners', clarifies that a dividend payable is recognised
	when appropriately authorised and no longer at the entity's discretion. An entity measures distributions
	of assets other than cash when it pays dividends to its owners, at the fair value of the net assets to be
	distributed. The difference between fair value of the dividend paid and the carrying amount of the net
	assets distributed is recognised in profit or loss. This IFRIC will not have any impact on the Group's
	financial statements.

	IFRIC 18, 'Transfers of Assets from Customers', addresses the treatment for assets transferred from a
	customer in return for connection to a network or ongoing access to goods or services, or both. It
	requires the transferred assets to be recognised initially at fair value and the related revenue to be
	recognised immediately; or, if there is a future service obligation, revenue is deferred and recognised
	over the relevant service period. This IFRIC will not have any impact on the Group's financial
	statements.

	Amendments to IFRS 1, 'Additional Exemptions for First-time Adopters' exempt entities that use the
	full cost method for oil and gas properties from retrospective application of IFRSs. It also exempts
	entities with existing leasing contracts from reassessing the classification of those contracts in
	accordance with IFRIC 4, 'Determining whether an arrangement contains a lease'. The amendment
	is not expected to have any impact on the Group's financial statements.

	Amendments to IFRS 2, 'Group Cash-settled Share-based Payment Transactions'. In addition to
	incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 - Group and treasury share
	transactions', the amendments expand on the guidance in IFRIC 11 to address the classification of
	group arrangements that were not covered by that interpretation. This amendment is not expected
	to have any impact on the Group's financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(a)

Basis of preparation (cont'd)

Improvements to IFRSs (issued May 22, 2008)

IFRS 5 (Amendment), 'Non-current Assets Held for Sale and Discontinued Operations', clarifies that

all of a subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan

results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a

discontinued operation is met. The amendment will not have an impact on the Group's operations.

Improvements to IFRSs (issued April 16, 2009)

IAS 1 (Amendment), 'Presentation of Financial Statements'. The amendment clarifies that the potential

settlement of a liability by the issue of equity is not relevant to its classification as current or non-

current. By amending the definition of current liability, the amendment permits a liability to be

classified as non-current (provided that the entity has an unconditional right to defer settlement by

transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the

fact that the entity could be required by the counterparty to settle in shares at any time. This

amendment is not expected to have any impact on the Group's financial statements.

IAS 7 (Amendment), 'Statement of Cash Flows', clarifies that only expenditure that results in a

recognised asset in the statement of financial position can be classified as a cash flow from investing

activities. This amendment is unlikely to have an impact on the Group's financial statements.

IAS 17 (Amendment) 'Leases', clarifies that when a lease includes both land and buildings,

classification as a finance or operating lease is performed separately in accordance with IAS 17's

general principles. Prior to the amendment, IAS 17 generally required a lease of land with an indefinite

useful life to be classified as an operating lease, unless title passed at the end of the lease term. A lease

newly classified as a finance lease should be recognised retrospectively. The amendment will not have

an impact on the Group's operations.

IAS 18 (Amendment), 'Revenue'. An additional paragraph has been added to the appendix to IAS 18,

providing guidance on whether an entity is acting as principal or agent.

IAS 36 (Amendment), 'Impairment of Assets', clarifies that for the purpose of impairment testing, the

cash-generating unit or groups of cash-generating units to which goodwill is allocated should not be

larger than an operating segment (as defined by IFRS 8, 'Operating segments') before aggregation.

The amendment will not have an impact on the Group's operations.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(a)

Basis of preparation (cont'd)

IAS 38 (Amendment), 'Intangible Assets', clarifies guidance in measuring the fair value of an

intangible asset acquired in a business combination and it permits the grouping of intangible assets as a

single asset if each asset has similar useful economic lives. The amendment removes the exceptions

from recognising intangible assets on the basis that their fair values cannot be reliably measured.

Intangible assets acquired in a business combination that are separable or arise from contractual or

other legal rights should be recognised. The amendment specifies different valuation techniques that

may be used to value intangible assets where there is no active market. The amendment is unlikely to

have an impact on the Group's financial statements.

IAS 39 (Amendment), 'Financial Instruments: Recognition and Measurement' clarifies that the scope

exemption within IAS 39 only applies to forward contracts that will result in a business combination at

a future date, as long as the term of the forward contract does 'not exceed a reasonable period

normally necessary to obtain any required approvals and to complete the transaction'. The amendment

removes reference to transactions between segments as being hedgeable transactions in individual or

separate financial statements and clarifies that amounts deferred in equity are only reclassified to profit

or loss when the underlying hedged cash flows affect profit or loss. The amendment is not expected to

have an impact on the Group's statement of comprehensive income.

IFRS 2 (Amendment), 'Share-based Payment', confirms that, transactions in which the entity acquires

goods as part of the net assets acquired in a business combination as defined by IFRS 3 (2008)

Business Combinations, contribution of a business on formation of a joint venture and common control

transactions are excluded from the scope of IFRS 2 Share-based Payment. The amendment will not

have an impact on the Group's operations.

IFRS 5 (Amendment), 'Non-current Assets Held for Sale and Discontinued Operations'. The

amendment clarifies that IFRS 5 specifies the disclosures required in respect of non-current assets

(or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the

general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and

paragraph 125 (sources of estimation uncertainty) of IAS 1. The amendment will not have an impact

on the Group's operations.

IFRS 8 (Amendment), 'Operating Segments', clarifies that the requirement for disclosing a measure of

segment assets is only required when the Chief Operating Decision Maker reviews that information.

This amendment is unlikely to have an impact on the Group's financial statements.

IFRIC 9 (Amendment), 'Reassessment of Embedded Derivatives', clarifies that embedded derivatives

in contracts acquired in a combination between entities or businesses under common control or the

formation of a joint venture are outside the scope of IFRIC 9. This amendment is unlikely to have an

impact on the Group's financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(a)

Basis of preparation (cont'd)

IFRIC 16 (Amendment), 'Hedges of a Net Investment in a Foreign Operation', clarifies that hedging

instruments may be held by any entity or entities within the group. This includes a foreign operation

that itself is being hedged. This amendment is unlikely to have an impact on the Group's financial

statements.

Standards, Amendments to published Standards and Interpretations issued but not yet effective

Certain standards, amendments to published standards and interpretations have been issued that are

mandatory for accounting periods beginning on or after January 1, 2011 or later periods, but which the

Group has not early adopted.

At the reporting date of these financial statements, the following were in issue but not yet effective:

Classification of Rights Issues (Amendment to IAS 32) (Effective February 1, 2010)

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (Effective July 1, 2010)

Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement

IAS 24 Related Party Disclosures (Revised 2009)

Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS1)

Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)

IFRS 9 Financial Instruments

Disclosures - Transfers of Financial Assets (Amendments to IFRS 7)

Amendment to IFRS 1 Limited Exemption from Comparatives IFRS 7 Disclosures for First-time

Adopters (Effective July 1, 2010)

Improvements to IFRSs (issued May 6, 2010)

IFRS 1 First-time Adoption of International Financial Reporting Standards

IFRS 3 Business Combinations (Effective July 1, 2010)

IFRS 7 Financial Instruments: Disclosures

IAS 1 Presentation of Financial Statements

IAS 27 Consolidated and Separate Financial Statements (Effective July 1, 2010)

IAS 34 Interim Financial Reporting

IFRIC 13 Customer Loyalty Programmes

The Group is still evaluating the effect that these amendments to published Standards, Standards

and Interpretations issued but not yet effective, on the presentation of its financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical

accounting estimates. It also requires management to exercise its judgement in the process of applying

the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or

areas where assumptions and estimates are significant to the financial statements, are disclosed in

Note 4.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(b)	Investment in subsidiaries

	Consolidated financial statements
	Subsidiaries are all entities (including special purpose entities) over which the Group has the power
	to govern the financial and operating policies generally accompanying a shareholding of more than
	one half of the voting rights. The existence and effect of potential voting rights that are currently
	exercisable or convertible are considered when assessing whether the Group controls another entity.
	Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
	are de-consolidated from the date that control ceases.

	The acquisition method of accounting is used to account for business combinations by the Group.
	The consideration transferred for the acquisition of a subsidiary is the fair values of the assets
	transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
	transferred includes the fair value of any asset or liability resulting from a contingent consideration
	arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and
	liabilities and contingent liabilities assumed in a business combination are measured initially at their
	fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any
	non-controlling interests in the acquiree either at fair value or at the non-controlling interests'
	proportionate share of the acquiree's net assets. Subsequent to acquisition, the carrying amount
	of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling
	interests' share of subsequent changes in equity. Total comprehensive income is attributed to
	non-controlling interests even if this results in the non-controlling interests having a deficit balance.

	The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree
	and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value
	of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than
	the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the
	difference is recognised directly in the statement of comprehensive income.

	Inter-company transactions, balances and unrealised gains on transactions between Group
	companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries
	have been changed where necessary to ensure consistency with the policies adopted by the Group.

	Transactions and non-controlling interests
	The Group treats transactions with non-controlling interests as transactions with equity owners of
	the Group. For purchases from non-controlling interests, the difference between any consideration
	paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded
	in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c)	Property, plant and equipment

	Property, plant and equipment are stated at historical cost less accumulated depreciation and
	impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour
	and an appropriate proportion of production overheads and costs directly attributable to bringing the
	assets to a working condition for its intended use. Cost also includes environmental decommissioning
	costs and the cost of dismantling and removing the items and restoring the site on which they are
	located. These costs are recognised as a liability.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(c)

Property, plant and equipment (cont'd)

Depreciation is provided on a straight line basis over the estimated useful lives of the assets.

Where an item of property, plant and equipment comprises major components with different useful

lives, the components are accounted for as separate items of property, plant and equipment.

Subsequent expenditure relating to an item of property, plant or equipment is capitalised when it is

probable that the future economic benefits from the use of the asset will increase by more than the

expenditure incurred. All other subsequent expenditure is recognised as an expense in the period

in which it is incurred.

Deposit, exploration, evaluation, mine development expenditure and deferred project expenditure

In respect of deposit, minerals, exploration, evaluation, and deferred project, expenditure is charged

to the statement of comprehensive income as incurred except where:

it is expected that the expenditure will be recouped by future exploitation or sale; or

substantial exploration and evaluation activities have identified a mineral resource but these

activities have not reached a stage which permits a reasonable assessment of the existence of

commercially recoverable reserves in which case the expenditure is capitalised.

Expenditure relating to both deposit and dam development and mine development are accumulated

separately for each identifiable area of interest. Such expenditure comprises net direct costs and an

appropriate portion of related overhead expenditure.

Expenditure is carried forward when incurred in areas where economic mineralisation is indicated, but

activities have not yet reached a stage which permits reasonable assessment of the existence of

economically recoverable reserves, and active and significant operations in relation to the area are

continuing. Each such project is regularly reviewed. If the project is abandoned or it is considered

unlikely that the project will proceed to development, accumulated costs to that point are written off

immediately.

Each area of interest is limited to a size related to a known or probable mineral resource capable of

supporting a mining operation. Projects are advanced to development status when it is expected that

accumulated and future expenditure can be recouped through project development or sale.

Expenditure relating to other expenses consists primarily of costs which provides benefit to the

development of the mine in general and is not specifically identifiable to a particular project.

Mining leases

Payments made under operating leases are recognised in the profit or loss on a straight line basis

over the term of the lease. Lease incentives received are recognised as an integral part of the total

lease expense, over the term of lease.

The Group's mining leases are of sufficient duration (or convey a legal right to renew for sufficient

duration) to enable all reserves on the leased properties to be mined in accordance with current

production schedules.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(d)	Amortisation and depreciation

	Amortisation of deferred project expenditure is based on the estimated useful life of the asset to
	which the expenditure relates.

	Depreciation is provided at rates calculated to write off the cost of fixed assets to their residual value
	over their estimated useful lives as follows:

	Buildings and infrastructure		- 20 to 40 years
	Plant, machinery & equipment		- 3 to 20 years
	Vehicles		- 3 to 5 years
	Mineral rights		- Based on the estimated life of reserves
	Exploration, evaluation and mine development		- Based on the estimated life on proven and
	expenditure, and expenditure on mineral rights		probable reserves

	Changes in estimates are accounted for over the estimated remaining economic life of the remaining
	commercial reserves of each project as applicable.

(e)	Intangible assets

	(i)	Goodwill
		Goodwill represents the excess of cost of acquisition over the Group's interest in the fair value
		of the net identifiable assets of the acquired subsidiaries at the date of acquisition.

		Goodwill on acquisitions of subsidiaries is included in intangible assets. Any net excess of the
		Group's interest in the net fair value of acquiree's net identifiable assets over cost is recognised
		in the statement of comprehensive income.

		Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
		On disposal of a subsidiary, the attributable amount of goodwill is included in the determination
		of the gains and losses on disposal.

		Goodwill is allocated to cash-generating units for the purpose of impairment testing.

	(ii)	Computer software
		Acquired computer software licences are capitalised on the basis of costs incurred to acquire
		and bring to use the specific software and are amortised over their estimated useful lives estimated
		to be five years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(f)	Impairment of assets

	Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
	impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
	changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
	loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable
	amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in
	use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
	are separately identifiable cash flows (cash-generating units).

(g)	Foreign currencies

	(i)	Functional and presentation currency
		Items included in the financial statements of each of the Group's entities are measured using United
		States Dollars, the currency of the primary economic environment in which the entity operates
		("functional currency"). The consolidated financial statements are presented in United States
		Dollars, which is the Group's functional and presentation currency. All financial information
		presented in United States Dollars have been rounded up to the nearest thousand.

	(ii)	Transactions and balances
		Foreign currency transactions are translated into the functional currency using the exchange rates
		prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the
		settlement of such transactions and from the translation at year-end exchange rates of monetary
		assets and liabilities denominated in foreign currencies are recognised in the statement of
		comprehensive income.

		Non-monetary items that are measured at historical cost in a foreign currency are translated using
		the exchange rate at the date of the transaction.

		Non-monetary items that are measured at fair value in a foreign currency are translated using the
		exchange rates at the date the fair value was determined.

(h)	Financial instruments

(i)	Financial assets
	Categories of financial assets
	The Group classifies its financial assets as available-for-sale financial assets.

	The classification depends on the purpose for which the investments were acquired. Management
	determines the classification of its financial assets at initial recognition.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(h)	Financial instruments (cont'd)

(i)	Financial assets (cont'd)
	(a)	Available-for-sale financial assets
		Available for sale financial assets are non-derivatives that are either designated in this category
		or not classified in any of the other categories. They are included in non-current assets unless
		management intends to dispose of the investment within twelve months of the end of the reporting
		period.

		Initial measurement
		Purchases and sales of financial assets are recognised on trade date, the date on which the
		Group commits to purchase or sell the asset. Investments are initially measured at fair value
		plus transaction costs for all financial assets except those that are carried at fair value through
		profit or loss.

		Subsequent measurement
		Available-for-sale financial assets are subsequently carried at their fair values.

		Investments in equity instruments that do not have a quoted market price in an active market and
		whose fair value cannot be reliably measured are measured at cost.

		Unrealised gains and losses arising from changes in the fair value of financial assets classified as
		available-for-sale are recognised in equity. When financial assets classified as available-for-sale
		are sold or impaired, the accumulated fair value adjustments are included in the statement of
		comprehensive income as gains and losses on financial assets.

		The fair values of quoted investments are based on current bid prices. If the market for a financial
		asset is not active, the Group establishes fair value by using valuation techniques. These include
		the use of recent arm's length transactions and reference to other instruments that are substantially
		the same.

		Impairment of financial assets
		The Group assesses at the end of each reporting period whether there is objective evidence that a
		financial asset or a group of financial assets is impaired. In the case of financial assets classified
		as available-for-sale, a significant or prolonged decline in the fair value of the security below its
		cost is considered in determining whether the securities are impaired. If any such evidence exists
		for available-for-sale financial assets, the cumulative loss - measured as the difference between
		acquisition cost and the current fair value, less any impairment loss on that financial asset
		previously recognised in equity - is removed from equity and recognised in the statement of
		comprehensive income.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(h)	Financial instruments (cont'd)

(i)	Financial assets (cont'd)
	(a)	Available-for-sale financial assets

		Impairment of financial assets (cont'd)
		If the fair value of a previously impaired debt security increases and the increase can be objectively
		related to an event occuring after the impairment loss was recognised, the impairment loss is
		reversed and the reversal recognised in the statement of comprehensive income. Impairment
		losses for an investment in an equity instrument are not reversed through the statement of
		comprehensive income.

(ii)	Long term receivables
	Long term receivables with fixed maturity terms are measured at amortised cost using the effective
	interest rate method, less provision for impairment. The carrying amount of the asset is reduced by the
	difference between the asset's carrying amount and the present value of estimated cash flows discounted
	using the effective interest rate. The amount of loss is recognised in the statement of comprehensive
	income. Long term receivables without fixed maturity terms are measured at cost. If there is objective
	evidence that an impairment loss has been incurred, the amount of impairment loss is measured as the
	difference between the carrying amount of the asset and the present value (PV) of estimated cash flows
	discounted at the current market rate of return of similar financial assets.

(iii)	Trade receivables
	Trade receivables are recognised initially at fair value and subsequently measured at amortised cost
	using the effective interest method, less provision for impairment. A provision for impairment of trade
	receivables is established when there is objective evidence that the Group will not be able to collect
	all amounts due according to the original terms of receivables. The amount of the provision is the
	difference between the asset's carrying amount and the present value of estimated future cash flows,
	discounted at the effective interest rate. The amount of provision is recognised in the statement of
	comprehensive income.

(iv)	Trade payables
	Trade payables are stated at fair value and subsequently measured at amortised cost using the effective
	interest method.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(h)	Financial instruments (cont'd)

(v)	Borrowings
	Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs
	incurred.

	Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of
	transaction costs) and the redemption value is recognised in the statement of comprehensive income
	over the period of the borrowings using the effective interest method.

	Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities.
	The dividends on these preference shares are recognised in the statement of comprehensive income
	as interest expense.

	Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
	settlement of the liability for at least twelve months after the end of the reporting period.

(vi)	Cash and cash equivalents
	Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term
	highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank
	overdrafts are shown within borrowings in current liabilities on the statement of financial position.

(vii)	Share capital
	Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
	new shares or options are shown in equity as deduction, net of tax, from proceeds.

(i)	Inventories

	Inventories comprise of stock piles of rutile, ilmenite and zircon and other consumables and are
	measured at the lower of cost and net realisable value. Net realisable value is the estimated selling
	price in the ordinary course of business, less the estimated cost of completion and selling expenses.

	The cost of inventories is based on the weighted average method and comprises of all cost of
	purchase and other production overheads attributable to the production of the rutile and ilmenite
	based on normal operating capacity and other costs incurred in bringing the inventories to their
	present location and condition. Obsolete, redundant and slow moving consumable stocks are
	identified on a regular basis and are written down to their estimated net realisable values.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(i)	Inventories (cont'd)

	Stock piles comprise of rutile, zircon and ilmenite sand that have been extracted from the mine and
	which have been processed, and the measurement thereof is subject to significant estimate and
	judgement. Stock piles are measured by using tonnage estimation procedures as follows:

	(i)	Tonnage in Silos

		Each 750 mt capacity silo is dipped using a string with weight attached to it and the tonnage
		corresponding to the length of the string which goes down the silo before it touches the ore
		in it is read off the attached Silo/Dome Conversion Charts. This gives the tonnage of product
		held in silo.

	(ii)	Tonnage in Barges

		At present there are 5 operational coastal type barges at the Sierra Leone based company viz Olga G,
		Marion L, Beatrice B, Sue S, and Iris W. Olga G can be loaded up to a maximum of 1,800 MT
		whilst the rest are loaded up to a 1,100 MT maximum. After loading each barge, the draft is
		taken at six different positions (three positions along each longitudinal side of the barge) and the
		average calculated. The tonnage corresponding to the calculated draft is read off the Barge
		Displacement Charts taking into consideration the specific gravity of the water in which the barge
		is immersed. Tonnage of product in the barge is then obtained by subtracting the empty barge
		weight from the loaded barge weight (the empty barge weight is obtained by taking its draft weight
		when it is empty).

	(iii)	Tonnage in Product Warehouse and Dome

		Tonnage of product in warehouse and dome are obtained by volumetric survey which is carried
		out by the Sierra Leone based company's surveyors. The volume of each product in these areas is
		multiplied by its corresponding density to ontain its tonnage.

	(iv)	Tonnage of Industrial Grade Rutile and Zircon Product Bags

		1 MT and 2 MT capacity bags are loaded with industrial grade rutile and zircon products.
		The total tonnage of product in these bags is obtained by physical bag count.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(i)

Inventories (cont'd)

(v)

Tonnage in Product Haulage Trucks

The tonnage loaded in the product haulage trucks is measured as the difference between the

reading of weight before and after loading obtained from the weighbridge.

Consumable stock comprises fuel stock and spare parts. Fuel stock is measured using the volume dip

reading method whilst spare parts are measured using physical unit count and average price per unit.

Inventories are stated at the lower of cost or net realisable value where cost is defined as follows:

Titanium bearing minerals and zircon

- Production cost and attributable overheads

Concentrates

- Production cost

Stockpiles

- Production cost

Materials

- Average cost

Fuel and sundry expenses

- Purchase cost

Goods-in-transit

- Invoice cost excluding freight

(j)

Deferred income taxes

Deferred income tax is provided in full, using the liability method, on temporary differences arising

between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

However, if the deferred income tax arises from initial recognition of an asset or liability in a

transaction, other than a business combination, that at the time of the transaction affects neither

accounting nor taxable profit or loss, it is not accounted for.

Deferred income tax is determined using tax rates that have been enacted by the end of the reporting

period and are expected to apply in the period when the related deferred income tax asset is realised

or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be

available against which deductible temporary differences can be utilised.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(k)	Agricultural Development Fund

	The Group commits the higher of 0.1% (one tenth of one percent) of gross sales revenue in US dollars
	for each year, based on gross sales free alongside ship at the Sierra Leone Port of Shipment, or
	USD 75,000 and this shall be used exclusively for the development of agriculture in the areas affected
	by operations under the mining lease or in areas adjacent thereto within the same chiefdom. The
	annual amounts are paid over to the separate fund set up and controlled by the GOSL, chiefdom
	representatives, and the Group's representatives.

(l)	Borrowing costs

	Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets
	are capitalised until such time as the assets are substantially ready for their intended use or sale.
	Other borrowing costs are expensed.

(m)	Retirement benefit obligations

	Short-term employee benefits
	The cost of all short-term employee benefits is recognised during the period in which the employees
	render the related service.

	Long-term employee benefits
	The Group does not operate any retirement benefit plan for its employees. For the Sierra Leone based
	Company, the Company makes a contribution of 10% of the employees basic salary to the National
	Social Security and Insurance Trust for payment of pension to staff on retirement. The employees also
	contribute 5% of their basic salary to the Trust. The Sierra Leone based Company also provides for
	end of term benefits based on the provisions contained in the Collective Bargaining Agreements;
	these benefits are paid to employees falling under this category when they leave the Company.

	Share options scheme
	The Group operates a share option scheme. The fair value of the employee services received in
	exchange for the grant of the options was recognised as an expense up to May 16, 2007, date on
	which the conditions pertaining to ''consideration to be paid on exercise of the option'' were changed.
	Henceforth, the consideration values of the options vesting are accounted as receivables. The total
	amount to be expensed over the vesting period is determined by reference to the fair value of the
	options granted. At the end of each reporting period, the entity revises its estimates of the number
	of options that are expected to become exercisable. It recognises the impact of the revision of
	original estimates, if any, in the statement of comprehensive income, and a corresponding adjustment
	to equity over the remaining vesting period.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(n)

Provision for restoration and rehabilitation

In accordance with the Group's environmental policy and applicable legal requirements, a provision

for site restoration and rehabilitation in respect of disturbed and contaminated land, and the related

expense, is recognised when the land is contaminated or disturbed. Changes in estimates of the site

restoration and rehabilitation provision are recognised as an expense in statement of comprehensive

income.

Costs of reclamation and rehabilitation are assessed on a regular basis and estimated costs are

provided over the life of the Mine. The expenditure and provisions include costs of labour, materials,

and equipment required to rehabilitate disturbed areas, cost of reclamation, plant and infrastructure

closure and subsequent environmental monitoring. The estimates are not discounted and are based

on current costs, legislature and community requirements and technology. Expenditure relating to

ongoing rehabilitation and restoration programmes is charged against the provisions made.

(o)

Revenue recognition

Revenue from the sale of rutile, zircon and ilmenite is measured at the fair value of the consideration

received or receivable, which is usually the invoice value of rutile, zircon and ilmenite and excludes

sales and value added taxes. Revenue is recognised when the significant risks and rewards of

ownership have been transferred to the buyer, recovery of the consideration is probable, the

associated costs and possible return of goods can be estimated reliably. There is no continuing

management involvement with the goods and the amount of revenue can be measured reliably.

Tranfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales

of rutile, zircon and ilmenite products, usually transfer occurs according to the terms of the contract

and with reference to Incoterms 2000.

Other income earned by the Group is recognised on the following basis:

•

Interest income - on a time-proportion basis using the effective interest method. When a

receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being

the estimated future cash flow discounted at original effective interest rate, and continues

unwinding the discount as interest income. Interest income on impaired loans is recognised

either as cash is collected or on a cost recovery basis as conditions warrant; and

•

Dividend income - when the shareholder's right to receive payment is established.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


2.	SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(p)	Provisions

	Provisions are recognised when the Group has a present legal or constructive obligation as a result
	of past events and it is probable that an outflow of resources, that can be reliably estimated, will be
	required to settle the obligation.

	Provisions for restructuring costs are recognised when the Group has a detailed formal plan for the
	restructuring which has been notified to affected parties and comprise lease termination penalties
	and employee termination payments. Provisions are not recognised for future operating losses.

(q)	Segment reporting

	Segment information presented relate to operating segments that engage in business activities for
	which revenues are earned and expenses incurred.

(r)	Exceptional items

	Exceptional items are events or transactions which, by virtue of their size or nature, have been
	disclosed in order to improve a reader's understanding of the financial statement.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


3.	FINANCIAL RISK MANAGEMENT

3.1	Financial risks factors

	The Group's activities expose it to a variety of financial risks:
	(a) market risk (including currency risk, fair value interest risk and price risk);
	(b) credit risk;
	(c) liquidity risk;
	(d) cash flow interest-rate risk; and
	(e) country risk.

	The Group's overall financial risk management programme focuses on the unpredictability of financial
	markets and seeks to minimise potential adverse effects on the Group's financial performance.

	A description of the significant financial risk factors is given below together with the risk management
	policies applicable.

(a)	Market risk

	Currency risk
	The Group operates internationally and is exposed to foreign exchange risk arising from various
	currency exposures, primarily with respect to Leone (SLL), Euro and GBP. Foreign exchange risk
	arises from future commercial transactions, recognised assets and liabilities and net investments in
	foreign operations. The Group places any excess of liquidity in stable currencies as a means to hedge
	its exposure to foreign currency risks.

	At December 31, 2010, if the USD had weakened/strengthened by 5% against the Euro, with all other
	variables held constant, post-tax loss for the year would have been USD 2,419,000 (2009:
	USD 2,582,000) higher/lower, mainly as a result of foreign exchange losses/gains on translation of
	Euro denominated borrowings.

(b)	Credit risk
	The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the
	statement of financial position are net of allowances for doubtful receivables, estimated by the Group's
	management based on prior experience and the current economic environment.

	The Group has no significant credit risk for the time being, as sales are based on off-take agreements
	with corporate customers. The Group has policies in place to ensure that sales of products and
	services are made to customers with an appropriate credit history.

(c)	Liquidity risk
	Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding
	through an adequate amount of committed credit facilities. The Group aims at maintaining flexibility
	in funding by keeping committed credit lines available.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


3.	FINANCIAL RISK MANAGEMENT (CONT'D)

3.1	Financial risks factors (cont'd)

(c)	Liquidity risk (cont'd)

	The table below analyses the Group's non-derivative financial liabilities into relevant maturity
	groupings based on the remaining period at the end of the reporting period to the contractual
	maturity date.
		Less than	Between 1	Between 2	Over
		1 year	and 2 years	and 5 years	5 years
		USD'000	USD'000	USD'000	USD'000
	At December 31, 2010
	Bank borrowings - overdraft	105	-	-	-
	Government of Sierra Leone loan	4,983	9,644	28,932	4,822
	Trade and other payables	16,165	-	-	-
		21,253	9,644	28,932	4,822
	At December 31, 2009
	Bank borrowings - overdraft	10	-	-	-
	Government of Sierra Leone loan	-	5,164	30,983	15,491
	Trade and other payables	20,014	-	-	-
		20,024	5,164	30,983	15,491

(d)	Cash flow and fair value interest rate risk
	As the Group has significant interest-bearing assets, its income and operating cash flows are
	substantially dependent of changes in market interest rates. The Group's interest rate risk arises from
	long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-
	rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

	Group policy is to maintain all its borrowings in fixed rate instruments. At year end, all borrowings
	were at fixed rates.

(e)	Country risk
	The Group has an operating subsidiary, namely Sierra Rutile Limited, based at Sierra Leone. The
	Group does not have an insurance cover to mitigate exposure to the risks present there.

3.2	Fair value estimation

	The nominal value less estimated credit adjustments of trade receivables and payables are assumed
	to approximate their fair values. The fair value of financial liabilities for disclosure purposes is
	estimated by discounting the future contractual cash flows at the current market interest rate that is
	available to the Group for similar financial instruments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


3.	FINANCIAL RISK MANAGEMENT (CONT'D)

3.3	Capital risk management

	The Group's objectives when managing capital are:
	• to safeguard the Group's ability to continue as a going concern, so that it can continue to provide
	returns for shareholders and benefits for other stakeholders, and

	• to provide an adequate return to shareholders by pricing products commensurately with the level
	of risk.

	The Group sets the amount of capital in proportion to risk. The Group manages the capital structure
	and makes adjustments to it in the light of changes in economic conditions and the risk characteristics
	of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the
	amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell
	assets to reduce debt.

	Consistently with others in the industry, the Group monitors capital on the basis of the debt-to-adjusted
	capital ratio. This ratio is calculated as net debt to adjusted capital. Net debt is calculated as total
	debt (as shown in the statement of financial position) less cash and cash equivalents. Adjusted capital
	comprises all components of equity (i.e. share capital, share premium, minority interest, retained
	earnings, and revaluation surplus) other than amounts recognised in equity relating to cash flow
	hedges, and includes some forms of subordinated debt.

	During 2010, the Group's strategy, which was unchanged from 2009, was to maintain the debt-to-
	capital ratio at the lower end of the range 5% to 25%, in order to secure access to finance at a
	reasonable cost. The debt-to-capital ratios at December 31, 2010 and at December 31, 2009 were
	as follows:	2010	2009
		USD'000	USD'000
	Total debt (note 15)	48,486	51,648
	Less: cash in hand and bank balance (note 30 (c))	(28,373)	(25,902)
	Net debt	20,113	25,746

	Total equity	110,556	120,968

	Debt-to-capital ratio	18%	21%

	The decrease in the debt-to-capital ratio during 2010 resulted primarily from the fact that
	USD improved vis a vis the Euro and additions to property, plant and equipment decreased
	by USD.4.6m. As a result, cash and cash equivalent increased.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


4.	CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

	Estimates and judgements are continuously evaluated and are based on historical experience and other
	factors, including expectations of future events that are believed to be reasonable under the
	circumstances.

4.1	Critical accounting estimates and assumptions

	The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
	will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
	significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
	the next financial year are discussed below.

(a)	Estimated impairment of goodwill
	The Group tests annually whether goodwill has suffered any impairment, in accordance with the
	accounting policy stated in note 2(e)(i). These calculations require the use of estimates (note 6).

(b)	Pension benefits

	The present value of the pension obligations depend on a number of factors that are determined on an
	actuarial basis using a number of assumptions. The assumptions used in determining the net cost
	(income) for pensions include the discount rate. Any changes in these assumptions will impact the
	carrying amount of pension obligations.

	The Group determines the appropriate discount rate at the end of each year. This is the interest rate that
	should be used to determine the present value of estimated future cash outflows expected to be required
	to settle the pension obligations. In determining the appropriate discount rate, the Group considers the
	interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits
	will be paid, and that have terms to maturity approximating the terms of the related pension liability.

(c)	Limitation of sensitivity analysis

	Sensitivity analysis in respect of market risk demonstrates the effect of a change in a key assumption
	while other assumptions remain unchanged. In reality, there is a correlation between the assumptions
	and other factors. It should also be noted that these sensitivities are non-linear and larger or smaller
	impacts should not be interpolated or extrapolated from these results.

	Sensitivity analysis does not take into consideration that the Group's assets and liabilities are managed.
	Other limitations include the use of hypothetical market movements to demonstrate potential risk that
	only represent the Group's view of possible near-term market changes that cannot be predicted with
	any certainty.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


4.	CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

4.1	Critical accounting estimates and assumptions (cont'd)

(d)	Asset lives and residual values

	Plant and equipment are depreciated over their useful lives taking into account residual values, where
	appropriate. The actual lives of the assets and residual values are assessed annually and may vary
	depending on a number of factors. In reassessing asset lives, factors such as technological innovation,
	product life cycles and maintenance programmes are taken into account. Residual value assessments
	consider issues such as future market conditions, the remaining life of the asset and projected disposal
	values. Consideration is also given to the extent of current profits and losses on the disposal of similar
	assets.

(e)	Depreciation policies

	Plant and equipment are depreciated to their residual values over their estimated useful lives. The
	residual value of an asset is the estimated net amount that the Group would currently obtain from
	disposal of the asset, if the asset were already of the age and in condition expected at the end of
	its useful life.

	The directors therefore make estimates based on historical experience and use best judgement
	to assess the useful lives of assets and to forecast the expected residual values of the assets
	at the end of their expected useful lives.

(f)	Impairment of available-for-sale financial assets

	The Group follows the guidance of IAS 39 on determining when an investment is other-than-
	temporarily impaired. This determination requires significant judgement. In making this judgement,
	the Group evaluates, among other factors, the duration and extent to which the fair value of an
	investment is less than its cost, and the financial health of and near-term business outlook for the
	investee, including factors such as industry and sector performance, changes in technology and
	operational and financing cash flow.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010


5.	PROPERTY, PLANT AND EQUIPMENT		Plant,	Mineral sand
			machinery	prospect	Construction
			and	and Mine	work in	Dredge
		Infrastructure	equipment	development	progress	D2	Exploration	Total
		USD'000	USD'000	USD'000	USD'000	USD'000	USD'000	USD'000
(a)	COST
	At January 1, 2010	17,672	166,459	66,233	24,725	10,126	2,459	287,674
	Addition	-	2,041	1,287	327	-	331	3,986
	Impairment charge	-	-	-	(7,844)	-	-	(7,844)
	Transfer	12,057	(12,057)	-	-	-	-	-
	At December 31, 2010	29,729	156,443	67,520	17,208	10,126	2,790	283,816

	DEPRECIATION
	At January 1, 2010	14,545	115,786	33,410	-	-	-	163,741
	Charge for the year	508	5,501	3,916	-	-	210	10,135
	At December 31, 2010	15,053	121,287	37,326	-	-	210	173,876

	NET BOOK VALUE
	At December 31, 2010	14,676	35,156	30,194	17,208	10,126	2,580	109,940

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010


5.	PROPERTY, PLANT AND EQUIPMENT (CONT'D)
			Plant, machinery	Mineral sand prospect	Construction
			and	and Mine	work in	Dredge
		Infrastructure	equipment	development	progress	D2	Exploration	Total
		USD'000	USD'000	USD'000	USD'000	USD'000	USD'000	USD'000
(b)	COST
	At January 1, 2009	17,672	161,234	51,018	37,069	10,521	2,055	279,569
	Addition	-	5,263	2,838	153	-	404	8,658
	Transfer	-		12,497	(12,497)	-	-	-
	Impairment charge	-	-	(120)	-	(395)	-	(515)
	Disposal	-	(38)	-	-	-	-	(38)
	At December 31, 2009	17,672	166,459	66,233	24,725	10,126	2,459	287,674

	DEPRECIATION
	At January 1, 2009	14,333	110,239	29,326	168	-	-	154,066
	Charge for the year	212	5,547	3,916	-	-	-	9,675
	Transfer	-	-	168	(168)	-	-	-
	At December 31, 2009	14,545	115,786	33,410	-	-	-	163,741

	NET BOOK VALUE
	At December 31, 2009	3,127	50,673	32,823	24,725	10,126	2,459	123,933

(c)	Expenditure capitalised in respect of the construction in progress amounted to USD 0.3m (2009: USD 0.2m). Depreciation has not been charged where the
	assets are presently not in the condition necessary to operate in the manner intended by management.

(d)	Depreciation charge of USD 10,135,000 (2009: USD 9,675,000) has been charged in cost of sales.

(e)	Initial findings of the strategic review committee suggest that the original unified configuration of Dredge D3 is unlikely to present the economically or
	technically optimal solution for mining Sierra Rutile's near term reserves. Accordingly, the capital spent on the dredge up until December 31, 2010
	(USD 9.9m) has been written down to the amount which will likely be used going forwards (USD 2.1m) creating an exceptional loss of USD 7.8m.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


6.	INTANGIBLE ASSETS		Computer
			software
		Goodwill	costs	Total
		USD'000	USD'000	USD'000
(a)	COST
	At January 1, 2010	12,876	570	13,446
	Addition during the year	-	-	-
	At December 31, 2010	12,876	570	13,446

	AMORTISATION
	At January 1, 2010	-	203	203
	Charge for the year	-	63	63
	At December 31, 2010	-	266	266

	NET BOOK VALUE
	At December 31, 2010	12,876	304	13,180

(b)	COST
	At January 1, 2009	12,876	570	13,446
	Addition during the year	-	-	-
	At December 31, 2009	12,876	570	13,446

	AMORTISATION
	At January 1, 2009	-	135	135
	Charge for the year	-	68	68
	At December 31, 2009	-	203	203

	NET BOOK VALUE
	At December 31, 2009	12,876	367	13,243

(c)	Amortisation charge of USD.63,000 (2009: USD 68,000) has been charged in cost of sales.

(d)	Impairment tests for goodwill: goodwill is allocated to the Group's cash-generating units identified
	according to country of operation and business activity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010

7.	INVESTMENTS IN SUBSIDIARY COMPANIES
(a)	The list of the Company's significant subsidiaries is as follows:
				Proportion of ownership interest		Proportion of voting power held
	Name	Class of shares held	Year end	Direct	Indirect	Direct	Indirect	Country of incorporation	Main business
	2010
	Titanium Fields Resources Ltd	Ordinary	December 31, 2010	100%	-	100%	-	British Virgin Islands	Intermediate holding company
	SRL Acquisition No.1 Limited	1 'A' share	December 31, 2010	-	100%	-	100%	British Virgin Islands	Intermediate holding company
	SRL Acquisition No.3 Limited	Ordinary	December 31, 2010	-	100%	-	100%	British Virgin Islands	Intermediate holding company
	The Natural Rutile Company Limited	Ordinary	December 31, 2010	-	100%	-	100%	British Virgin Islands	Marketing of Rutile
	Sierra Rutile Holdings Limited	Ordinary	December 31, 2010	-	95.17%	-	95.17%	British Virgin Islands	Intermediate holding company
	Sierra Rutile Limited	Ordinary	December 31, 2010	-	95.17%	-	95.17%	Sierra Leone	Extraction, concentration, separation and sale
									of Rutile, Ilmenite and Zircon sands.
	Agricultural Resources Group Ltd	Ordinary	December 31, 2010	100%	-	100%	-	British Virgin Islands	Agricultural projects
	Biofuel Resources Group Ltd	Ordinary	December 31, 2010	100%	-	100%	-	British Virgin Islands	Biofuel projects

	2009
	Titanium Fields Resources Ltd	Ordinary	December 31, 2009	100%	-	100%	-	British Virgin Islands	Intermediate holding company
	SRL Acquisition No.1 Limited	1 'A' share	December 31, 2009	-	100%	-	100%	British Virgin Islands	Intermediate holding company
	SRL Acquisition No.3 Limited	Ordinary	December 31, 2009	-	100%	-	100%	British Virgin Islands	Intermediate holding company
	The Natural Rutile Company Limited	Ordinary	December 31, 2009	-	100%	-	100%	British Virgin Islands	Marketing of Rutile
	Sierra Rutile Holdings Limited	Ordinary	December 31, 2009	-	96.12%	-	96.12%	British Virgin Islands	Intermediate holding company
	Sierra Rutile Limited	Ordinary	December 31, 2009	-	96.12%	-	96.12%	Sierra Leone	Extraction, concentration, separation and sale of Rutile, Ilmenite and Zircon sands.
	Agricultural Resources Group Ltd	Ordinary	December 31, 2009	100%	-	100%	-	British Virgin Islands	Agricultural projects
	Biofuel Resources Group Ltd	Ordinary	December 31, 2009	100%	-	100%	-	British Virgin Islands	Biofuel projects

b) With the exception of the Sierra Leone based company (SRL), all the subsidiaries are incorporated in the British Virgin Islands (BVI) where there is no legal requirement for the preparation and filing of audited accounts. Sierra Rutile Limited (SRX) is quoted on the AIM market of the London Stock Exchange which requires the publication of annual audited financial statements.

c) During the year ended December 31, 2010, further shares equivalent to 0.951% of the issued share capital of Sierra Rutile Holdings Limited were transfered to the Government of Sierra Leone (GOSL) with regards to PAYE not remitted to GOSL by SRL in accordance with SRL Act and amendment to the Act.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


8.	FINANCIAL ASSETS	Available-for-sale
		financial assets
(a)	The movement in financial assets are		Provision for
	as follows:	Cost	impairment	Net
		USD'000	USD'000	USD'000
	Unlisted
	At January 1, 2009	2,200	(2,200)	-
	Additions	-	-	-
	At December 31, 2009	2,200	(2,200)	-
	Additions	-	-	-
	At December 31, 2010	2,200	(2,200)	-

(b)	Financial assets represent 15/15 fractional interest in "Class B" Share of the subsidiary company, SRL
	Acquisition No.1 Limited, acquired from Nord Resources Corporation in 2006. The "Class B" Share
	confers to the Group fixed dividend only and carries no voting rights. Since no other revenue is derived
	from SRL Acquisition No.1 Limited's activities in addition to no voting rights, the investment in the
	"Class B" Share has thus not been accounted for as subsidiary company as normally required by IAS 27.

9.	NON-CURRENT RECEIVABLES		2010	2009
			USD'000	USD'000
	Loan to the Government of Sierra Leone (see note (a) below)		727	727
	Other non-current receivables		-	26
			727	753

(a)	This represents an amount loaned to Government of Sierra Leone (GOSL) to settle existing obligations
	to the International Finance Corporation. The loan is unsecured and payment was due at the end of
	1995.

10.	DEFERRED INCOME TAX

	Deferred income tax is calculated on all temporary differences under the liability method at 30%.

(a)	There is a legally enforceable right to offset current tax assets against current tax liabilities and
	deferred income tax assets and liabilities when the deferred income taxes relate to the same fiscal
	authority on the same entity. The following amounts are shown in the statement of financial position:
			2010	2009
			USD'000	USD'000
	Deferred tax assets		-	-
	Deferred tax liabilities		-	-
			-	-

	At the end of the reporting period, the Group had unused tax losses of USD.498,034,000
	(2009: USD 456,213,000) available for offset against future profits. No deferred tax asset has been
	recognised in respect of such losses due to unpredictability of future profit streams.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


10.	DEFERRED INCOME TAX (CONT'D)

(b)	The movement on the deferred income tax account is as follows:		2010	2009
			USD'000	USD'000
	At January 1,		-	-
	Statement of comprehensive income (charge)/credit (note 19(a))		-	-
	At December 31,		-	-

(c)	The movement in deferred tax assets and liabilities during the year, without taking into consideration
	the offsetting of balances within the same fiscal authority on the same entity, is as follows:
				Accelerated
				tax
(i)	Deferred tax liabilities:			depreciation
				USD'000
	At January 1, 2009			-
	Debited/(Credited) to Statement of comprehensive income			-
	At December 31, 2009			-
	Debited/(Credited) to Statement of comprehensive income			-
	At December 31, 2010			-

(ii)	Deferred tax assets:		Retirement
		Tax	benefit
		losses	obligations	Total
		USD'000	USD'000	USD'000
	At January 1, 2009	-	-	-
	Charged to Statement of comprehensive income	-	-	-
	At December 31, 2009	-	-	-
	Movement for the period	12,470	219	12,689
	Deferred tax assets not recognised	(12,470)	(219)	(12,689)
	At December 31, 2010	-	-	-

11.	INVENTORIES		2010	2009
			USD'000	USD'000
(a)	Rutile		2,918	3,671
	Ilmenite		560	1,020
	Zircon concentrate		1,415	2,474
	Consumables		8,698	8,923
			13,591	16,088

(b)	The cost of inventories recognised as expense and included in cost of sales amounted to USD 2,272,000
	(2009: USD -ve 2,036,000).

(c)	For the year under review, stock of consumables impaired amounted to USD 2,924,000.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


12.	TRADE AND OTHER RECEIVABLES	2010	2009
		USD'000	USD'000
	Trade receivables	5,876	12,528
	Advances and prepayments	7,415	3,908
	Other receivable (see note (i) below)	370	370
		13,661	16,806

(i)	This represents the contingent element of the disposal proceeds arising on the disposal of three
	subsidiaries during the year ended December 31, 2008.

(ii)	The carrying amount of trade and other receivables approximates their fair value.

	As of December 31, 2010, none of trade receivables was impaired (2009: USD Nil). The
	amount of the provision was nil as of December 31, 2010 (2009: USD Nil).

	As of December 31, 2010, trade receivables of USD 373,000 (2009: USD 3,703,000) were past
	due but not impaired. These relate to independent customers for whom there is no recent history
	of default. The ageing analysis of these trade receivables is as follows:
		2010	2009
		USD'000	USD'000

	0 to 30 days	373	3,703

	The carrying amount of the Group's trade and other receivables are denominated in the following
	currency:	2010	2009
		USD'000	USD'000
	US Dollar	12,879	16,008
	Sierra Leone Leone	9	12
	GB Pound	56	199
	Euro	250	495
	Australian Dollar	440	-
	South African Rand	27	92
		13,661	16,806

	A provision of USD 350,000 was made against prepayments. The other classes within trade
	and other receivables do not contain impaired assets.

	The maximum exposure to credit risk at the end of the reporting period is the fair value of each class
	of receivable mentioned above. The Group does not hold any collateral as security.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


13.	SHARE CAPITAL	Number of	Ordinary
		shares	shares
(a)	Issued shares and options		USD'000
	At January 1, 2009	246,076,181	238,026
	Proceeds from new issues (See note (ii) below)	151,200,000	25,219
	Employee share option scheme:
	- Options vested	483,333	596
	- Adjustment for share options	(11,895,439)	(11,878)
	At December 31, 2009 and 2010	385,864,075	251,963

(i)	The total authorised number of ordinary shares is 500,000,000 shares (2009: 500,000,000 shares)
	with no par value. All issued shares are fully paid and are admitted on the AIM market of the
	London Stock Exchange.

(ii)	At the end of November 2009, SRX made a new placement of 151,200,000 common shares. The
	placing with institutional investors at a price of 10p per share raised £15,120,000 (USD 25.219 million)
	before expenses.

(iii)	Reconciliation of number of shares	Number of	Ordinary
		shares	shares
			USD'000
	Issued shares	385,864,075	251,963
	Options vested but not yet exercised	11,895,439	11,832
	Adjustment for share options	(11,895,439)	(11,832)
		385,864,075	251,963

(b)	Share options - Employees
	Share options were granted to directors and to selected employees. The exercise price of the granted
	option was determined by the Board before such grant. According to section 2.3 of the ''Rules of SRX
	Unapproved Share Option Scheme'', the price should not be less than the highest of the :
	o Nominal value of the shares;
	o Average of the middle market quotations of the shares as derived from the Official list for the 30
	dealing days immediately preceding the Grant date; and
	o Middle market quotation of the shares as derived from the Official list on the Grant date.

	Exercise of the option was not subject to performance-related conditions. The options granted had
	exercise prices ranging from 47p to 78p each varying on the date of grant.

	One third of the option granted vested immediately, one third vested on the first anniversary of the
	date of grant, and the remaining third vested on the second anniversary of the date of grant.

	For the year ended December 31, 2009, 483,333 options (2008: 733,333 options) vested. At year
	ended December 31, 2009, the provision for the remaining 11,011,963 options were written back
	because management did not expect them to be exercised before the expiry date as the exercise
	prices were by far higher than the market price.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


13.	SHARE CAPITAL (CONT'D)

(c)	Share options - Professional services
	In 2005, in consideration of services given to the company by NabarroWells & Co Ltd, (NWCF LLP),
	the company also granted to NWCF LLP an option to subscribe for 936,007 common shares of no par
	value at a subscription price of 47p each. In 2007, NWCF LLP exercised its option and subscribed
	for 52,531 shares at 47p per share. The company issued these shares which were admitted on AIM
	market for trading. At year ended December 31, 2009, the provision for the remaining 883,476 options
	were written back because management did not expect them to be exercised before the expiry date
	as the exercise prices were by far higher than the market price. These options expired in 2010.

14.	MINORITY INTEREST

	Pursuant to the First Amendment Agreement dated February 4, 2004, enterred by and between the
	Government of the Republic of Sierra Leone (GOSL) and Sierra Rutile Limited (SRL) regarding
	PAYE taxes due from SRL (See note 32), during the year ended December 31, 2010, SRL Acquisition
	No.3 Limited transferred further 951 shares (2009: 1,416 shares) it held in Sierra Rutile Holdings Limited
	(SRHL) to GOSL, representing 0.951% (2009: 1.416%) ownership interest in SRHL and giving rise to a
	minority shareholder (GOSL). As at December 31, 2010, GOSL's shareholding in SRHL amounted
	to 4.833%. In line with changes in IAS 27, 'Consolidated and Separate Financial Statements', the Group
	has recognised non-controlling interests even if they have a deficit balance.

15.	BORROWINGS	2010	2009
		USD'000	USD'000
(a)	Non-current :
	Government of Sierra Leone loan	43,398	51,638

	Current:
	Bank overdraft	105	10
	Government of Sierra Leone loan	4,983	-
		5,088	10
	Total borrowings	48,486	51,648

(i)	The rates of interest on borrowings vary between 8% to 24%.

(ii)	Government of Sierra Leone borrowing is subject to interest of 8% per annum and is repayable on
	June 15 and December 15 in each year commencing on the first payment date which is the earlier
	of 84 months after date of first disbursement or June 15, 2012. The interest is calculated on the basis
	of a 360 day year consisting of twelve months of thirty days.

	The Group does not have any undertaking, nor is it contractually bound to create, any lien on or with
	respect to any of its rights or revenues.

	Interest arising before March 1, 2008 was capitalised according to the terms of the Loan Agreement
	between SRL and the Government of Sierra Leone, the first interest payment shall not be made by the
	company until the earliest of the interest payment date occurring thirty - six months after the date of
	first disbursement, or June 15, 2008. During the year 2008, the Government of Sierra Leone and SRL
	signed a moratorium whereby all interests falling due after June 15, 2008 and upto June 15, 2010
	would be capitalised. Payment of interests resumed after June 15, 2010.
			41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


15.	BORROWINGS (CONT'D)

(b)	The exposure of the Group's borrowings to interest-rate changes and the contractual repricing
	dates are as follows:	6 months	6 to 12	1 to 5	Over
		or less	months	years	5 years	Total
		USD'000	USD'000	USD'000	USD'000	USD'000
	At December 31, 2010
	Total borrowings	2,597	2,491	38,576	4,822	48,486

	At December 31, 2009
	Total borrowings	10	-	36,147	15,491	51,648

(c)	The maturity of non-current borrowings is as follows:				2010	2009
					USD'000	USD'000
	After one year and before five years				38,576	36,147
	After five years				4,822	15,491
					43,398	51,638

(d)	Non-current borrowings can be analysed as follows:				2010	2009
					USD'000	USD'000
	- After one year and before five years
	Government of Sierra Leone loan				38,576	36,147
	- After five years
	Government of Sierra Leone loan				4,822	15,491
					43,398	51,638

(e)	The effective interest rates at the end of the reporting period were as follows:
				2010		2009
				Euro	Leone	Euro
				%	%	%
	Government of Sierra Leone loan			8	-	8
	Bank overdraft			11.5	24	11.5

(f)	The carrying amounts of the Group's borrowings are denominated in the following currencies:
					2010	2009
					USD'000	USD'000
	Leone				83	-
	Euro				48,403	51,648
					48,486	51,648

(g)	The carrying amounts of non-current borrowings are not materially different from their fair value.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


16.	RETIREMENT BENEFIT OBLIGATIONS	2010	2009
		USD'000	USD'000
	Balance at January 1,	659	485
	Current service costs	70	174
	Balance at December 31,	729	659

	Actuarial assumptions
	The principal actuarial assumptions at the reporting dates were :

	Voluntary retirement age for men (in years)	60	60
	Voluntary retirement age for women (in years)	55	55
	Discount rate at the year-end	11%	10%
	Future salary increases	10%	10%

	The discount rate is the yield at the reporting date on Bank of Sierra Leone bond that matures in one
	year's time.

17.	PROVISION FOR LIABILITIES AND CHARGES	2010	2009
		USD'000	USD'000
	At January 1,	3,261	3,261
	Additional provision during the year	-	-
	At December 31,	3,261	3,261

	Rehabilitation
	Cost of reclamation and rehabilitation are assessed on a regular basis and estimated costs are provided
	over the life of the Mine. The expenditure and provisions include costs of labour, materials, and
	equipment required to rehabilitate disturbed areas, cost of reclamation, plant and infrastructure closure
	and subsequent environmental monitoring. The estimates are not discounted and are based on current
	costs, legislature and community requirements and technology. Expenditure relating to ongoing
	rehabilitation and restoration programmes is charged against the provisions made. There was no
	additional provision during the year as a result of revision done to previous computation in view of
	reduction in costs. Thus, management considers the current provision to be adequate.

18.	TRADE AND OTHER PAYABLES	2010	2009
		USD'000	USD'000
	Trade payables	6,343	6,909
	Other payables and accrued expenses	9,822	10,760
	Consolidation adjustment on disposal of shares in subsidiary	-	2,345
		16,165	20,014

	Included in other payables and accrued expenses is an amount of USD 1,007,000 (2009: USD 1,173,000)
	relating to remaining shares to be transferred to the GOSL (see note 32).

	The carrying amounts of trade and other payables approximate their fair value.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


19.	INCOME TAX	2010	2009
		USD'000	USD'000
(a)	Current tax on the adjusted loss for the year at 0% - 30%	-	-
	Deferred income tax (Note 10)	-	-
	Minimum turnover tax for the year	(159)	(302)
	Charge to statement of comprehensive income	(159)	(302)

(b)	The tax on the Group's loss before tax differs from the theoretical amount that would arise using the
	basic tax rate of the Group as follows:
		2010	2009
		USD'000	USD'000

	Loss before tax	(13,771)	(7,565)

	Tax calculated at 0%	-	-
	Effect of different tax rates in different countries	(7,362)	(9,338)
	Investment allowance	(6,660)	(526)
	Income not subject to tax	(1,507)	(1)
	Expenses not deductible for tax purposes	3,059	1,473
	Tax losses on which no deferred income tax asset was recognised	12,470	8,392
	Minimum turnover tax for the year	159	302
	Tax charge	159	302

(c)	Under the provisions of the Sierra Rutile Agreement (Ratification) Act 2002, tax is charged at an
	amount not less than 3.5% of the turnover or more than 37.5% of the profits of the business in
	any financial year. A subsequent agreement was reached in June 2003 with the GOSL to reduce
	the rate to 0.5% of the turnover of the business through the year 2014.

	The Group, through its subsidiary SRL, is entitled to unutilised tax losses brought forward and capital
	allowances in respect of fixed asset acquisitions.

(d)	Current tax liabilities	2010	2009
		USD'000	USD'000
	At January 1,	175	(70)
	Charged to the statement of comprehensive income
	(see note 19(a) above)	159	302
	Paid during the year	(59)	(57)
	At December 31,	275	175

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


20.	LOSS BEFORE TAXATION	2010	2009
		USD'000	USD'000
	Loss before taxation is arrived at after:
	Charging:
	Depreciation on property, plant and equipment (note 5)
	- owned assets	10,135	9,675
	Amortisation of intangible assets (note 6)	63	68
	Impairment of property, plant and equipment	7,844	515
	Auditors' remuneration - Audit and other services	114	58
	Employee benefit expense (note 23)	7,549	6,888

21.	SALES

	Revenue represents the invoiced amount in respect of sales of rutile, ilmenites, bauxite and zircon
	extracted during the period excluding sales discount and consists of the following :
		2010	2009
		USD'000	USD'000
	Rutile	38,514	35,461
	Ilmenite	2,653	1,330
	Zircon	2,747	58
		43,914	36,849

22.	EXPENSES BY NATURE	2010	2009
		USD'000	USD'000
	Depreciation (note 5)	10,135	9,675
	Amortisation (note 6)	63	68
	Changes in inventories of finished goods and work in progress	2,272	(2,036)
	Production and shipping costs	23,740	24,245
	Operating overheads	8,670	5,742
	Royalties, mining leases and rent	838	749
	Provision for obsolete stocks and write offs	2,924	-
	Administrative and marketing expenses	1,163	982
	Other expenses associated with accidented dredge	726	-
	Non-current receivable written off	26	-
	Prepayment written off	350	-
	Other provisions	270	-
	Merger and acquisition charges	939	-
	Directors fees and remuneration	987	943
	Insurance cost	1,498	2,025
	Accounting and audit fee	121	80
	Meeting, travel and other expenses	315	312
	Total cost of sales and administrative and marketing expenses	55,037	42,785

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


23.	EMPLOYEE BENEFIT EXPENSE	2010	2009
		USD'000	USD'000
	Wages, salaries and benefits, including termination benefits	6,444	6,003
	Payroll Oncost, including social security costs	1,105	885
		7,549	6,888

24.	OTHER INCOME	2010	2009
		USD'000	USD'000
	Interest income	71	16
	Loss from disposal of plant	-	(8)
	Profit on disposal of 1.416% shares in subsidiary	-	1,971
	Sundry income	100	208
		171	2,187

25.	EXCEPTIONAL ITEMS	2010	2009
		USD'000	USD'000
	Professional and other costs associated with disposal of subsidiaries	-	760
	Impairment of property, plant and equipment	7,844	515
	Placement cost	-	1,715
	Adjustment for employee share options	-	(6,397)
	Proceeds from insurance claim	(7,500)	(3,500)
	Costs associated with insurance claim	2,731	3,209
		3,075	(3,698)

26.	FINANCE INCOME/(COSTS)	2010	2009
		USD'000	USD'000
	Interest expense:
	- Government of Sierra Leone loan	(4,040)	(3,664)
	- Bank overdrafts	(150)	(12)
	- Others	(88)	-
	Total borrowing costs	(4,278)	(3,676)
	Net foreign exchange transaction gains/(losses) (note 27)	4,534	(3,838)
		256	(7,514)

27.	NET FOREIGN EXCHANGE GAINS/(LOSSES)	2010	2009
		USD'000	USD'000
	The exchange differences credited/(charged) to the
	statement of comprehensive income are included as follows:
	Finance costs (note 26)	4,534	(3,838)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


28.	LOSS PER SHARE	2010	2009
		USD	USD
(a)	Basic loss per share

	Loss attributable to owners of the parent (thousand)	(12,357)	(7,867)

	Weighted average number of ordinary shares in issue	385,864,075	257,635,328

	Basic loss per share	(0.032)	(0.031)

(b)	Diluted loss per share
	Loss attributable to owners of the parent used to
	determine diluted loss per share (thousand)	(12,357)	(7,867)

	Number of shares
	Weighted average number of ordinary shares in issue	385,864,075	257,635,328
	Adjustments for : - New placement (see note 33(i))	113,660,925	-
	- Share options (see note 33(iii))	15,925,000	-
	Weighted average number of ordinary shares for diluted
	loss per share	515,450,000	257,635,328

	Diluted loss per share	(0.024)	(0.031)

29.	BUSINESS COMBINATIONS

(a)	Disposal
	Pursuant to the First Amendment Agreement dated February 4, 2004, entered by and between the
	Government of the Republic of Sierra Leone (GOSL) and SRL regarding PAYE taxes due from
	SRL (See note 32), on October 1, 2009, SRL Acquisition No.3 Limited transferred an additional
	951 shares (2009: 1,416 shares) it held in Sierra Rutile Holdings Limited (SRHL) to GOSL,
	representing 0.951% (2009: 1.416%) ownership interest in SRHL, a subsidiary incorporated
	in British Virgin Islands. SRHL acts as an intermediate holding company.

	The details of assets acquired and liabilities disposed and the disposal consideration are as follows:
		2010	2009
		USD'000	USD'000
	Accounts receivables	2,597	3,672
	Accounts payables	(2,596)	(2,514)
	Net assets	1	1,158
	Profit on disposal credited to statement of comprehensive income	-	1,971
	Profit on disposal credited to retained earnings	1,172	-
	Total consideration	1,173	3,129

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


30.	NOTES TO THE STATEMENTS OF CASH FLOW	2010	2009
		USD'000	USD'000
(a)	Cash generated from operations
	Loss for the year	(13,771)	(7,565)
	Adjustments for:
	Depreciation on property, plant and equipment	10,135	9,675
	Amortisation of intangible assets	63	68
	Interest income	(71)	(16)
	Interest expense	4,278	3,676
	Exchange (gain)/loss on borrowings	(4,993)	2,901
	Loss on disposal of plant	-	8
	Foreign currency translation difference	459	(186)
	Impairment of Dredge D3 (2009: Dredge D2)	7,844	395
	Impairment of other property, plant and equipment	-	120
	Share option scheme - Employee	-	(6,397)
	Profit on disposal of 1.416% shares in subsidiary	-	(1,971)
	Prepayments written off	26	-
	Increase in provision for retirement benefit obligations	70	174
		4,040	882
	Changes in working capital (excluding the effects of
	acquisition of subsidiaries)
	-inventories	2,497	(1,606)
	-trade and other receivables	3,145	1,565
	-trade and other payables	(418)	973
	Cash generated from operations	9,264	1,814

(b)	Non cash transactions

	In 2009, the principal non cash transaction was the vesting of options granted to directors and selected
	employees pursuant to share option plan described in note 13(b). As a result, equity increased by
	USD 596,000 in respect of 483,333 option shares which vested.

(c)	Cash and cash equivalents
		2010	2009
		USD'000	USD'000
	Cash in hand and at bank	6,836	2,218
	Short term bank deposits	21,537	23,684
	Cash and cash equivalents	28,373	25,902

	Cash and cash equivalents and bank overdraft include the following for the purpose of the statement of
	cash flows:
		2010	2009
		USD'000	USD'000

	Cash and cash equivalents	28,373	25,902
	Bank overdrafts	(105)	(10)
		28,268	25,892

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


31.	CAPITAL COMMITMENTS	2010	2009
		USD'000	USD'000
	Property, plant and equipment acquisition contracted for at the
	end of the reporting period but not yet incurred:	2,146	1,100

	Details of capital commitments are as follows:

(i)	spirals for dredge 1 for an amount of USD 1,431,000 (2009: USD nil).
(ii)	other capital expenditures USD 715,000 (2009: USD 1,100,000).

32.	AGREEMENT WITH THE GOVERNMENT OF THE REPUBLIC OF SIERRA LEONE

	According to the First Amendment Agreement dated February 4, 2004, entered by and between the
	Government of the Republic of Sierra Leone and SRL, the Government assigned to SRL A 3 all its
	right, title and interest in, to, and under the future PAYE taxes due from SRL to the Government in
	an amount not exceeding USD 37 m. In consideration for the foregoing assignment, SRL A 3 agreed
	to transfer up to a 30% equity interest in Sierra Rutile Holdings Ltd to the Government, within 60 days
	of the end of the calendar year commencing on the ''Refurbishment Start Date'' (i.e April 1, 2005),
	equal in value to the PAYE amounts accrued during such calendar year.

	As at December 31, 2010, 4,833 shares (As at December 31, 2009 : 3,882 shares) were already
	transferred and PAYE accrued for the year in SRL amounted to USD 1,007,000 (2009: USD 1,173,000).

33.	EVENTS AFTER THE REPORTING PERIOD

	Events after the reporting period are disclosed only to the extent that they relate directly to the set of
	financial statements and are material in effect. As at the date of issuing this set of financial statements,
	there were no material events after the reporting period to disclose except the following:

(i)	At the end of February 2011, SRX made a new placement of 113,660,925 common shares. The placing
	with institutional investors at a price of 10p per share raised £11.4m (USD 18.3 m) before expenses.
	All the new shares have been admitted to trading on AIM. Following the placement, the total number of
	ordinary shares in issue amounts to 499,525,000.

(ii)	On March 11, 2011, out of the proceeds of USD 18.3m raised above, USD 18m was utilised to fund
	SRL to enable it to make a part-payment of the loan outstanding to the GOSL. Following this early
	repayment, an agreement has been reached with the GOSL such that the next principal repayment
	of the loan will be in June 2013. Subsequently, the interest repayments in 2012 will now be lower
	by USD 1m.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

33.

EVENTS AFTER THE REPORTING PERIOD (CONT'D)

(iii)

On March 3, 2011, SRX granted 15,700,000 options to senior management employees and directors

of SRX. The options were granted pursuant to SRX's Share Option Plan, and are exercisable at

20p per share from the date of vesting. The options will vest quarterly in four equal portions, on

March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, subject to continued

employment with SRX. The options will expire on the third anniversary of grant. The total number of

outstanding vested and unvested options as of March 3, 2011 was 15,925,000.

(iv)

In February 2011, it was resolved that the Company:

(a) be authorised to issue an unlimited number of shares;

(b) changes its name from Titanium Resources Group Ltd (TRG) to Sierra Rutile Limited (SRX).

a new Memorandum and Articles of Association of the Company;

34.

SEGMENT REPORTING

Reportable segments are strategic business units that offer different products and services. They are

managed separately because each business requires different technology and marketing strategies.

The Group has only one geographical (Sierra Leone) and reporting segment. As a result, the

statement of financial position and the statement of comprehensive income, shown on previous

pages, relate to that segment.

35.

RELATED PARTY TRANSACTIONS

Professional/

Project

Merger and

Amount

management

acquisition

payable

fees

costs

Total

(a)

Transactions and balances

USD'000

(i)

2010

Shareholder:

Cost of Air tickets paid for Mr. Boulle

(previous shareholder) to attend meetings

on behalf of the company

(55)

Director:

Enterprise in which Mr. Alex Kamara

is also a director - Cemmats Group**

(6)

(231)

(237)

(ii)

2009

Director:

Enterprise in which Mr. Len Comerford is a director - PWMIL*

(631)

(1,954)

(2,585)

Enterprise in which Mr. Alex Kamara is also a director - Cemmats Group**

(1)

(195)

(196)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


35.	RELATED PARTY TRANSACTIONS (CONT'D)

*	In 2006, SRL entered into a material mine development contract with PW Mining International
	Limited (PWMIL), an enterprise in which Mr Len Comerford is a director. The contract
	covers a period of 5 years.

	On May 1, 2006, Mr Comerford was appointed Chief Executive Officer of SRX and he resigned
	on February 3, 2009.

**	Mr. Alex B. Kamara was appointed as a director of SRX on March 10, 2008. Mr. Kamara is also a
	non-executive director of Cemmats Group, a Sierra Leonean company which has a number of
	contracts with SRL.

(b)	Out of the 113,660,925 common shares issued, refered to in note 33(i), two substantial shareholders,
	namely: Pala Investments Holdings Limited AG and M&G Securities Limited, subscribed for 43,356,991
	and 37,900,000 shares, respectively.

(c)	SRX has undertaken to provide financial support to SRL and will not request repayment of loans made
	to SRL until such time that SRL will be in a position to settle its indebtedness to it.

(d)	Amount owed to related parties are unsecured. No provisions have been made for doubtful debts in
	respect of amounts owed by related parties.

(e)	Consultancy agreements with previous Directors
	Following his resignation as a non-executive Director, the Company entered into a 12 months
	consultancy agreement with Mr. Baker for professional services. The Company shall pay Mr. Baker
	GBP 2,500 per month during the duration of the contract.

	Mr. Malouf resigned as a Director of the Company on February 21, 2011. The Company then entered
	into a 6 months consultancy agreement with him against a payment of USD 4,000 per month.

(f)	Key management personnel compensation	2010	2009
		USD'000	USD'000
	Directors' fee	987	943
	Salaries and short-term employee benefits	3,977	2,948
	Post employment benefits	24	200
	Termination benefits	140	136
		5,128	4,227

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010


36.	REPORTING CURRENCY

	The financial statements are presented in thousands of United States Dollar (USD).

37.	MAJOR SHAREHOLDERS

	Substantial individual shareholders and corporate investors own up to 62.88% (2009: 65.04%) of the
	Company's shares. The remaining 37.12% (2009: 34.96%) of the shares is widely held.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR DGGDLIXGBGBB

Date		Source	Headline
7th Dec 2016	7:30 am	RNS	Suspension - Sierra Rutile Limited
6th Dec 2016	12:56 pm	RNS	Merger Update
5th Dec 2016	7:00 am	RNS	Form 8.3 - Iluka Resources
2nd Dec 2016	7:00 am	RNS	Form 8.3 - Iluka Resources
29th Nov 2016	7:00 am	RNS	Merger Update
25th Nov 2016	7:00 am	RNS	Merger Update
22nd Nov 2016	7:00 am	RNS	Form 8.3 - [offeree/offeror] - Iluka Resources
21st Nov 2016	2:39 pm	RNS	German Antitrust Authority Clearance Granted
17th Nov 2016	7:00 am	RNS	Form 8.3 - Iluka Resources
4th Nov 2016	10:00 am	RNS	Merger Update
3rd Nov 2016	7:00 am	RNS	Refinancing of Bank Facilities
3rd Nov 2016	7:00 am	RNS	Form 8.3 - Iluka Resources
27th Oct 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
26th Oct 2016	7:00 am	RNS	Merger Update
21st Oct 2016	7:00 am	RNS	Q3 2016 Operational Update
18th Oct 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
30th Sep 2016	7:09 am	RNS	Sierra Rutile Limited H1 2016 Interim Results
29th Sep 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
26th Sep 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
15th Sep 2016	7:00 am	RNS	Merger Update
14th Sep 2016	7:00 am	RNS	Merger Update
6th Sep 2016	7:04 am	RNS	Merger Update
5th Sep 2016	7:00 am	RNS	Form 8.3 - Iluka Resource Ltd
2nd Sep 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
1st Sep 2016	4:28 pm	RNS	Merger Update
1st Sep 2016	7:00 am	RNS	Form 8.3 - Iluka Resources
25th Aug 2016	7:00 am	RNS	Merger Update
22nd Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
12th Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
11th Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
10th Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
9th Aug 2016	7:00 am	RNS	Statement regarding disposal of company or assets
9th Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
3rd Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Limited
2nd Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Ltd.
1st Aug 2016	7:00 am	RNS	Recommended proposal for Sierra Rutile by Iluka
1st Aug 2016	7:00 am	RNS	Form 8.3 - Iluka Resources Ltd.
29th Jul 2016	7:18 am	RNS	Announcement re Iluka Resources Limited
15th Jul 2016	7:00 am	RNS	Q2 and Half-Year 2016 Operational Update
6th Jul 2016	3:43 pm	RNS	Results of AGM
2nd Jun 2016	7:00 am	RNS	Successful Gangama Dry Mine Commissioning
31st May 2016	7:00 am	RNS	Total Voting Rights and Block Listing Return
28th Apr 2016	7:00 am	RNS	Annual Financial Report and Accounts
26th Apr 2016	7:00 am	RNS	Operational Update
21st Apr 2016	7:00 am	RNS	Notification of Major Interest in Shares
21st Apr 2016	7:00 am	RNS	Notification of Major Interest in Shares
19th Apr 2016	8:50 am	RNS	Admission Announcement
15th Apr 2016	2:08 pm	RNS	Full Exercise of Bookrunner Option
14th Apr 2016	7:00 am	RNS	Successful placing of $20.0 million in new equity
31st Mar 2016	7:00 am	RNS	Preliminary Results

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