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Sierra Rutile Limited

Sierra Rutile Provides Q2 2013 Operational Update

Achieves Record Monthly Rutile Production

London, UK, 4 July 2013: Sierra Rutile Limited (AIM: SRX) ("SRL") is pleased to provide an operational update on the second quarter of 2013 ("Q2").

Highlights:

·; Production for Q2 was in line with budget, and remains on track to deliver on full-year production guidance:

- Rutile production of 26,898 tonnes, a 23% increase on Q2 2012 production; and

- Ilmenite production of 9,395 tonnes, a 75% increase on Q2 2012 production.

·; Record rutile production for June 2013 of 12,390 tonnes, surpassing the previous record set in July 2012 by 17%.

·; Lanti Dry Mining project successfully commissioned and running above name-plate capacity.

·; 70,000 tonnes rutile supply agreement signed with a leading pigment producer.

·; Defined an additional 39,300 tonnes of rutile (at 3.49% grade) and 17,300 tonnes of zircon (at 1.54% grade) in several tailings areas surrounding the mineral separation plant, providing a readily-available source of high-margin, easily accessible, rutile and zircon.

·; Front-end engineering and design studyfor the Gangama Feasibility Study completed and capital costs are in line with the pre-feasibility study. Given recent changes in foreign exchange rates, steel and other material prices and declining equipment orders among other factors, work is underway to re-cost the project. This process is expected to result in substantially lower capital costs for the project.

Commenting on Q2 performance, CEO of SRL, John Sisay said: "The overhaul of the dredge during the quarter and the successful commissioning of the Lanti Dry Mining concentrator have been significant milestones for Sierra Rutile and ensure that the company remains on track to deliver on its guidance of 125,000 tonnes of rutile production in 2013. Additionally, the definition and quantification of the tailings resource provides us additional flexibility to process this high-margin tonnage at the most opportune time.

While the market remains relatively soft, we continue to be confident of the positive outlook for the industry in the medium-term. The market context will be an important decision driver in the Board's decision on the timing for development of the Gangama Dry Mining project, or in the timing of returning cash to shareholders."

Q2 2013 Operational Update

Production

For the month of June 2013, SRL produced a record 12,390 tonnes of rutile and 3,335 tonnes of ilmenite, 17% greater than the previous record of 10,551 tonnes of rutile set in July 2012.

Production for Q2 was 26,898 tonnes of rutile and 9,395 tonnes of ilmenite, 23% and 75%, respectively, ahead of Q2 2012 volumes (Q2 2012: 21,917 tonnes of rutile and 5,355 tonnes of ilmenite). SRL remains on track to deliver on its guidance of 125,000 tonnes of rutile production in 2013.

During Q2 SRL also undertook a planned three-week shutdown to overhaul certain critical components of the existing Lanti Dredge. In some cases, this was the first time that a number of these components had been overhauled since the dredge was commissioned in 1979 and it is expected that these overhauls will last the residual operating life of the dredge. This work was completed on time and with no lost-time injuries. Since the shut-down, there has been a significant increase in the mining rate of the dredge.

The heavy mineral concentrator for the Lanti Dry Mining project underwent its final performance testing and was successfully commissioned, having achieved an average feed rate of 522 tonnes per hour ("tph") over a 168-hour period, exceeding the design specification of 500 tph. The Lanti Dry Mining operations have experienced minimal impacts to production during recent wet weather conditions.

The completion of the Lanti Dry Mining project ramp-up and step-up in the Lanti Dredge production have resulted in a significant increase in the production of heavy mineral concentrate from these production units. This has flowed through to the mineral separation plant, where the average daily rutile production has increased substantially.

Expansion projects

The front-end engineering and design study for the Gangama Dry Mining project was completed during Q2 and the capital cost estimate is in line with the pre-feasibility estimate of US$103 million. SRL is currently undergoing a value-optimisation and re-costing exercise to reduce these costs further though the integration of updated foreign exchange rates and commodity prices, the results of which are expected during Q3.

The project will be reviewed by the Board of SRL during the third quarter of 2013.

Mineral Separation Plant ("MSP") Tailings Resource

During Q2, SRL carried out an exploration programme to better define the tonnes and grade of the rutile, ilmenite and zircon resource in the historic MSP tailings. These tailings, distinct from the Mogbwemo tailings project, have accumulated adjacent to the mineral separation plant since SRL began operations in 1979.

The programme, focused on 11 of the 14 identified tailings areas, quantified a measured and indicated resource of 1.13 million tonnes of in situ ore at an average rutile grade of 3.49% and zircon grade of 1.54% totalling 39,297 tonnes of rutile and 17,314 tonnes of zircon, respectively. Pending ilmenite analytical results are expected to add further upside to the resource and an update will be provided in due course.

Whilst the tonnage of the resource is a relatively small proportion of the 841 million tonnes of defined resource within SRL's mining lease area, the grades are much higher, ranging from 1.34% to 17.34% rutile and 0.22% to 16.6% of zircon. This provides SRL with the opportunity to blend this product directly into the MSP, or via an existing 50 tph tailings upgrading facility. The high grade of the resource, low-cost mining with excavator and trucks, combined with the close proximity of this resource to the MSP, are expected to only require estimated production costs of US$130 to US$175 per tonne of rutile, excluding by-product credits from ilmenite and zircon.

A map showing the location of the MSP Tailings Resource relative to the MSP can be found at http://www.sierra-rutile.com/uploads/q22013tradingupdate.pdf 

Financing

As at 30 June 2013, SRL had US$11.6 million in cash. In addition, SRL also held inventory of 25,600 tonnes of rutile.

Sales

Weak demand for TiO2 feedstocks carried through into the second quarter of 2013. Despite this, SRL's production was fully committed and there are indications that market conditions are improving. All major pigment companies have recently announced price increases for their products and many report declining finished product inventory levels. Similarly, raw material inventory levels at titanium sponge producers are being drawn down. Selling prices for all of SRL's products continue to remain above historical levels.

During the quarter, SRL signed a 70,000 tonne rutile supply agreement with a leading pigment producer. The contract consists of seven shipments of 10,000 tonnes each through to December 2014. The first shipment under the contract is due to take place in the first week of July.

ENDS

The information in this announcement has been reviewed and approved for release by Mr Mark Button, NHDip, MMRM, Pr.Sci.Nat., SACNASP, who has 24 years' experience in mineral commodities, of which 15 years is specific to mineral resource estimation, and is currently an independent contractor providing consulting services to Sierra Rutile Limited. Mr Button has sufficient experience in relation to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Button has consented to inclusion of this information in the form and context in which it appears.

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

A 'Measured Mineral Resource' is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit.

An 'Indicated Mineral Resource' is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.

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 800 million tonnes (as at 31 August 2012).

www.sierra-rutile.com