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Sierra Rutile Limited

Sierra Rutile Provides Q4 2014 Operational Update

and 2015 Guidance

London, UK, 12 January 2015: Sierra Rutile Limited (AIM: SRX) ("Sierra Rutile") is pleased to provide an operational update on the fourth quarter of 2014 ("Q4 2014").

Highlights

· Strong Q4 2014 operational performance with production of 31,025 tonnes of rutile and 10,574 tonnes of ilmenite:

- Third highest quarter of rutile production ever;

- 14.5% increase in rutile production from Q3 2014; and

- Annualized Q4 production higher than any full-year production to date.

· Despite a strong Q4 2014, full-year 2014 production was 114,163 tonnes of rutile, compared to guidance of 120,000 tonnes, largely resulting from ongoing Ebola-related challenges.

· Continued strong cost performance:

- Total Operating Cash Cost1 of US$646/t for 2014, a 5% reduction on 2013; and

- All-in Operating Cash Cost2 of US$683/t for 2014, a 10% reduction on 2013.

· Record full-year rutile sales volumes, despite difficult market conditions.

· 2015 production and operating cost guidance:

- Full-year 2015 production:

§ Rutile production: 120,000-130,000 tonnes

§ Ilmenite production: 30,000-35,000 tonnes

- Full-year 2015 operating costs:

§ Direct operating cash cost: US$520-530/ tonne3

§ Total operating cash cost: US$595-615/ tonne

§ All-in operating cash cost: US$650-670/ tonne

1 Total operating cash cost (includes direct operating costs, general administrative costs and corporate costs but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.

2 All-in operating cash cost (total operating cash cost plus stay-in-business capital cost, but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.

3 Direct operating cash cost (includes direct operating costs but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.

Commenting on the Q4 2014 performance, Chief Executive Officer, John Sisay said: "We are very pleased to record the highest quarter of rutile production for the year and one of our highest quarters of production ever. We are proud to have achieved this result whilst in the midst of the ongoing Ebola virus outbreak. As has been the case throughout the year, we have continued to focus on cost control and are pleased to have retained control of our costs when certain products and services in Sierra Leone are experiencing Ebola-linked inflation.

Looking forward into 2015, we continue to expect that Ebola-related challenges will reduce, allowing us to drive and expand our assets further. Our management and staff have made huge efforts to minimise the effect of Ebola on our operations and to keep our employees safe and Ebola-free, and I would like to express my appreciation for their efforts in achieving the Q4 performance in these difficult circumstances."

Ebola update 

To date there remain no cases of Ebola at Sierra Rutile's operations. The extensive risk mitigation measures previously announced remain in operation at Sierra Rutile's operations and the development of the situation is being monitored carefully.

Overall, the direct impact of the Ebola outbreak on Sierra Rutile's operations has been limited. Sales remain unaffected and, as previously announced, the general supply chain has been adapted to the situation. The only material impact to operations has been the slow provision of irregular parts and materials (i.e., those materials not consumed by operations on an ongoing basis). Here, the lead time for delivery has increased due to limitations on sea freight and the significantly reduced number of commercial airlines flying into Sierra Leone. As noted, there have also been some Ebola-related inflationary pressures on certain locally sourced products and services.

Sierra Rutile continues to work closely with the government of Sierra Leone in its broader efforts to combat Ebola and during the quarter, together with its shareholders, made a further donation of Le1 billion to Government of Sierra Leone's Ebola Orphan Fund.

Production

Q4 2014 rutile production was 31,025 tonnes of rutile and 10,574 tonnes of ilmenite (Q4 2013: 36,059 tonnes of rutile and 9,231 tonnes of ilmenite), representing Sierra Rutile's third highest quarter of rutile production ever, a 14.5% increase on Q3 2014 rutile production (Q3 2014: 27,078 tonnes) and a run-rate higher than any year of Sierra Rutile's production on an annual basis.

1. Zircon Concentrate is a semi-finished zircon product grading 40-55% ZrO2.

Despite the strong Q4 2014 performance, production did not meet forecast levels of 36,862 tonnes of rutile, largely as a result of extended maintenance shutdowns and slower than expected commissioning of the mineral separation plant upgrade.

As noted above, the greatest impact of the Ebola outbreak has been on the provision of irregular parts and materials. During the current quarter this has, on occasions, caused regular maintenance shutdowns to be longer than the norm due to a lack of spare parts or maintenance materials. Sierra Rutile continues the process of re-optimizing spare and material inventory levels to accommodate for Ebola-related supply delays, whilst avoiding holding excessive working capital.

As reported in our announcement on 9 October 2014, the upgrade to the mineral separation plant was successfully completed on budget in Q3 2014 and commissioning commenced in late September 2014. Commissioning proceeded slower than expected, however, in part due to the same parts and materials issues highlighted above, and partly due to an abnormally high zircon content of the plant feed that caused challenges in ramp-up.

Finally, as has been widely publicized, the Government of Sierra Leone implemented a strict travel ban and limitation on public gatherings during the Christmas and New Year period. Unlike previous travel bans, this did not formally require any restriction on Sierra Rutile's operations. Given the general limitations during the period, however, Sierra Rutile elected to perform non-scheduled opportunistic maintenance shutdowns on some operations during the period of travel restrictions.

Full-year production was 114,163 tonnes of rutile and 35,839 tonnes of ilmenite, representing a 5.1% decrease and 10.8% increase on 2013, respectively. The lower production from 2013 was caused, in part, as a result of mining operations being in a lower grade area during 2014, and more significantly by the challenges described in previous quarterly updates and above.

Cost Efficiency

Cost control continued to be a key focus for Q4 2014 and overall costs remained within budget and aligned with prior quarters, notwithstanding the inflation in costs for certain products and services due to Ebola.

For Q4 2014, Direct Operating Cash Costs were US$594/ tonne, Total Operating Cash Costs were US$686/ tonne and All-in Operating Cash Costs were US$717/ tonne. This resulted in a substantial reduction in operating costs for 2014 compared to 2013, notwithstanding the 5.1% reduction in rutile production in 2014.

Sales

Sales volumes of rutile for 2014 were a record for Sierra Rutile, despite difficult markets for mineral sands. As announced on 9 October 2014, Sierra Rutile had already committed sales for Q4 and these occurred as planned. Demand for 2015 product remains robust, although remains sensitive to price.

In the near-term, improving economic conditions in the US are expected to support above trend pigment demand growth rates. In the long-term, China's rebalancing to consumer-oriented sectors will support titanium feedstock consumption. Sierra Rutile remains well positioned to supply the market with its premium products as supply/demand fundamentals improve and inventories are worked through.

Expansion Projects

Mineral Separation Plant Upgrade

The Mineral Separation Plant Upgrade was successfully commissioned during the quarter, albeit at a slower rate than expected, as noted above. A final step in the Mineral Separation Plant upgrade will occur during H1 2015; being the addition of new spirals to give both greater throughput and flexibility in processing different types of tailings material.

Gangama Dry Mining Project

Sierra Rutile continues to optimize the Gangama Dry Mining Project while monitoring market conditions and the impact of Ebola to assess the appropriate time to commence the project. Sierra Rutile has completed its discussions on the deferral of repayments for the loan from the Government of Sierra Leone. Repayments will resume from June 2016, which will allow the funds that would be used for loan repayments to be used for the Gangama Dry Mining Project.

Financing

Cash Balance

As at 31 December 2014, Sierra Rutile had a cash balance of US$6.5 million.

Nedbank Senior Term Loan Facility

Sierra Rutile agreed to extend the availability period of the senior term loan facility with Nedbank, and has up until 31 December 2015 to reach financial close.

2015 Guidance

The 2015 guidance on production and operating costs is as follows:

For clarity, the above guidance includes no production from the Gangama Dry Mining Project.

From 1 January 2015, Sierra Rutile will revert to the fiscal provisions of the Sierra Rutile Agreement (Ratification) Act 2002. This revision sees royalty rates increase from 0.5% to 4%. The cost impact of this is largely offset by reductions in expected fuel costs, meaning the main driver of the 2015 cost guidance when compared to 2014 is production volume.

Forward-Looking Information

This document may contain forward-looking statements. These forward-looking statements are made as of the date of this announcement and Sierra Rutile Limited (the "Company") does not intend, and does not assume any obligation, to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable securities legislation.

Forward-looking statements relate to future events or future performance and reflect Company management's expectations or beliefs regarding future events and future performance and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual reports. These risks, uncertainties, assumptions and other factors could adversely affect the outcome and financial effects of the plans and events described herein.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward- looking statements.

ENDS

For Further Information:

Notes to Editors

About Sierra Rutile Limited

Sierra Rutile produces titanium feedstock industrial minerals (primarily rutile, with some associated ilmenite), as well as smaller quantities of zircon. Sierra Rutile's mine, located in the south west of Sierra Leone, is one of the largest natural rutile deposits in the world, with a JORC-Compliant Mineral Resource for measured, indicated and inferred resources for the Sierra Rutile mine of over 911 million tonnes (as at 30 September 2013).

www.sierra-rutile.com