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Sierra Rutile Limited

Sierra Rutile Provides Q3 2014 Operational Update

London, UK, 9 October 2014: Sierra Rutile Limited (AIM: SRX) ("Sierra Rutile") is pleased to provide an operational update on the third quarter of 2014 ("Q3").

Highlights

· Rutile production for the quarter in-line with prior quarters with significant increase in ilmenite production:

- 27,078 tonnes of rutile in Q3, a 3% decrease on Q2 2014 production; and

- 9,986 tonnes of ilmenite in Q3, a 19% increase on Q2 2014 production. 

· Operating expenditures for the quarter in-line with previous quarters as ongoing improvements in cost efficiency sustained. 

· 2014 production guidance revised to 120,000 tonnes of rutile at an all-in cash cost1 of $655/tonne. 

· Upgrade to the mineral separation plant completed on budget and commissioning commenced. 

· Continued advancement of the Gangama Dry Mining project, including completion of a feasibility study for a 500tph throughput option. 

· TiO2 volume demand outlook remains strong and Sierra Rutile has observed positive upward movements in pricing over Q3.

Commenting on the Q3 performance, CEO John Sisay said:

"I am very pleased with the overall performance for the quarter, with a robust operational performance, continued focus on costs and a strong balance sheet. Notwithstanding the challenges of the ongoing Ebola outbreak, disruptions to operations remain minimal and largely indirect in nature as we continue to be free from any cases of Ebola at our operations. While it was encouraging to see our operations remain strong and stable, our efforts to enhance production during the quarter have been hampered by actions imposed to limit the spread of the virus, causing us to reduce our production guidance for the year to 120,000 tonnes.

1. All-in 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.

Our cost efficiency efforts continue to yield results and our cost performance for the quarter was strong, particularly if the reduced by-product sale volume is considered. Equally encouraging was the completion, on budget, of the upgrade to the mineral separation plant, an important step in enhancing our recoveries and ensuring sufficient throughput capacity for future increased production from the Gangama project. Demand for our premium rutile product is robust and it was pleasing to see us comfortably meet our target sales volume for 2014 within the quarter, positioning us well for the final quarter of 2014 and into 2015."

Production

Sierra Rutile produced 27,078 tonnes of rutile, 9,986 tonnes of ilmenite and 444 tonnes of zircon concentrate in Q3. While these production levels are consistent with previous quarters of 2014, the planned increase in production levels for Q3 was not achieved, largely due to the indirect impact of the Ebola outbreak in Sierra Leone.

To date, the direct impact of the Ebola outbreak on Sierra Rutile has been minimal, limited to a three day interruption in production during Q3 due to the restrictions imposed by the Government of Sierra Leone to contain the outbreak, as announced on September 8, 2014. This caused an approximate loss of 1,500 tonnes of rutile production.

Indirectly, the Ebola outbreak has constrained the increased production plan for Q3 due to limitations imposed by Sierra Rutile to safeguard its operations and people.

Isolated Ebola-related challenges have also occurred in Sierra Rutile's supply chain, causing sub-optimal production on certain occasions. Additionally, the greater time taken to source and transfer contractors to Sierra Rutile's operations for the commissioning of the mineral separation plant upgrade has meant that no enhanced production from this project has been realized in Q3 (discussed further below).

Sierra Rutile does not expect any further interruptions to production, our supply chain has now been adjusted to mitigate the effects of Ebola, and the upgrade to the mineral separation plant is undergoing commissioning. As a result, production for Q4 is expected to be significantly higher than in prior quarters of 2014.

2. Zircon Concentrate is a semi-finished zircon product grading 40-45% ZrO2.

Production lost in the year to date means, however, that the increased production level in Q4 is unlikely to make up the existing shortfall for the year to-date. Guidance for full year production has, therefore, been reduced to 120,000 tonnes of rutile, plus associated by-products.

Cost efficiency

Despite the production underperformance, cost performance remains strong, with total operating expenditures for Q3 in-line with previous quarters. This includes one-off additional costs associated with the Ebola outbreak, including the strengthening of health care facilities, community support and charitable donations. Total operating cash cost3 per tonne increased by 11% to $676/tonne over H1 2014 mainly due to the 3% decrease in rutile production and a 17% decrease in by-product revenues caused by the timing of shipments. As a result of the revised production guidance, Sierra Rutile has revised full-year all-in cash cost guidance to $655/tonne, direct operating cash costs4guidance to $540/tonne and expects total operating cash cost of $605/tonne.

Expansion projects

Commissioning of Mineral Separation Plant Upgrade

The upgrade to the mineral separation plant was successfully completed on budget in Q3, despite slower than expected sourcing and transit of contractors to complete the project. Commissioning commenced in late September 2014 and is progressing well. The upgrade will increase the process recoveries and reduce unit costs as a result of improved power and fuel economies.

Ongoing Advancement of Gangama Dry Mining Project

During the quarter, Sierra Rutile continued to advance options for the Gangama Dry Mining project, completing a feasibility study on a scalable 500tph throughput option as an alternative to the 1,000tph throughput option previously announced on October 31, 2012. Highlights of the 500tph project include lower total capital expenditures and a longer mine life. The project would be expected to produce 46,000 tonnes of rutile per year.

3. 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.

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

Table 1: Gangama Dry Mining 500tph vs. 1,000tph

The Gangama Dry Mining project, whether developed as a 500tph, 1,000tph or two stage (2x500tph) project has been greatly de-risked given the experience gained in commissioning and sustainably operating the Lanti Dry Mining operation. Lessons learned through the construction of the Lanti Dry Mining operation have been applied to the design of Gangama, and include the following alterations:

· Direct tip feed system - eliminating the need for front-end loaders

· Two-stage scrubbing - increasing recoveries through the spiral circuit

· Increased design flexibility to cope with ore variability -providing greater operational flexibility and increased recoveries

· Integrated waste handling facilities - reducing re-handle

Sierra Rutile is now considering the findings of the 500tph feasibility study as it finalizes future mine plans and continues to monitor market conditions for the appropriate time to develop the Gangama Dry Mining project in one of its variants.

The ability to realize multiple low-capital dry mining projects across its large resource base provides Sierra Rutile with excellent operational flexibility. As demonstrated by the Lanti Dry Mining project, Sierra Rutile is able to quickly bring on-line additional dry mining units for a limited capital cost, and has the ability to quickly scale-up production in order to respond to market demand.

Financing

As at 30 September 2014, Sierra Rutile had a cash balance of US$14.6 million.

Sales

Demand for Sierra Rutile's products remains very encouraging. Sales in Q3 were robust and Sierra Rutile has now contracted all rutile sales for the remainder of  20147. While demand has been strong, this has not yet translated into meaningful price increases. Pricing has stabilized, however, with small upward movements observed over Q3.

Shipments to customers have been entirely unaffected by the Ebola outbreak.

Ebola update

A safe work environment remains a first priority for Sierra Rutile. To date, there have been no Ebola cases at Sierra Rutile's operations. The company has implemented proactive mitigation measures to minimize risk to the company's operations and employees and we continue to monitor the situation vigilantly.

Sierra Rutile continues its ongoingsupport towards Sierra Leone's efforts to contain Ebola. Together with our shareholders, we have donated Le1 billion to the government of Sierra Leone and Le100 million to the local Bonthe and Moyamba District Councils for utilization in their efforts to combat Ebola.

Sierra Rutile continues to be in close consultation with the Government and local authorities and has provided them with all possible assistance and support in this cause. Initiatives have included engagement with local communities in providing education on the disease as well as providing access to medical staff to assist local authorities with monitoring activities.

Sierra Rutile's proactive approach to mitigating the disruption related to Ebola has positioned the company well to remain cash generative and focused on growth despite the hardships Sierra Leone faces with Ebola.

7. Sierra Rutile currently expects to hold inventory at the end of 2014 that it may choose to sell during Q4 2014.

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