African Minerals and Shandong Iron & Steel Group have signed final agreements for acquisition by Shandong of 25% of African Mineral's Tonkolili iron ore project in central Sierra Leone for a cash consideration of $1.5 billion. Shandong is one of the largest iron and steel groups in China and is currently ranked as the world's ninth largest steel group. The agreements include discounted off-take arrangements for Shandong for iron ore produced at the Tonkolili mine, which will be developed in three phases.

Phase I of the Tonkolili project is scheduled to enter production during the fourth quarter of 2011 and to build up to a planned production rate of up to 12 million mt/y of direct shipping iron ore lump and fines product. Phase II will add 23 million mt/y of hematite concentrate production. Phase III will consider production of up to 45 million mt/y of magnetite concentrate from primary magnetite mineralization.

Shandong will purchase 2 million mt/y of Phase I production, an additional 8 million mt/y after Phase II is commissioned, and 10 million mt/y during Phase III, with discounts in each phase ranging from zero to 15%. Shandong will pay the $1.5-billion consideration for its 25% interest in the Tonkolili project upon closing, which is principally conditioned upon receipt of relevant Chinese regulatory approvals.

The Tonkolili project currently has a JORC-compliant resource of 12.8 billion mt extending over a combined strike length of 30 km. Resources include substantial direct shipping ore and saprolite mineralization overlying a very large magnetite orebody.

In addition to the mine, African Minerals is developing significant port and rail infrastructure to support the project via its subsidiary African Rail and Port Services (SL) Ltd., in which the government of Sierra Leone has the right to acquire a 10% interest. With the exception of this interest, the Tonkolili project companies are wholly-owned by African Minerals.