African Minerals Limited announce that it has signed a revised Memorandum of Understanding with Shandong Iron & Steel Group Co Limited in respect of Shandong's proposed USD 1.5 billion investment in AML's Tonkolili iron ore project and related infrastructure. The legally binding and exclusive MoU, which requires final contractual documentation to be prepared, supersedes all previous agreements with Shandong and reflects the considerable progress made at the Company since discussions between AML and SISG began in July 2010.

Highlights of revised MoU

11. SISG will invest USD 1.5 billion in return for 25% of the subsidiaries holding the Project.

2. The consideration will be paid in full on closing and is payable either in cash or by demand bank guarantee.

3. Closing of SISG's investment will be conditional on receipt of, amongst other things, necessary governmental and regulatory approvals.

4. The funds from the Investment will be used by the Company to accelerate the development of the mine operation at Tonkolili and for construction of the related infrastructure in Sierra Leone.

5. SISG will have the right to appoint a minimum of two out of five directors to the board of each project company and one director to the board of AML.

6. SISG has an option to acquire up to 25% of annual iron ore production from each of the 3 production phases, by reference to the benchmark prices.

7. The MoU envisages a separate iron ore off-take agreement for a total of 2Mtpa of Phase I production, and an incremental 8Mtpa after Phase II is commissioned, at a discount to benchmark prices. From the date of commencement of production of Phase III, the separate off take agreement includes 5Mtpa hematite fines and 5Mtpa magnetite concentrate , save that when there are no more hematite fines for production in the Project, SISG shall receive 10Mtpa magnetite concentrate for the remainder of the life of the Project, at a discount to benchmark prices.

8. SISG may also elect to receive iron ore in lieu of its share of any dividends declared from the mining operations of the Project of an amount calculated by reference to the benchmark prices for the accountable period.

9. The MoU envisages that the funding for Phase III of the Tonkolili Project will be debt finance but, to the extent that shareholder funding is required, the MoU provides for this to be through shareholder loans pro rata between the Parties.

10. Both AML and SISG's rights as shareholders will be protected in the event of an offer to acquire either party's full interest in the Project.

Commenting on the MoU, Mr Frank Timis executive chairman of African Minerals said that "We are delighted to have further developed our relationship towards a formal partnership with one of the world's largest steel mills. Upon completion, Shandong's proposed strategic investment would provide us with the financial strength to accelerate the development of the Tonkolili Project and the agreement also provides a buyer for a significant proportion of our iron ore product. The investment by Shandong would give us the ability to pay down the current debt, and to commit to our Phase II expansion at an earlier stage thereby providing significant benefits to the Company, its shareholders, SISG and the Government and People of Sierra Leone."