African - · PDF fileEstablishment of the Fiscal Regime allows African ... Frank Timis...

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African Minerals LimitedInterim Report 2010

African MINERALS

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African Minerals Limited is a minerals exploration and development Company with significant interests in Sierra Leone.

The Company is focused on the development of the world class iron ore deposit at Tonkolili and its related rail and port infrastructure.

African Minerals aims to build value for its shareholders, and maintain a strong commitment to its social and environmental responsibilities in all areas of its operations.


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Key Highlights

January

Divestment of Sierra Leone Hard Rock Ltd to Obtala Resources in exchange for 9.9% of Obtala’s enlarged issued share capital to the value of US$6.9 million.

February

Tonkolili Magnetite JORC compliant Mineral Resource estimate increased to 10.5 Bt.

Pilot Plant Metallurgy indicates potential production of a 70% Fe Magnetite concentrate, at a mass recovery of 26.5% containing low levels of impurities.

US$125 million underwritten cash placing of 20,000,000 shares at US$6.26 (£4.00) per share.

May

Drilling Programme commenced to establish JORC compliant Hematite Resource.

June

Three Phase Strategy announced for the development of the Hematite, Saprolite and Magnetite Ore bodies at Tonkolili.

China Railway Materials Commercial Corporation deal completed following approval from Government of the People’s Republic of China, raising equity of US$247 million for a 12.5% shareholding in AML.

Cash at bank and short-term investments US$336 million.

July

Term sheet signed with Cape Lambert Resources Limited for refurbishment and sale of 33.33% of the Pepel to Marampa port & rail infrastructure for US$45 million.

August

Mining Lease granted by Government of Sierra Leone with unanimous ratification by Sierra Leone Parliament.

Environmental Impact Assessment Licence awarded.

September

Revised MOU signed with Shandong Iron & Steel Group, China, for US$1.5 billion investment in the project at asset level together with an off-take agreement.


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Chairman’s Statement

“Building the Foundations”


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The first half of 2010 has seen African Minerals make outstanding progress at our flagship Tonkolili iron ore project, establishing an exceptionally strong base from which to develop what we believe will be Africa’s largest iron ore mining operation. Support from the Government of Sierra Leone, strategic partnership with the People’s Republic of China, and the ongoing confidence of our shareholders have enabled African Minerals to initiate its three phase development strategy in order to bring Tonkolili into production by Q4 2011. Mining Lease & EiA Licence AwardedOur strong relationship with Sierra Leone was further enhanced when, in August, the national parliament unanimously voted in favour of the Mining Lease for the Tonkolili project and infrastructure. The Company was also awarded an Environmental Impact Assessment Licence for the project. Although these were necessary steps in bringing the mine into production, the overwhelming support received by the Government and Parliament of Sierra Leone is an endorsement of the mutual benefits that this project will bring and represents a major milestone in the Company’s development. Establishment of the Fiscal Regime allows African Minerals to develop Tonkolili with greater financial clarity and to move forward with its three phase strategy to develop the port, rail and mine site facilities required to support the projects. We warmly thank His Excellency the President of the Republic of Sierra Leone, his Cabinet and the Members of Parliament for their support and we look forward to continuing our long-term relationship with the Government of Sierra Leone.

Magnetite & Hematite AssetsOver this accounting period we made a number of significant announcements, not least of which was the near doubling of our Resource to 10.5 billion tonnes, making the Tonkolili deposit the world’s largest reported JORC compliant Magnetite Iron Ore mineral resource. We are currently undergoing an expedited drilling programme to establish a JORC compliant Hematite Resource overlaying our existing Magnetite Ore Resource. To date over 170,000 metres of diamond core drilling have been completed and the mine is being developed in preparation for our Phase 1 production. The Definitive Feasibility Study on the Magnetite Resource was paused in Q2 2010 to allow us to focus on our Hematite drilling programme. We plan to resume the DFS once an engineering study for the Hematite Resource has been completed towards year end 2010.

Three Phase Production StrategyCentral to our development programme is the three phase production strategy devised to target the DSO, Saprolite and Magnetite Iron Ore bodies at Tonkolili. The Company believes this three phase strategy could deliver the potential opportunity to self-fund part of the expansion of the project’s production capacity from 10 mtpa up to 25 mtpa of Hematite product and then a further 45 mtpa of Magnetite product.


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Chairman’s Statement continued

“Commencing production of 10 mtpa DSO Lumps and Fines in Q4 2011.”


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Phase I construction has already commenced, with the refurbishment of Pepel Port and existing narrow gauge railway infrastructure from Pepel to Lunsar, as well as the new rail construction from Lunsar up to Tonkolili. Phase I will create capacity for up to 10 mtpa, and the production of DSO Lump and Fines is due to commence in Q4 2011. As the true form of the mining project takes shape and we expand our production through Phases II and III, we will continue to focus on streamlining our operations to ensure that a low cost of production is achieved through maximising efficiencies in all aspects of our operations.

FinancingHaving laid the foundations in 2009 and in the first six months of 2010, the Company is poised to become a significant producer of iron ore into the global market. Furthermore, levels of interest in West Africa’s vast natural resources are steadily increasing, particularly with regard to the region’s enormous potential to deliver iron ore projects of significant scale and quality.

At the level of the global market, we have witnessed many of the major iron ore players signing agreements, particularly with the rapidly developing nations of China and India, to guarantee buyers in newly discovered iron ore areas. Equally, large Chinese and Indian steel producers are seeking to secure a stable and reliable supply of raw materials to meet rising demand for steel in their own domestic markets. African Minerals has taken a keen interest in developing such strategic relationships with the ever growing Chinese infrastructure and steel companies.

China Railway Materials Commercial CorporationThe business was boosted during the first half of 2010 through a US$247 million investment agreement signed with China Railway Materials Commercial Corporation (“CRM”), a major integrated service provider in the railway industry and one of the leading three steel traders in China. The agreement with CRM secures financing for the first stage of iron ore production in the first years of operation. Furthermore, the agreement with CRM builds a strong foundation from which to secure funds for the second phase of production and opens the door to increased Asian investment into the business.

Cash PlacingWe also completed a US$125 million cash placing in February to support the construction of critical infrastructure required for the first phase of production at Tonkolili.

Shandong Iron & Steel Group MouAfrican Minerals has been successful in securing a MOU for US$1.5 billion of development capital from Shandong Iron & Steel Group (“Shandong”), which will be used to develop the Tonkolili project and related infrastructure. Shandong is currently due to complete its due diligence process in October. Subject to the results of that due diligence and agreement on final documentation, the target date for signing the Subscription and Off-take Agreements with Shandong is 20 November 2010.


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Upon the finalisation of financing arrangements, we intend to move forward with a plan that will see approximately US$1.75 billion of direct foreign investment into Sierra Leone over the next two years that will result in the development of the Tonkolili Project to the point where it can produce and export 35 million tonnes per year of Hematite Iron Ore product between the first and second phases. In future years, we and our strategic partners plan to expand the Project further.

Cape LambertIn addition to these financing arrangements we have also signed a Term Sheet with Cape Lambert Resources Limited, to share infrastructure between Pepel and Marampa reducing the development requirements for both companies.

Disposal of Diamond AssetsThe Company has also streamlined and consolidated its portfolio and the business to focus our efforts and resources on Tonkolili. In January we transferred the entire issued share capital of Sierra Leone Hard Rock Ltd, our former licence holder for our diamond operations in the country, to Obtala Resources plc in return for 9.9% of their business. This investment allows us to benefit from an indirect exposure to the strengthening diamond market without requiring any further funding or management of any further diamond related activities by the Company.

Chairman’s Statement continued


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Director ChangesDuring the first half of this year we welcomed Mr Dermot Coughlan and Mr Liu Guoping to the Board of Directors. Mr Coughlan brings with him a wealth of operational, financial and corporate governance expertise in the manufacturing, engineering and mining industries, including experience at Rio Tinto plc and other major companies. He also brings with him significant advisory and board experience with some of the largest companies in the world, as well as having served on the boards of philanthropic, community and educational boards. We are already benefiting from his significant impact on the Board of African Minerals.

We were also very pleased to welcome Mr Liu who joins the African Minerals Board as a Vice-President with China Railway Materials Commercial Corporation. As a significant shareholder (12.3%) in the Company, we are sure CRM will continue to enhance the Company’s partnerships in Asia and we look forward to Mr Liu’s contribution to the success of the Company.

We were sorry to see Mr Craig Smith resign from his post as CFO and would like to thank Craig for the time and effort he has spent helping to develop the Company. We wish him well in the future.

OutlookThe timing of the development of the Tonkolili project could not be better. Iron ore demand continues to rise and the Tonkolili project is set to lead iron ore supply out of the West African region.

In conclusion, we are enthusiastic and extremely positive about the future prospects for African Minerals as we continue to develop and grow into a producing iron ore company. Once again I would like to thank the Government and people of Sierra Leone for their continued support, as well as the Board of Directors for their unending commitment to the vision of the Company, and our shareholders for their confidence in our project. Also, I would like to thank each employee for their hard work and dedication to strengthening and carrying this vision forward. I look forward to the next six months as we continue to build towards production in 2011.

Frank TimisExecutive Chairman


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Operational Review

“African Minerals is very pleased to announce that having been awarded both the Mining Lease by the Government and Parliament of Sierra Leone as well as the Environmental Impact Assessment Licence, and having successfully raised over US$370 million of capital so far this year through the market and our strategic partnership with CRM, we have been able to commence expediting Phase I of our three phase development strategy and are making preparations to bring 10 mtpa of DSO Hematite Iron Ore into production by Q4 2011. The first half of this year has seen mine and infrastructure development in preparation for production move forward on budget and on schedule as we progress towards delivery of first ore on ship in 2011.”


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MiningThe first half of 2010 has seen African Minerals deliver a 10.5 Bt JORC Compliant Magnetite Iron Ore Resource in February, with pilot plant tonnage scale metallurgy indicating that the production of a 70% Fe concentrate with low levels of impurities, is possible using a conventional Magnetite processing circuit.

A concerted drilling programme, which commenced in May, is currently under way to establish a JORC compliant resource for the Hematite Iron Ore body which overlays the Magnetite Resource. Currently Management estimates potential resources of up to 200 Mt of Hematite DSO and 1.3 Bt of Saprolite Iron Ore, however, this drilling is only expected to be completed by November this year, and results of the metallurgy testing currently being undertaken by BE Enterprises will follow shortly thereafter. Our three phase production strategy, announced in June 2010, will enable African Minerals to address the three different Iron Ore bodies — Hematite DSO, Saprolite and Magnetite — in manageable stages and design, finance and construct the related infrastructure in conjunction with the mining of these different phases of the Tonkolili Iron Ore mineralisation. Phase I infrastructure and mine development have already begun and production of the Hematite DSO Lumps & Fines is due to commence in Q4 2011.

Alongside the Hematite drilling programme, the mine site infrastructure is progressing successfully, with the construction of the interim mine camp, infrastructure pad and clearance work for the mine area preparation nearing completion.

The mine team will complete mining tender selection during Q3 and begin mobilising the mining fleet early in January in support of

the mine haul road development, raw water dam construction and finally the tailings dam construction. The staged processing plant strategy is progressing well, with the manufacturing of the Stage 1 plant processing in conjunction with the second stage fixed plant moving into the procurement phase during October to allow successful completion in Q3 of 2011.

The trial pit activities move into operation in support of further large scale geological model validation, with the mining activities poised for Q4 2010 operations.

infrastructureRailOur Phase I all-rail solution development commenced in May of this year, with the rehabilitation of the existing 74 km of railway from Pepel Port to Lunsar, and the construction of the new 126 km railway line from Lunsar to Tonkolili. This work is being carried out by four contractors, with RACEC rehabilitating the existing rail infrastructure, and WHBO, Dawnus, and Basil Read constructing the rail road alignment and formation between Lunsar and Tonkolili, using engineering designs prepared by WorleyParsons and Jeffares & Green. This work is currently on schedule and on budget. Rail and sleepers are currently being shipped to Sierra Leone and due for arrival imminently, whilst our first two locomotives are currently being constructed in South Africa. Construction of the ore cars is about to be awarded this month.

We are pleased to announce that our first construction locomotive was delivered to Sierra Leone on 2 September 2010, and was greeted by the President of Sierra Leone in a welcoming ceremony at the main port in Freetown.


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Operational Review continued

PortPepel Port rehabilitation is well under way and will be designed to handle a capacity of 10mtpa of DSO Hematite Iron Ore for Phase I. The port materials handling infrastructure has been designed by ELB. Clearance work in preparation for the construction of the stockyard and port operating facilities is progressing on schedule as is the development of the offices and campsite at the port. Civil concrete contractors have mobilised this month, in preparation for the structural and mechanical contractors who will mobilise in November to construct the conveyor gantries and transition towers. Looking ahead, the stacker will arrive early in 2011 and development has begun on the automation of the port operating plant. Contracts for dredging services and marine engineering are in final negotiations as is the contract for transhipment services.

In addition to this work at Pepel for Phase I, we have also commenced preparation work for the design and development of Phase II’s Tagrin Point Port. The Marine and Landside geotechnical

work and environmental & social baseline studies are well advanced in support of the engineering design for Phase II.

Health & SafetyAfrican Minerals has a clear vision in all matters of HSE&S and Risk, which will enable us to match best practices within the mining industry and, wherever possible, exceed them. AML aims to set the benchmark standard for West Africa and become the mining operation of choice for professionals in this region. Our goal is to ensure a consistent level of good Health, Safety, Security, Risk and Emergency Response management in the short-term, by applying a risk based approach. This year we have conducted a full review and restructuring of HSE&S, and put key management in place to cover all our strategic positions. We have implemented a structured incident reporting/response procedure, and engaged an international standard emergency evacuation service provider. Going forward we plan to develop comprehensive capacity to support the requirements of our expanding


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construction phase, and at the same time plan for the implementation of the operational mining phase of AML in Sierra Leone.

EnvironmentAfrican Minerals’ commitment to the environment is unparalleled. Meeting the government and licensing demands and continuing to first and foremost protect the environment in which we work, AML has ongoing biodiversity offset programmes for mitigation and enhancement currently under way. During 2010 an ESHIA for Phase I was completed and the Environmental Impact Assessment Licence was granted by the Government of Sierra Leone in conjunction with the Mining Lease.

Corporate & SocialAfrican Minerals continues to build strong relationships with national and local governments and organizations. Consultation Committees have been established in seven chiefdoms to manage community needs for Phase I project activities; crop compensation amounts have been agreed through consultation with affected

parties and the Ministry of Agriculture, Forestry and Food Security; a Social Impact Assessment for Phase I has been completed including a Stakeholder Engagement Plan, Community Development Action Plan and a Resettlement Policy Framework; and employment offices are currently being opened up in three key chiefdoms to provide easier access for communities to AML job opportunities. We have helped the community through employment programmes, by donating building supplies to youth groups and providing a generator for non-stop broadcasting of a radio station. African Minerals continues to support our ongoing scholarship programme for schoolchildren and provision of education facilities in the project areas. We are also focused on providing infrastructure and facilities to improve local health through the building of potable water wells, supporting the improvement of health facilities and working to assist with the central eradication of malaria in the region.

The projects already provide substantial employment opportunities for the people of


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Operational Review continued

Sierra Leone and, with our development plans approved, we look forward to the time when we will become the largest taxpayer in Sierra Leone and a major contributor to the country’s redevelopment and improved standards of living.

Financial ReviewThe financial performance of the Company for the six month period to 30 June 2010 mainly reflects expenditure on the development of the Company’s iron ore assets in Sierra Leone.

Loss after taxation for the six month period ended 30 June 2010 was US$31.5 million (2009: US$5.1 million). Loss per share was 13.6 US cents (2009: 2.7 US cents).

The total assets of the Group amounted to approximately US$599 million (2009: US$157 million) as at the period end, which includes intangible assets amounting to approximately US$121 million (2009: US$87 million) and tangible fixed assets amounting to approximately US$81 million (2009: US$12 million). Intangible assets relate to accumulated deferred exploration and evaluation costs in respect of the Company’s licence interests in Sierra Leone. The Company’s accounting policy is to capitalise these costs pending determination of the feasibility of the project to which they relate.

As at 30 June 2010, the Company had cash and short-term investments of US$336 million (2009: US$9.6 million).

The information in this press release that relates to hematite metallurgy is based on information compiled and reviewed by Rodney Elvish, who is a Fellow and CPMet of the Australasian Institute of Mining and Metallurgy (“AusIMM”). Mr. Elvish is an independent consultant to the Company, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Elvish has reviewed this press release and consents to the inclusion in the press release of the matters based on his information in the form and context in which this appears. The information in this press release that relates to geological exploration is based on information compiled by Marcus Reston, who is a Fellow of the Geological Society of London (“FGS”), and a Member of the Australian Institute of Geoscientists (“AIG”). Mr Reston General Manager: Geology & Exploration, is a full-time employee of the Company, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Reston has reviewed this press release and has consented to the inclusion in this press release of the matters based on his information in the form and context in which this appears.


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Independent Review Report to African Minerals Limited

introductionWe have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have formed.

Directors’ responsibilitiesThe half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”, as adopted by the European Union.

Our responsibilityOur responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

Shipleys LLPChartered AccountantsLondon, UK28 September 2010


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Consolidated Income Statementfor the six month period ended 30 June 2010

Period ended Period ended Year ended 30 June 30 June 31 December 2010 2009 2009 Notes US$ US$ US$

Continuing Operations Revenue 534,905 160,727 160,727 Cost of sales (452,893) — — Gross profit 82,012 160,727 160,727 Impairment of intangible fixed assets 6 (3,858,705) — — Net operating expenses 4 (35,101,813) (4,167,186) (1,812,138)Profit on disposal of subsidiary — 2,193,116 13,594,833 Operating (loss)/profit (38,878,506) (1,813,343) 11,943,422 Dividend receivable 7,347,477 — — Finance income 26,723 116,708 191,619 (Loss)/profit before tax (31,504,306) (1,696,635) 12,135,041 Tax — — — (Loss)/profit from continuing operations (31,504,306) (1,696,635) 12,135,041

Discontinued Operations Loss for the period from discontinued operations — (3,422,723) (26,011,707)Loss for the period (31,504,306) (5,119,358) (13,876,666)Other comprehensive income — — — Total comprehensive loss for the period (31,504,306) (5,119,358) (13,876,666)Attributable to equity holders of the parent (31,504,306) (5,119,358) (13,876,666)Basic loss per share — cents 5 (13.61) (2.73) (6.95) Basic earnings/(loss) per share continuing activities — cents 5 (13.61) (0.90) 6.07 Diluted loss per share — cents 5 (13.61) (2.73) (6.95)Diluted earnings/(loss) per share continuing activities — cents 5 (13.61) (0.90) 5.78


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Consolidated Balance Sheetat 30 June 2010

30 June 30 June 31 December 2010 2009 2009 Notes US$ US$ US$

Non-current assets Intangible fixed assets 6 121,311,475 86,822,911 83,506,886 Tangible fixed assets 7 80,863,103 12,656,707 4,874,362 Total non-current assets 202,174,578 99,479,618 88,381,248 Current assets Inventories 1,190,289 2,748,812 1,587,022 Trade and other receivables 15,402,957 28,877,727 22,378,452 Financial assets at fair value through profit or loss 44,291,304 16,731,768 42,207,102 Short-term investments 330,000,000 — 71,742,400 Cash and cash equivalents 6,089,227 9,629,563 4,904,921 Assets of disposal group classified as held for sale — — 7,388,947 Total current assets 396,973,777 57,987,870 150,208,844 Total assets 599,148,355 157,467,488 238,590,092 Equity Share capital 8 2,725,426 1,876,924 2,136,396 Share premium account 667,188,491 210,810,325 310,055,096 Equity reserves 13,787,000 10,827,950 13,251,459 Profit and loss account (124,252,726) (87,276,557) (95,597,009)Attributable to equity holders 559,448,191 136,238,642 229,845,942 Minority interest — 8,516,692 — Total equity 559,448,191 144,755,334 229,845,942 Non-current liabilities Provisions 773,268 1,165,364 731,094 Total non-current liabilities 773,268 1,165,364 731,094 Current liabilities Trade and other payables 38,926,896 11,546,790 7,490,833 Liabilities of disposal group classified as held for sale — — 522,223 Total current liabilities 38,926,896 11,546,790 8,013,056 Total liabilities 39,700,164 12,712,154 8,744,150 Total equity and liabilities 599,148,355 157,467,488 238,590,092


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Period ended Period ended Year ended 30 June 30 June 31 December 2010 2009 2009 US$ US$ US$

Loss for the period (31,504,306) (5,119,358) (13,876,666)Share-based payments 4,267,057 2,523,109 5,383,474 Depreciation of tangible fixed assets 421,698 2,464,080 4,795,445 Amortisation of intangible fixed assets — 1,404,285 — Impairment of intangible fixed assets 3,858,705 — 19,320,508 Loss on disposal of tangible fixed assets — — 592,594 Profit on disposal of subsidiary — (2,193,116) (13,594,833)Profit on disposal of financial assets (59,535) — —Decrease/(increase) in financial assets at fair value through profit or loss 16,842,288 (3,241,433) (15,070,620)Unrealised foreign exchange (gain)/loss 2,887,256 (1,752,149) (2,967,778)Dividend receivable (7,347,477) — —Interest received (26,723) (116,708) (191,619)Operating cash flow before working capital changes (10,661,037) (6,031,290) (15,609,495)Decrease/(increase) in inventories 396,733 (1,028,626) (1,248,578)Increase in trade and other receivables (763,643) (6,385,311) (4,799,977)Increase in provisions 42,174 — 58,281 Increase in trade and other payables 31,436,063 5,846,634 1,820,306 Net cash flow from operating activities 20,450,290 (7,598,593) (19,779,463)Cash flows from investing activities Interest received 26,723 116,708 191,619 Proceeds of sales of tangible assets — — 1,125,127 Proceeds on disposal of financial assets 199,128 — — Payments to acquire tangible assets (76,410,439) (464,833) (920,911)Payments to acquire intangible assets (41,663,294) (11,466,829) (32,516,393)Investment in subsidiary — 11 — Increase in short-term deposits with banks (258,257,600) — (71,742,400)Net cash inflow/(outflow) from investing activities (376,105,482) (11,814,943) (103,862,958)Cash flows from financing activities Proceeds of ordinary share issue 355,037,287 — 98,995,407 Proceeds of exercise of options 1,652,742 183,934 692,770 Proceeds of exercise of warrants 149,469 — — Net cash inflow from financing activities 356,839,498 183,934 99,688,177 Net increase/(decrease) in cash and cash equivalents 1,184,306 (19,229,602) (23,954,244)Cash and cash equivalents at beginning of period 4,904,921 28,859,165 28,859,165 Cash and cash equivalents at end of period 6,089,227 9,629,563 4,904,921

Consolidated Cash Flow Statementfor the six month period ended 30 June 2010


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Consolidated Statement of Changes in Equityfor the six month period ended 30 June 2010

Share Profit and Share premium Equity loss capital account reserves account Total US$ US$ US$ US$ US$As at 1 January 2010 2,136,396 310,055,096 13,251,459 (95,597,009) 229,845,942 Allotments during the period 589,030 373,991,060 (829,047) — 373,751,043 Issue expenses — shares — (16,911,545) — — (16,911,545)Share-based payments — — 4,267,057 — 4,267,057 Reserves transfer — options — — (2,848,589) 2,848,589 —Reserves transfer — warrants — 53,880 (53,880) — —Loss for the period — — — (31,504,306) (31,504,306)As at 30 June 2010 2,725,426 667,188,491 13,787,000 (124,252,726) 559,448,191 As at 1 January 2009 1,875,174 209,136,256 9,942,383 (82,302,856) 138,650,957 Allotments during the period 1,750 182,184 — — 183,934 Share-based payments — — 2,523,109 — 2,523,109 Reserves transfer — options — — (145,657) 145,657 —Reserves transfer — warrants — 1,491,885 (1,491,885) — Loss for the period — — — (5,119,358) (5,119,358)As at 30 June 2009 1,876,924 210,810,325 10,827,950 (87,276,557) 136,238,642


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Notes to the Interim Financial StatementsFor the six month period ended 30 June 2010

1. Accounting PoliciesThe interim financial statements, which are unaudited, have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” adopted by the International Accounting Standards Board (IASB). This interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Annual Report for the year ended 31 December 2009 and any public announcements made by the Company during the interim reporting period.

The unaudited interim financial statements for the six months ended 30 June 2010 do not constitute statutory accounts and have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2009.

The financial information for the year ended 31 December 2009 has been extracted from the statutory accounts for that period. The Auditors’ report for the year ended 31 December 2009 was unqualified.

The financial information for the six months ended 30 June 2009 has been extracted from the interim results released to 30 June 2009 and amended where necessary to separately disclose the results of continuing and discontinued operations.

2. DividendsNo dividends were paid or proposed during the period.


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3. Segment ReportingBusiness Segments

Gold and Period ended iron Ore base metals Diamonds infrastructure Corporate Total30 June 2010 US$ US$ US$ US$ US$ US$Revenue — 534,905 — — — 534,905Operating loss (374,240) (2,042,715) — (1,269,226) (35,192,325) (38,878,506)Dividend receivable — — — — 7,347,477 7,347,477Finance income — — — — 26,723 26,723Tax — — — — — —Loss for the period (374,240) (2,042,715) — (1,269,226) (27,818,125) (31,504,306)Total assets 157,530,369 9,116,113 — 34,401,470 398,100,403 599,148,355Total liabilities 2,445,116 15,691 — 775,382 36,463,975 39,700,164Cash utilised in operations 1,928,791 515,628 — 16,040 17,989,831 20,450,290Cash flows from investing (93,219,060) — — (24,854,673) (258,031,749) (376,105,482)Cash flows from financing — — — — 356,839,498 356,839,498Net movement in cash and cash equivalents (91,290,269) 515,628 — (24,838,633) 116,797,580 1,184,306Payments to acquire tangible assets (51,589,212) — — (24,821,227) — (76,410,439)Payments to acquire intangible assets (41,629,848) — — (33,446) — (41,663,294)Depreciation of tangible fixed assets 376,189 828 — 8,408 36,273 421,698Amortisation of intangible fixed assets — — — — — —Impairment of intangible fixed assets — 2,576,119 — 1,282,586 — 3,858,705


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3. Segment Reporting continuedGeographical segments

Period ended Sierra Leone Canada Bermuda UK Guernsey Total30 June 2010 US$ US$ US$ US$ US$ US$Revenue 534,905 — — — — 534,905Total assets 204,645,625 127,929 392,991,106 719,058 664,637 599,148,355Total liabilities 3,732,389 — 34,170,889 293,108 1,503,778 39,700,164Cash utilised in operations 2,396,224 — 19,027,628 (469,593) (503,969) 20,450,290Cash flows from investing (118,073,732) — (258,031,802) 16 36 (376,105,482)Cash flows from financing — — 356,839,498 — — 356,839,498Net movement in cash and cash equivalents (115,677,508) — 117,835,324 (469,577) (503,933) 1,184,306Payments to acquire tangible assets (76,410,439) — — — — (76,410,439)Payments to acquire intangible assets (41,663,294) — — — — (41,663,294)Depreciation of tangible fixed assets 399,211 — — 14,074 8,413 421,698Amortisation of intangible fixed assets — — — — — —Impairment of intangible fixed assets 1,282,586 2,576,119 — — — 3,858,705

Notes to the Interim Financial Statements continuedfor the six month period ended 30 June 2010


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3. Segment Reporting continuedBusiness Segments

Gold and Period ended iron Ore base metals Diamonds infrastructure Corporate Total30 June 2009 US$ US$ US$ US$ US$ US$Revenue — — 160,727 — — 160,727 Operating loss (873,212) (16,347) 160,727 (1,207) (1,083,304) (1,813,343)Finance income — — — — 116,708 116,708 Tax — — — — — —Loss for the period from discontinued operations — — (3,422,723) — — (3,422,723)Loss for the period (873,212) (16,347) (3,261,996) (1,207) (966,596) (5,119,358)Total assets 76,524,782 11,713,497 27,660,387 4,985,333 36,583,489 157,467,488 Total liabilities 1,020,795 531,370 497,993 153,452 10,508,544 12,712,154 Cash utilised in operations (1,108,989) (313,386) (326,196) 2,707 (5,852,729) (7,598,593)Cash flows from investing (9,076,765) (816,096) (50,073) (1,941,852) 69,843 (11,814,943)Cash flows from financing — — — — 183,934 183,934 Net movement in cash and cash equivalents (10,185,754) (1,129,482) (376,269) (1,939,145) (5,598,952) (19,229,602)Payments to acquire tangible assets 326,642 — 11,252 80,074 46,865 464,833 Payments to acquire intangible assets 8,750,134 816,096 38,821 1,861,778 — 11,466,829 Depreciation of tangible fixed assets 917,462 3,397 1,496,499 12,010 34,712 2,464,080 Amortisation of intangible fixed assets — — 1,404,285 — — 1,404,285 Impairment of intangible fixed assets — — — — — —


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3. Segment Reporting continuedGeographical segments

Period ended Sierra Leone Canada Bermuda UK Guernsey Total30 June 2009 US$ US$ US$ US$ US$ US$Revenue - — 160,727 — — 160,727 Total assets 121,915,717 3,035,295 31,807,235 387,559 321,682 157,467,488 Total liabilities 2,164,105 488,704 9,639,308 97,238 322,799 12,712,154 Cash utilised in operations (3,079,089) — (2,245,105) (869,411) (1,404,988) (7,598,593)Cash flows from investing (10,952,582) (932,204) 116,621 (14,752) (32,026) (11,814,943)Cash flows from financing — — 183,934 — — 183,934 Net movement in cash and cash equivalents (14,031,671) (932,204) (1,944,550) (884,163) (1,437,014) (19,229,602)Payments to acquire tangible assets 417,968 — — 14,819 32,046 464,833 Payments to acquire intangible assets 10,534,625 932,204 — — — 11,466,829 Depreciation of tangible fixed assets 2,464,080 — — — — 2,464,080 Amortisation of intangible fixed assets 1,404,285 — — — — 1,404,285 Impairment of intangible fixed assets — — — — — —



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4. Net Operating Expenses

Period ended Period ended Year ended 30 June 30 June 31 December 2010 2009 2009 US$ US$ US$Depreciation of tangible fixed assets 421,698 2,464,080 4,795,445 Depreciation of tangible fixed assets transferred to disposal group — (1,496,599) (2,917,394)Loss on disposal of tangible fixed assets — — 592,594 Employee costs 1,224,426 1,693,648 5,872,123 Foreign exchange differences 8,439,305 (1,378,574) (2,452,731)Other operating charges 3,966,574 3,602,955 5,609,247 Profit on disposal of financial assets (59,535) — — Financial assets at fair value through profit or loss — fair value losses 16,842,288 (3,241,433) (15,070,620) 30,834,756 1,644,077 (3,571,336)Share-based payments: Shares 1,107,673 — — Options (see note 9) 3,143,277 2,523,109 5,383,474 Warrants (see note 9) 16,107 — — 4,267,057 2,523,109 5,383,474 35,101,813 4,167,186 1,812,138


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5. Loss Per Share

Period ended Period ended Year ended 30 June 30 June 31 December 2010 2009 2009 US$ US$ US$Loss for the period (31,504,306) (5,119,358) (13,876,666)Continuing operations (31,504,306) (1,696,635) 12,135,041 Discontinued operations — (3,422,723) (26,011,707)

Basic earnings/(loss) per share — cents Shares Shares SharesBasic weighted average number of common shares in issue 231,403,129 187,528,629 199,628,275 Basic loss per share — cents (13.61) (2.73) (6.95)Basic earnings/(loss) per share continuing activities — cents (13.61) (0.90) 6.07 Diluted earnings/(loss) per share — cents Shares Shares SharesBasic weighted average number of common shares in issue 231,403,129 187,528,629 199,628,275 Adjustment for share options — — 10,202,154 231,403,129 187,528,629 209,830,429 Diluted loss per share — cents (13.61) (2.73) (6.95)Diluted earnings/(loss) per share continuing activities — cents (13.61) (0.90) 5.78

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares and dividing the profit attributable to equity holders of the Company by the adjusted weighted average number of ordinary shares in issue during the period. For share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options.



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6. intangible Fixed Assets

Total US$Cost At 1 January 2010 117,787,996 Additions 41,663,294 As at 30 June 2010 159,451,290 Amortisation At 1 January 2010 34,281,110 Impairment 3,858,705 As at 30 June 2010 38,139,815 Net book value At 30 June 2010 121,311,475 At 31 December 2009 83,506,886

Intangible fixed assets comprise the cost of purchasing mineral exploration licences and certain deferred exploration expenditure on the Company’s mineral licences. The Board of Directors regularly assesses the potential of each mineral licence and impairs any deferred exploration expenditure that it believes to be unrecoverable. The Board of Directors undertook an impairment review of the Group’s intangible fixed assets as at 30 June 2010. The impairment charge for the current period was US$3,858,705 (2009: US$nil). The resultant impairment charges were as follows:

Net book value Net book value as at 30 June as at 30 June 2010 before 2010 after impairment impairment impairment charge charge chargeProject US$ US$ US$Canada — nickel exploration 2,576,119 2,576,119 —Sierra Leone — coal exploration 1,282,586 1,282,586 — 3,858,705 3,858,705 —


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7. Tangible Fixed Assets

Assets being Plant & Fixtures & constructed machinery fittings Total US$ US$ US$ US$Cost At 1 January 2010 — 7,383,267 559,208 7,942,475 Additions 75,784,488 625,951 — 76,410,439 Transfer to intangible assets — — — —Disposals — — — —As at 30 June 2010 75,784,488 8,009,218 559,208 84,352,914 Depreciation At 1 January 2010 — 2,802,992 265,121 3,068,113 Charge for the year — 380,066 41,632 421,698 Disposals — — — —As at 30 June 2010 — 3,183,058 306,753 3,489,811 Net book value At 30 June 2010 75,784,488 4,826,160 252,455 80,863,103 At 31 December 2009 — 4,580,275 294,087 4,874,362

8. Called Up Share Capital

Period ended Period ended 30 June 30 June Number of 2010 Number of 2009 shares US$ shares US$Authorised Common shares of US$0.01 each 350,000,000 3,500,000 350,000,000 3,500,000 Preference shares of US 0.001 each 100,000,000 100,000 100,000,000 100,000 issued and fully paid At 1 January 213,639,654 2,136,396 187,517,441 1,875,174 Allotments during the period 58,902,956 589,030 175,000 1,750 At 30 June 272,542,610 2,725,426 187,692,441 1,876,924



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8. Called Up Share Capital continued

i. On 11 February 2010, 20,000,000 new shares were issued by way of a placing for gross proceeds of US$125,288,000 before issue expenses of US$8,161,545.

ii. On 18 February 2010, 50,000 new common shares were issued for consideration of US$38,580 on the exercise of share options.

iii. On 9 March 2010, 133,333 new common shares were issued for consideration of US$101,323 on the exercise of share options.

iv. On 17 March 2010, 133,333 new common shares were issued for consideration of US$149,469 on the exercise of share warrants.

v. On 23 March 2010, 1,099,999 new common shares were issued for consideration of US$829,276 on the exercise of share options.

vi. On 19 April 2010, 50,000 new common shares were issued for consideration of US$38,443 on the exercise of share options.

vii. On 22 June 2010, 33,579,474 new common shares were issued for consideration of US$246,660,832 before expenses of US$8,750,000.

viii. On 22 June 2010, 3,000,000 new common shares with a value at grant date of US$839,973 were issued on the achievement of corporate objectives under the Employee Share Scheme.

ix. On 23 June 2010, 836,817 new common shares were issued for consideration of US$630,049 on the exercise of share options.

x. On 24 June 2010, 20,000 new common shares were issued for consideration of US$15,071 on the exercise of share options.

9. Equity Reservesa) OptionsThe Group has issued share options under a share option scheme adopted by the Group on 5 November 2004. Movements in share options over US$0.01 common shares in the Company in the period were as follows:

Number of optionsAs at 1 January 2010 16,648,455 Options granted in the period 3,000,000 Options exercised in the period (2,190,149)As at 30 June 2010 17,458,306

The stock-based compensation recognised as an expense in the period to 30 June 2010 was US$3,143,277 (2009: US$2,523,109). A transfer of US$2,848,589 was made from the equity reserve to the profit and loss reserve during the period (2009: US$145,657). This represented the reversal of the charge previously made through the Income Statement for options exercised during the period.


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9. Equity Reserves continuedb) WarrantsMovements in warrants over US$0.01 common shares in the Company in the period were as follows:

Number of warrantsAs at 1 January 2010 266,667 Warrants exercised in the period (133,333)As at 30 June 2010 133,334

The stock-based compensation recognised as an expense in the period to 30 June 2010 was US$16,107 (2009: US$nil). In the period a transfer of US$53,880 (2009: US$nil) was made from the equity reserve to the share premium account representing the reversal of the charge made against the share premium account prior to 2010 for warrants exercised in the period. In the period, a transfer of US$nil (2009: US$1,491,885) was made from the equity reserve to the share premium account representing the reversal of the charge made against the share premium account prior to 2010 for warrants lapsed in the period.

10. Post-Balance Sheet EventsOn 13 July 2010, the Company announced that it had entered into a strategic, binding Memorandum of Understanding with Shandong Iron & Steel Group Co Limited in respect of its iron ore project at Tonkolili and the related infrastructure projects.

11. Related Party TransactionsDuring the six month period ended 30 June 2010 the following related party transactions occurred:

Rent and administration services, excluding VAT, amounting to US$272,471 (2009: US$57,473) and security deposits amounting to US$31,472 (2009: US$30,057) were charged by Eastern Petroleum Corporation Limited, a company of which Frank Timis is a Director and has an ownership interest. In the balance sheet as at the period end, trade and other receivables included prepaid rent of US$nil (2009: US$17,346) and security deposits amounting to US$76,711 (2009: US$34,692) owed by Eastern Petroleum Corporation Limited. Legal fees, excluding VAT, amounting to US$515,071 (2009: US$109,622) were charged by Clyde & Co LLP, a firm of which Christopher Duffy is a partner. In the balance sheet as at the period end, trade and other payables included US$96,842 (2009: US$62,314) owed to Clyde & Co LLP.

12. Reporting JurisdictionsThe Company is a reporting issuer in certain Canadian jurisdictions. However, the Company is a “designated foreign issuer” as defined in Canadian National Instrument 71–102 and is subject to foreign regulatory requirements, including those of the AIM market of the London Stock Exchange. As such, the Company is exempt from certain requirements otherwise imposed on reporting issuers in Canada. In particular, financial statements of the Company may be prepared under International Financial Reporting Standards or accounting principles that meet the non-Canadian disclosure requirements to which the Company is subject.


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AuditorsShipleys LLP10 Orange StreetHaymarketLondon WC2H 7DQ

Nominated Advisorand Joint BrokerCanaccord Genuity Limited Cardinal Place, 7th Floor80 Victoria StreetLondon SW1E 5JL

Joint BrokerMirabaud Securities Limited 21 St James SquareLondon SW1Y 4JP

PR AdvisorPelham Bell Pottinger5th FloorHolborn Gate330 High HolbornLondon WC1V 7QD

UK SolicitorsClyde & Co51 EastcheapLondon EC3M 1JP

Canadian SolicitorsBlake Cassels and Graydon LLP199 Bay StreetSuite 2800 Commerce Court WestToronto ON M5L 1A9 Canada

Registered OfficeVictoria Place31 Victoria StreetHamilton HM 10Bermuda

RegistrarsComputershare Trust Company of Canada600, 530 — 8th Ave SWCalgary AB T2P 3S8Canada

Company Number34816

Company Information

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www.african-minerals.com

African MINERALS

Guernsey OfficeThird Floor, Dixcart House Sir William Place, St Peter PortGuernsey GY1 1GXTel:+44 (0) 1481 726833

Registered OfficeVictoria Place31 Victoria StreetHamilton HM10Bermuda

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