exploration discovery development - morningstar, inc

African Minerals LimitedAnnual Report and Accounts for the year ended 31 December 2008

Creating value through:

ExplorationDiscoveryDevelopment

African MINERALS

Global Reports LLC

www.african-minerals.com

African Minerals Limited (“the Company”, “African Minerals”, or “AML”), is a mineral exploration company with signifi cant interests in Sierra Leone, West Africa.

The Company holds an extensive portfolio of mineral rights in Sierra Leone, a country in which it has been actively investing since 2003. Sierra Leone is a mineral rich country which has been largely unexplored and has recovered quickly from a period of instability. Elections held in Sierra Leone during 2007 resulted in a smooth handover of power demonstrating a successful African democracy.

African Minerals completed the country’s fi rst aeromagnetic survey during 2004 and subsequent exploration programmes and multi-element sampling analysis have resulted in the Company assembling a large mineral exploration portfolio in Sierra Leone. The Company is particularly excited by the progress at its fl agship project, the Tonkolili iron ore project, where a JORC compliant magnetite resource of 5.1 Billion tonnes has been prepared by SRK Consulting (UK) Limited. This project is already world class and the potential exists for an additional 5 Billion tonne resource over the 20km strike extension to the north at Kasafoni. Exploration activities at Tonkolili have also confi rmed the potential for 800 Million tonnes of hematite mineralisation.

The Marampa iron ore project, located approximately 80km from Tonkolili, is being managed and operated by Cape Lambert Iron Ore Ltd which has a 35% interest in the project. Cape Lambert have committed up to US$25 Million towards a feasibility study at the project and have assembled a very experienced iron ore team to progress the project.

The Company signed a lease agreement with the Government of Sierra Leone in November 2008 over key rail and port infrastructure. Dependent upon the results of engineering studies, the Company will refurbish and construct rail and port facilities to accommodate its iron ore production and shipping capacity requirements and provide third party access at commercial rates.

The strength of AML’s iron ore assets were clearly endorsed by investors’ response to the equity placing in October 2008, which took place successfully at a time when very diffi cult market conditions prevailed. The Company has the necessary funding and industry experienced personnel to accelerate the development of its iron ore operations in order to unlock further shareholder value.

African Minerals aims to create value through exploration, discovery and development.

African MINERALS

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Tonkolili Iron Ore Project� Over 61,000 metres of core drilled using up to four

drill rigs at the Numbara, Simbili and Marampon deposits and used in the mineral resource estimate prepared by SRK Consulting (UK) Limited

� Expedited drilling programme allowed resource calculation to be undertaken within nine months of commencement of drilling

� Site laboratory established and operational

� State of the art exploration camp constructed and operational

� More than 15,000 samples assayed at independent laboratory consultants Amdel Limited

Post year-end highlights at Tonkolili:

� Total JORC compliant Mineral Resource at Tonkolili increased to 5.1 Billion tonnes

� 3.1 Billion tonnes in the Indicated category with an average grade of 30.7% Total Iron

� 1.9 Billion tonnes in the Inferred category with an average grade of 28.9% Total Iron

� Metallurgical test work indicates that Tonkolili iron ore is upgradeable to a high quality concentrate grading in excess of 68% Fe at a mass recovery of over 30%, with impurities at levels less than 4.5% SiO2, 0.6% Al2O3 and 0.01% P.

� Geophysics and reconnaissance drilling over a strike length of 20km at Kasafoni indicates the potential to increase the iron ore magnetite mineral resource to in the order of 10 Billion tonnes as supported by SRK Consulting (UK) Limited

� Exploration confi rms potential for 800 Million tonnes of hematite mineralisation

Marampa Iron Ore Project� Early exploration results encouraging, with

potential for signifi cant hematite mineralisation extending from previously mined area

� Agreement completed with Cape Lambert Iron Ore Limited under which the Company acquired 9% of Cape Lambert in return for an investment by Cape Lambert of a 30% stake in Marampa

� Option granted to Cape Lambert to acquire Marampa for US$200 Million

� Cape Lambert assumes operational management of the Marampa project

Post year-end highlights at Marampa:� Cape Lambert increased stake in Marampa

to 35%

� African Mineral’s interest in Cape Lambert increased to 11.6%

� Metallurgical tests produced a high-grade concentrate suitable for the manufacture of blast furnace feed pellets

� Air core drilling of Marampa tailings commenced in late March 2009, working towards a JORC compliant Mineral Resource

� Drill samples also to be used to prepare a representative bulk tailings sample for bench scale metallurgical test work

Infrastructure� 99 year lease signed with Government of Sierra

Leone to reconstruct, manage and operate key port and railway infrastructure, subject to results of engineering studies

� Agreement anticipates the Company will build and operate extension of railway to Tonkolili

� Work underway on extensive engineering studies and conceptual construction designs, required as part of this major infrastructure project

Finance� £20 Million before expenses raised in October

2008 by way of a cash placing with institutional investors

� Strong endorsement by key investors in extremely diffi cult market conditions

� Cash at bank and short term deposits as at 31 December 2008 was US$28.9 Million

Key Management Appointments (post year-end)� Alan Watling joined the Board on 1 February 2009

as Chief Executive Offi cer, bringing a wealth of project management and engineering experience to the Company

� John Blanning joined the Company on 16 March 2009 as Vice President – Mine Engineering and has over 23 years mining experience, having most recently been Head of Mining at Fortescue Metals Group

� Steve Allard joined the Company on 23 March 2009 as Vice President – Infrastructure. Prior to joining the Company, Steve was most recently Head of Port, Fortescue Metals Group, where he was integral in the successful transition from design and construction phase into operations

Highlights for 2008Tonkolili — a World Class Iron Ore Project

African Minerals Limited Annual Report and Accounts 2008


Highlights 01

Chairman’s Statement 02

Review of Operations 06

Social Development 14

Directors and Senior Management 16

Company Information 17

Directors’ Report 18

Corporate Governance 20

Directors’ Remuneration Report 21

Independent Auditors’ Report 23

Consolidated Income Statement 24

Consolidated and Company Balance Sheets 25

Consolidated Cash Flow Statement 26

Consolidated Statementof Changes in Equity 27

Notes to the Financial Statements 28

Glossary of Terms 46

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02Chairman’s Statement

“At Tonkolili, we have now confi rmed a world class magnetite iron ore resource.”

Above:

Drill core from Numbara

demonstrating mineralisation at

a down-hole depth in excess of

620 metres

Our primary strategy over the past year has been to accelerate the development of the Company’s iron ore interests in Sierra Leone, and to establish appropriate infrastructure for eventual production from these projects. The lease agreement over key port and railway infrastructure is a vital part of our strategy in this respect.

African Minerals has invested signifi cantly in Sierra Leone over the past four years and we regard the infrastructure project, which further demonstrates our strong relationship with the Government of Sierra Leone, as proof of the Government’s endorsement of the part being played by our Company in the country’s development.

Although our focus has been to develop our iron ore assets in Sierra Leone, we also have strategic investments in companies which hold iron ore assets in Australia and Mozambique.

We have also taken the opportunity to strengthen management and the Board. The recruitment of senior executives with signifi cant iron ore experience such as our CEO, Alan Watling, places us in a strong position to become a signifi cant iron ore producer supplying Chinese, European and American steel markets.

Iron ore projectsWe have concentrated our fi nancial, management and operational resources on the Company’s fl agship project, Tonkolili and formed a strategic alliance with Cape Lambert Iron Ore Limited (“Cape Lambert”) at the Marampa iron ore project.

At Tonkolili, we have now confi rmed a world class magnetite iron ore resource which complies fully with industry-recognised “JORC” standards. We are very excited that Tonkolili is turning out to be one of the largest iron ore discoveries on the African continent. In May 2009, we announced a Mineral Resource estimate of 5.1 Billion tonnes for the Numbara, Simbili and Marampon deposits.

The fi nal magnetic concentrate of this world class project is high quality, upgrading to 68% iron with very low impurities and is suitable for blast furnace feed. Interim pre-feasibility studies have indicated that operating costs will be in the lowest quartile of iron ore producers, further reinforcing Tonkolili’s position as a world class iron ore project.

Geophysics and reconnaissance drilling over a strike length of 20km at Kasafoni indicate the potential to increase the iron ore magnetite mineral resource to in the order of 10 Billion tonnes.

A signifi cant thickness and strike extent of hematite mineralisation comprised of hematite cap and oxidised transition zone overlies the primary magnetite

resources at Tonkolili. Exploration to date suggests that this may comprise of the order of 800 Million tonnes of material over Numbara, Simbili and Marampon alone. Additional drilling and geological modelling to enable the preparation of a JORC compliant Mineral Resource for these zones is also underway.

We have a new partner in the Marampa iron ore project, Cape Lambert, with the technical expertise and fi nancial capacity to help us realise the full potential of Marampa, which we believe could develop into a signifi cant iron ore project.

With the development of the key port and rail infrastructure, African Minerals is now well positioned to accelerate both the Tonkolili and Marampa projects towards production. We look forward to completing pre-feasibility studies during the current year, with a view to developing a substantial mining operation.

Infrastructure developmentIn November 2008 our wholly owned subsidiary, African Railway and Port Services (SL) Limited, fi nalised a 99 year lease in respect of the Pepel Port and the Pepel – Marampa – Tonkolili Railway, covering the redevelopment of the infrastructure of the port and railway.

Under the terms of the lease, we will undertake an engineering study of an upgrade to the deep water Pepel Port and of the existing railway between Pepel and Marampa. Subject to the results of the studies, the Company will upgrade, operate and maintain the port and railway, making them available at commercial rates to other users including mining companies and general cargo and passenger transporters.

Following receipt of satisfactory engineering and feasibility studies, the Company will also construct and operate an extension of the railway to the Company’s iron ore project at Tonkolili, enabling the Company effi ciently and cost effectively to transport its iron ore production for export to international markets.

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Left:

Core drilling at Tonkolili

Below:

QE II Quay

— Freetown, Sierra Leone

Below Left:

Bumbuna hydro-electric dam



Strategic investments and acquisitionDuring the year we made a number of important strategic investments which both diversify our minerals portfolio and present shareholders with signifi cant development potential.

On 13 May 2008, the Company acquired 11,425,000 fully paid ordinary shares in Baobab Resources plc, which has a balanced portfolio of projects in Mozambique at various stages of development, its principal asset being the Iron-Titanium-Vanadium Tete project.

On 1 October 2008, the Company completed an agreement with Cape Lambert Iron Ore Limited (“CLIO”) in respect of the Company’s iron ore project at Marampa, Sierra Leone (the “Marampa Project”) whereby CLIO acquired a 30% interest in Marampa Iron Ore Limited (“Marampa”). In return, the Company acquired 44,000,000 fully-paid ordinary shares in CLIO and CLIO agreed to contribute US$25 Million towards a feasibility study at the Marampa Project. Subsequent to the year end, the Company acquired a further 17,000,000 fully-paid ordinary shares in CLIO in return for CLIO increasing its stake in Marampa to 35%.

On 23 October 2008, the Company acquired 8,700,000 ordinary shares in West African Diamonds plc (“WAD”). WAD is a diamond focused explorer with operations in Guinea and Sierra Leone and holds a portfolio of development and advanced exploration assets across West Africa.

On 14 April 2008, the Company acquired 100% of the share capital of White River Resources Inc, a Canadian exploration company with mineral claims on the largely under-explored Kluane ultramafi c belt in the Yukon province.

BoardThis has been an important year in the development of the Board. I am pleased to report that the Board has been materially strengthened, both in terms of the skills of its members and to refl ect accepted codes of good corporate governance.

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A number of colleagues have moved on to pursue other interests. David Gadd-Claxton, formerly President of Diamond Exploration and Production, left the Company in January 2008. Mike Wittet stepped down as a Non-Executive Director in April 2008. I thank them for their contribution and support. In November 2008 Bruce Kirk, formerly President, Iron Ore and Base Metals, resigned for personal reasons. Bruce was instrumental in advancing the Tonkolili project over the previous twelve months towards resource status. In the circumstances, I greatly appreciated his offer to continue his support for the Company in a consultancy capacity. Roy Pitchford stepped down from his role as CEO in November 2008, becoming a Non-Executive Director, to focus on his external business interests before leaving the Company in February 2009. I thank him for his contribution to the Company.

I am pleased to welcome three new Non-Executive Directors to the Board. Mark Ashurst joined in January 2008. Mark is a senior investment banker with a broad range of corporate fi nance skills gained from over 20 years’ experience in the City of London. Peter Truscott (Lord Truscott of St. James’s), formerly a Labour MEP, Government Minister and spokesman joined in April 2008. Peter has brought to the Board a wealth of political experience, particularly in foreign affairs and international trade. Christopher Duffy joined us in February 2009. Chris has been a partner in Clyde & Co, an international fi rm of lawyers based in the City of London, since 1989. He is a highly experienced corporate lawyer who has advised numerous companies in relation to their activities in the UK and many other jurisdictions including, in particular, Africa.

I was delighted to announce in December 2008 that Alan Watling had agreed to join African Minerals as CEO with effect from 1 February 2009. Alan’s appointment has added a wealth of engineering and project management experience to the Board and executive team. He is leading the development of the Tonkolili project and the port and railway infrastructure project. Alan has proven expertise in major port and railway construction projects, substantial mining related experience and a successful track record in completing projects against tight deadlines. He has the background and credentials to build and lead the team that will drive African Minerals forward to the completion of defi nitive feasibility studies over our iron ore projects and then onward into production.

Financial reviewThe fi nancial performance of the Company throughout the year ended 31 December 2008 refl ects continued increasing expenditure on the development of the Company’s iron ore assets.

Loss after taxation for the 12 month period ended 31 December 2008 was US$23.6 Million (2007: US$42.3 Million). Loss per share was 14.33 cents (2007: 30.05 cents).

The total assets of the Group amounted to approximately US$152.8 Million as at the period end, which includes intangible assets amounting to approximately US$76.8 Million.

In October 2008, the Company successfully raised £20 Million by way of a placing of 26,666,700 new common shares at a price of 75 pence per share with institutional investors. We were delighted with the endorsement that our premier institutional shareholders gave the Company in subscribing to the placing, especially given the extremely diffi cult market conditions at the time. The proceeds of the placing will allow us to progress the development of our fl agship Tonkolili project into the feasibility study stage and will allow us to undertake extensive engineering and construction work on key infrastructure in Sierra Leone to support our iron ore projects.

During the year, the Company completed one sale of rough diamonds, its fourth such sale, sourced wholly from its alluvial bulk sampling activities in the Kono district of Sierra Leone, realising gross sale proceeds of US$2.5 Million (2007: US$7.5 Million).

As at 31 December 2008, the Company had cash at bank and short term deposits of US$28.9 Million (2007: US$44.2 Million).

EmployeesOur people are our key resource. On behalf of our shareholders I would like to thank them all for their contribution over the past year during which the Company has successfully progressed its fl agship iron ore projects.

Chairman’s Statementcontinued

Top: AML’s Freetown offi ce

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Above: Drill core at Tonkolili



OutlookAfrican Minerals, like so many other mining companies, has been adversely affected by the world economic down-turn. Steel and iron ore related equities have recently experienced one of the worst periods on record as has been the case for most mining sector companies.

We strongly believe that the Asian region, most notably China and India, will continue to focus on securing quality iron ore deposits of magnitude as supply defi cits are realised given the subdued levels of supply activity resulting from the global crisis. The Tonkolili project is world class due to the size of the JORC compliant resource, quality of product and proximity to a deep water port as well as being located in a region with shipping costs and voyage times to steel markets located in both Europe and China that are comparable to those from Brazil.

The Company has strengthened its senior management team with the appropriate engineering skill base required to expedite the Tonkolili project towards development and production. We are targeting the completion of a defi nitive feasibility study by mid 2010 in order to have fi rst product on ship in 2012. The team that has been assembled already has a proven track record of fast tracking the development and construction of iron ore operations of a similar scale.

I am confi dent that the Tonkolili and Marampa projects have the potential to add signifi cant shareholder value even in this time of economic instability. I am very pleased that we have discovered such a large valuable resource at Tonkolili and now have the team in place to realise its full potential.

We will continue to pursue value adding strategies with regards to our other exploration activities. I would also like to thank the Government of Sierra Leone for their continued strong working relationship with the Company. We are committed to improving that country’s infrastructure and in doing so helping to raise the standard of living in Sierra Leone.

Frank TimisExecutive Chairman

“I am confi dent that the Tonkolili and Marampa projects have the potential to add signifi cant shareholder value even in this time of economic instability. I am very pleased that we have discovered such a large valuable resource at Tonkolili and now have the team in place to realise its full potential. ”

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06Tonkolili Iron Ore Project

Above:

Core drilling on Simbili

prospect at Tonkolili

Below:

Senior geologist Joseph Lebbie

examining core

“Resource potential of 10 Billion tonnes”� 5.1 Billion tonne JORC compliant Mineral Resource reported for Numbara, Simbili and

Marampon

� Geophysics and reconnaissance drilling over a strike length of 20km at Kasafoni indicates the potential for a further 5 Billion tonnes to increase the total iron ore magnetite mineral resource to in the order of 10 Billion tonnes

Highlights

� Mineral Resource estimate prepared by SRK Consulting (UK) Ltd

� 5.1 Billion tonne JORC compliant Mineral Resource

� Mineral Resource average grade 30.0% Total Iron

� Recent metallurgical test work indicates that Tonkolili iron ore is upgradeable to a high quality concentrate grading in excess of 68% Fe at a mass recovery of over 30%

� Concentrate impurities at levels less than 4.5% SiO2, 0.6% Al2O3 and 0.01% P

� Blast furnace grade concentrate, potential to upgrade to direct reduced iron (DRI) grade

� High mining recovery of 97.5% reported in JORC Mineral Resource estimate

� Geophysics and reconnaissance drilling over a strike length of 20km at Kasafoni indicate the potential to increase the iron ore magnetite mineral resource to in the order of 10 Billion tonnes

� Exploration confi rms potential for 800 Million tonnes of hematite mineralisation at Numbara and Simbili alone

Review of Operations

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Below: Laboratory technician operating Satmagan instrument which provides same-day results for on-site geological interpretation

Above: Tonkolili exploration camp

Right: Core Shed at Tonkolili



SierraLeone

BoKenemaGbangbatok

LunsarTagrin Point

Bumbuna

Kabala

Kissdougou

Guinea

MarampaMine

PepelPort

FreetownPort

Liberia

Kindia

CONAKRY

Atlantic Ocean

N

FREETOWN

Waterloo

ExistingRailway

ProposedRailway

Hydro-electricScheme

Makeni

Yengema

PortLoko

TONKOLILIPROJECT

The 2008 exploration programme was highly successful, delivering a signifi cant mineral resource in an accelerated time frame. The deployment of multiple drill rigs and the provision of dedicated analytical equipment expedited the collection and processing of drill samples and allowed the Company to meet its target for the commencement of work on a Mineral Resource estimate by the end of 2008.

Activities were tightly focused on defi ning the grade, continuity and extent of signifi cant magnetite mineralisation identifi ed from aeromagnetic geophysics and later confi rmed by drilling.

An intensive drilling campaign commenced early 2008 using up to six diamond drill rigs from the Company’s own fl eet and those of drill contractor Boart Longyear.

Phase I of the drilling programme focused on the Numbara, Simbili and Marampon deposits, which were prioritised due to apparent thickening of the Banded Iron Formation (BIF) noted in interpretations of airborne magnetic data.

Drilling was conducted on 300m x 100m sections at Numbara, 400m x 200m sections at Simbili, and approximately 400m centres at Marampon, yielding a total of 61,285m of core as at 31 December 2008.

All drill holes have been surveyed for location and deviation, while core is fully oriented and comprehensively logged for lithology, structure and engineering properties to ensure compliance to industry best practice for iron ore exploration.

All aspects of on-site sample preparation, packing and subsequent metallurgical processing and assaying were managed by Amdel Limited of Australia (“Amdel”), an independent metallurgical laboratory with proven expertise in the preparation and analysis of iron ore.

This highly successful year ended with the commencement of a Mineral Resource estimation programme by SRK Consulting (UK) Limited who are widely acknowledged to be expert in iron ore resource estimation. Mineral Resource estimations were announced in February and May 2009 bringing the total mineral resource at Tonkolili to 5.1 Billion tonnes.

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Tonkolili Mineral Field Magnetic Model5.1Bt JORC Resource and 5 Bt additional potential

Source: African Minerals

08Review of OperationsTonkolili Iron Ore Project

Above:

Senior geologist Jospeh Lebbie logging drill core at Tonkolili

MetallurgyDetailed metallurgical characterisation of the ore is underway, including ore characterisation at the CSIRO Iron Ore Group, and further Davis Tube Recovery (DTR) test work at Amdel.

The DTR method adopted for systematic analysis of drill core was a standard laboratory procedure which was not optimised for Tonkolili ores.

Additional DTR work at Amdel has focused on refi ning the process with the objective of increasing the concentrate iron grade, and minimizing the SiO2 and Al2O3 impurities.

Results of selected samples to date have demonstrated that high grade concentrates containing over 68% can be consistently achieved at a grind size of 25 microns and with a mass recovery of over 30%. Impurities at levels less than 4.5% SiO2, 0.6% Al2O3 and 0.01% P can also be achieved.

This work confi rms that Tonkolili ore is high grade and suitable for Blast Furnace feed with basic processing and will assess amenability to generate a premium product suitable for DRI feed.

Mineral Resource StatementSRK Consulting (UK) Limited commenced work on the Mineral Resource Estimate during December 2008 with a visit to the project site.

A total of 70,552 metres of diamond core was drilled for the mineral resource estimation. All samples were assayed for in-situ grade, Davis Tube Recovery (DTR) and assay of the DTR concentrate. This allows for modelling of the magnetic concentrate grade at the time of resource estimation, which gives a high level of confi dence in the mass recovery and grade of the magnetic concentrate.

The Mineral Resource estimate as reported is restricted to the primary magnetite BIF and does not include hematitic duricrust or transition zone material. This hematite mineralisation offers signifi cant potential for upgrading to a saleable product, which is now being addressed in the 2009 work programme.

All resources are reported on an in-situ dry tonnes and grade basis, and within a Whittle Shell representing a metal price of 80 US cents per dry metric tonne unit

RESOURCE CATEGORY TONNES (Bt) Fe_TOT Fe_MAG SiO2 Al2O3 P % % % % % Numbara INDICATED 1.6 30.2 25.7 44.6 5.1 0.05 INFERRED 0.5 28.6 23.9 45.7 5.7 0.05 TOTAL 2.1 29.8 25.3 44.9 5.2 0.05 Marampon INDICATED 0.4 28.8 27.4 46.6 4.7 0.06 INFERRED 0.1 30.1 27.6 45.8 4.0 0.05 TOTAL 0.5 29.0 27.4 46.5 4.6 0.06 Simbili INDICATED 1.1 32.1 28.7 44.1 3.5 0.05 INFERRED 1.4 29.0 26.1 46.5 4.8 0.05 TOTAL 2.5 30.4 27.3 45.4 4.2 0.05 Total Indicated 3.1 30.7 27.0 44.7 4.5 0.05 Total Inferred 1.9 28.9 25.6 46.3 5.0 0.05 TOTAL 5.1 30.0 26.5 45.3 4.7 0.05

Numbara, Marampon & Simbili Mineral Resource Statement

Note: any differences between totals and sub-totals are a function of rounding

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Above:

Pencil magnet is strongly attracted to the magnetite-rich core



Considerable Hematite PotentialA signifi cant thickness and strike extent of hematite mineralisation comprised of hematite cap and oxidised transition zone overlies the primary magnetite resource at Tonkolili.

Exploration to date suggests that this may comprise in the order of 800 Million tonnes of material over Numbara, Simbili and Marampon alone.

The principal focus of ongoing work is to defi ne zones of high grade hematite, with preliminary metallurgical test work having already indicated that these should be amenable to upgrading to a saleable product.

The Company continues to expedite a comprehensive metallurgical programme to assess the amenability of this material for product generation to provide early cash fl ow on commencement of production.

Ongoing WorkMetallurgical work is ongoing on both magnetite and hematite material to characterize ores, and to determine upgradability and optimal mineral processing strategies.

Additional shallow drilling is planned at Numbara and Simbili to better defi ne hematite mineralisation and to enable the preparation of a JORC compliant Mineral Resource.

Ongoing exploration work is focused on the signifi cant along-strike potential of the Kasafoni area with the objective of identifying additional BIF mineralisation to realise the resource target of 10 Billion tonnes.

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Lunsar

Pepel Port

Port Loko

Waterloo

Masiaka

Tagrin Point

FREETOWN

Old MarampaMine

MarampaExploration

LicenceExisting railway

(requiring rehabilitation)

Proposed railwayto Tonkolili

10Review of Operations

Marampa Iron Ore Project

The Marampa Iron Ore project (“Marampa Project”) comprises exploration licence EXPL09/06, located 150km northeast of Freetown, Sierra Leone, West Africa. The licence has an area of 319km2 and surrounds the Marampa mining lease, where from 1933 to 1975 the Development Corporation of Sierra Leone (“DELCO”) mined and exported approximately 60 Million tonnes of iron ore.

The Marampa Project has the advantage of being connected by an 84km railway to an existing deep water port, stockpiling and ship loading facility located at Pepel to the southwest.

Exploration by the Company has located several iron ore prospects on the licence. These represent extensions to, and outliers of the same geological formation hosting the red cap and specular hematite schist ore mined by DELCO. In addition, there is a signifi cant quantity of iron ore tailings located on the licence left from the DELCO operations.

Scout exploration diamond drilling by the Company over a prominent gravity anomaly at Gafal West, which is the prospect located to the southwest of the old mine, has confi rmed the occurrence of specular hematite schist mineralisation with iron grades ranging from 23 to 30% over broad intervals. This mineralisation is open to the south and west.

Above:

Ship loader at Pepel Port

Above:

Marampa Railway

Metallurgical test work on this diamond drill core during 2008 demonstrated that a saleable high-grade, low impurity concentrate can be produced using simple crushing, coarse grinding and gravity separation.

Ground gravity geophysical surveys and recent geological mapping have also indicated that the specular hematite schist formation extends approximately 10km north of the old mine and have confi rmed another prospect located 7km to the south.

Project InvestmentOn 1 October 2008, the Company formalised an agreement with ASX listed Cape Lambert Iron Ore Limited (“CLIO”) for a 30% investment in the Marampa Project. Under the terms of the agreement, CLIO paid a consideration of 44 Million fully paid ordinary shares, will fund US$25 Million towards a feasibility study and assumes management of the Marampa Project. On 22 January 2009 and subsequent to the close of the fi nancial year, CLIO increased its investment in the Marampa Project to 35% with a further consideration of 17 Million fully paid ordinary shares.

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Above:

Marampa drill core

The divestment of 35% of the Marampa Project to CLIO will enable the Company to focus on the development of its world class Tonkolili iron ore project whilst retaining an interest in the Marampa Project and exposure to exploration upside. CLIO is well placed to add value to, and advance, the Marampa Project with proven management and technical credentials and a strong balance sheet.

2009 Work ProgrammeCLIO has initiated a comprehensive work programme at the Marampa Project, which is focused on:

� determining the viability of establishing a tailings retreatment operation,

� defi ning the resource potential of the hard rock extensions to the old DELCO mine and

� defi ning the resource potential of the regional prospects.

Drilling and bulk metallurgical sampling of the tailings during 2009 is designed to defi ne a resource inventory and to develop a process fl ow sheet to underpin the establishment of a tailings retreatment operation, thereby establishing a cash fl ow and enabling early refurbishment of the existing rail and port infrastructure.

In parallel to the tailings assessment, drill testing of the prospects immediately west and north of the old DELCO mine will be undertaken with the objective of defi ning a JORC compliant Mineral Resource and to provide representative samples for fl ow sheet metallurgical test work. The outcome of these programmes will provide a basis for scoping the development of a hard rock mining operation, which would have synergies with the infrastructure established for tailings retreatment.

Trenching and scout drilling will be extended to cover the regional prospects to assess their resource potential.

Encouraging metallurgical test results were reported by CLIO during April 2009 for a bulk composite sample of historical hematite tailings from Marampa. A test regime comprising wet, high intensity magnetic separation for roughing and cleaning and reverse fl otation cleaning of the middlings fraction produced a high-grade concentrate suitable for the manufacture of blast furnace feed pellets. The hematite concentrate produced from the tailings graded 65% iron and 3.9% silica for a mass and iron recovery of 46% and 91.6% respectively.

Air core drilling of the tailings commenced in late March 2009, and drill samples will be used to prepare a JORC compliant Mineral Resource estimate, and a representative bulk tailings sample for follow-up bench scale metallurgical test work.

Above:

Marampa exploration

offi ce in Lunsar

Defi ned Drill Targets

Source: Marampa Iron Ore Limited

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Right:

Refurbishing of offi ces

and accommodation at Pepel

12Review of Operations

InfrastructureIn May 2008 the Company announced that it had signed a Memorandum of Understanding (“MoU”) with the Government of Sierra Leone in respect of the port and railway and power infrastructure requirements for the Company’s iron ore projects at Marampa and Tonkolili.

The MoU led to the signing, in November 2008, of an exclusive 99 year lease between the Company and the Government. Subject to the results of engineering studies to be undertaken by the Company, African Minerals will undertake the redevelopment of Pepel Port, refurbish the existing railway between Pepel and Marampa and construct an extension of the railway from Marampa to Tonkolili. The Company has also agreed to manage the port and railway, making those facilities available to other users, including other mining companies and general freight and passenger transport companies, at commercial rates.

It is intended that the infrastructure will in due course provide a facility servicing the West African sub-region, enabling both Sierra Leone and neighbouring countries to export their goods to international markets. The Company is considering additional port areas for its operations. The rail and port infrastructure will provide access for people in the region to a reliable and effi cient mode of transport; it will encourage the

development of other businesses in the area whilst promoting decentralisation from a densely populated Freetown. AML therefore anticipates that the project will bring positive benefi ts to the local and national economies as well as improving the standard of living for the people of Sierra Leone.

Work is under way on extensive engineering studies and conceptual construction designs required as part of this major infrastructure project. The Company has already commenced the reconstruction of offi ces and accommodation at Pepel.

The Company has assembled the skill-base and expertise required in order to undertake a project of this size and we look forward to completing the engineering studies required on the port and railway in order to progress the redevelopment of these key elements of infrastructure in Sierra Leone.

The Company has invested signifi cantly in Sierra Leone over the past four years and sees this latest element of its relationship with the Government of Sierra Leone as further proof of the latter’s endorsement of the part being played by the Company in the country’s development.

Bathymetric Surface

Vessel Routing to Pepel Port



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Other ProjectsAML is concentrating its fi nancial, management and operational resources on the Company’s fl agship Tonkolili iron ore project, the Marampa iron ore project (in conjunction with Cape Lambert Iron Ore Limited) and the Pepel Port and Railway infrastructure project. This strategy, together with the challenging economic conditions being experienced by business in general, has resulted in the Company’s decision to scale back activities at its diamond, base metals and uranium exploration projects.

A summary of these projects is as follows:� The Gori Hills prospect is a 20 km2 target where

a nickel-cobalt anomaly has been identifi ed by reconnaissance stream sediment sampling. Initial surface trench results from this anomaly returned an average grade of 0.73% nickel and 0.061% cobalt over an interval of 56 m between depths of 1 m and 3.2 m.

� The Lovetta uranium anomaly, located in eastern Sierra Leone near the Liberian border, comprises an area of 160 km2. In the immediate project area, seven anomalies of over 10 ppm uranium and over 450 counts per minute uranium have been identifi ed by a programme of soil and scintillometer sampling over a four kilometre strike length. A trenching programme has delineated up to a 150 m strike length and widths of 66 m of anomalous uranium and thorium and is open in both directions.

� The Laminaia gold project area is defi ned by a 14km north-south trend over 100pb gold. Within this broad trend three discrete anomalies have been identifi ed over 100ppb gold (peak grade of 680ppb gold) with an overall strike length of some 2km. Rock chip samples of alluvial quartz fl oat returned an average grade of 117 g/t gold. No further work has been carried out on this project to date.

� Follow-up kimberlite exploration sampling activities continued in 2008 and the compilation of these results along with aeromagnetic survey data is being used to refi ne potential drilling targets. 13 high priority aeromagnetic targets, with coincident positive kimberlite grains and 10 high priority drainage targets, have been defi ned to form the basis of future kimberlite drilling programmes.

� The Company continued with a cost-effective bulk sampling programme at the Konama alluvial diamond project during 2008, in order to defi ne a sustainable economic resource. The Company completed a sale of rough diamonds recovered from the bulk sampling programme during the period, fully compliant with the Kimberley Process

Certifi cation Scheme. A total of 7,218.86 carats were sold during the period at an average price of US$345.84 per carat, realising gross sales proceeds of approximately US$2.5 Million (US$2.2 Million net).

� Through its wholly owned subsidiary, White River Resources Inc., the Company holds mineral claims and rights to earn-in mineral claims in the Canadian Yukon province on the Kluane ultramafi c belt, an area that the Company believes has signifi cant potential. An initial exploration programme was conducted on certain mineral claims during 2008. The scale of the programme was not suffi cient to conclusively ascertain the prospectivity of the mineral claims.

The Company is pursuing value adding strategies with regard to its other projects that may include alliances and joint ventures with suitors and is in the process of fi nalising the relinquishment of certain licences in Sierra Leone, which have not revealed any signifi cant mineral anomalies. This will allow us to focus both funding and resources on project areas which have the potential to add the most value.

Above:

Aerial view of the Konama

alluvial diamond operations



13

Laminaia

Gori Hills

Lovetta

Konama and Nimini Hills

Bo

KenemaGbangbatok

Lunsar

Bumbuna

KabalaGuinea

Liberia

Atlantic Ocean

N

FREETOWN

Waterloo

Makeni

Yengema

PortLoko

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Social Development Projects in 2008 “These programmes are undertaken to assist the Sierra Leone government’s drive to reduce poverty and provide improved health care, education, infrastructure, sports and local government development.”

As a socially responsible organisation and one of the largest employers in Sierra Leone, African Minerals Limited is continually implementing social development programmes within Sierra Leone to support communities in its operational areas and to complement government initiatives across the country. These programmes are undertaken to assist the Sierra Leone government’s drive to reduce poverty and provide improved health care, education, infrastructure, sports and local government development.

In 2008, the Company spent approximately US$300,000 in funding various social development projects in Sierra Leone including:

� Provision of safe drinking water in areas in which the Company operates

� Construction and maintenance of roads and bridges for communities

� Support to sporting activities both at community and national levels

� Various forms of support to the educational sector in Sierra Leone

� Contribution to the development of social infrastructure in Marampa Chiefdom, Port Loko District

� Support to Local Government — Port Loko District Council

� Support to the Rural Transport Sector — Kalasongoia, Kafe Samiria & Samiaia Bendugu Chiefdoms

Provision of Safe Drinking Water — Kalasongoia and Samiaia Bendugu ChiefdomsThe need for sustainable water supply in remote communities has been an important national and global issue for governments, non-governmental organisations and community-centred companies like African Minerals. In the last twelve months the Company has extended water supplies to three more villages in its exploration areas. It has also enhanced the supply of treated water from natural gravity flow for three villages, namely Kemendugu I and II and Sambaia in the Chiefdom of Samiaia Bendugu. This safe water supply scheme now provides safe drinking water for some 200 people.

The Company believes the provision of safe drinking water to these villages has decreased the incidence of infectious and parasitical diseases. For the past two years, the Company has had in place an appropriate water safety programme and community initiatives which cover hygiene and public awareness of water safety.

Top:

Educational materials donated by the Company

Middle:

Local schoolchildren near Tonkolili

Bottom:

Provision of safe drinking water at local villages

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Construction and Maintenance of Roads and Bridges Since its inception, the Company has made road construction and maintenance an integral part of its development programme in its host communities. In 2008 the Company spent approximately US$40,000 on the maintenance of local road networks, helping the farming community within these areas to access markets and other services.

The construction of a 15km road that links the upper end of Tonkolili with the rest of the District is on course. To date, the Company has spent US$75,000 on contract labour and equipment hire to reconstruct the road, including the provision of drainage and culverts.

Sports at Community and National LevelsSince October 2007 the Company has been providing financial support to East End Lions Football Club, one of the most successful and popular football clubs in Sierra Leone. The Company provided a total of US$60,000 financial support to the club in 2008.

The Company has, in the last three years, complemented government efforts in achieving its sporting goals. The Company has supported over ten sporting functions within the country, spending approximately US$15,000 on such sporting activities in 2008. This included the organisation of football gala tournaments in some of the Company’s operational areas.

Education Sector Development and Scholarship Scheme In support of the Sierra Leonean government’s 2025 vision (basic education for all children), the Company has donated school furniture and teaching materials to primary and secondary schools in the Tonkolili District to the tune of US$25,000.

The Company has commenced construction of a three class room block in Kemdudgu, in the Kalasongoia Chiefdom. In addition, it has also provided financial support for the construction of a school in the village of Sambaia in the Samiaia Bendugu Chiefdom.

The Company is providing financial support to 10 teachers in three primary schools in the form of supplementary income as an incentive to attract and retain qualified teaching staff in deprived rural areas.

Since 2005 the Company has developed a national scholarship scheme, geared towards helping underprivileged and disadvantaged children to access learning and study materials and meet tuition fees. In September 2008 the Company distributed 300 scholarships with learning materials to the tune of US$45,000 nationwide. 45% of this assistance went to support children in remote areas of the country, 40% went to primary and secondary schools and the balance went to students in tertiary education. The scholarships cover tuition fees for one year and provision of essential learning materials.

Contribution towards the Development of Social Infrastructure — Marampa Chiefdom, Port Loko DistrictIn complementing the Sierra Leonean government’s and the international community’s drive to improve upon the country’s infrastructure, the Company has made another milestone contribution to the development of the country’s infrastructure in the Marampa Chiefdom, Port Loko District.

In 2008 the Company supplied building materials and other essential equipment to the Marampa Chiefdom to refurbish its dilapidated Town Hall. The project is on-going and the Company will be spending approximately US$20,000 to complete the project.

The project is intended to assist the Marampa Chiefdom Council provide meaningful employment for young people in the area. On completion of the project, the Town Hall will have an entertainment complex, including a cinema, and is expected to provide employment for 20-50 young people whilst also generating income for the Chiefdom.

Support to Local Government — Port Loko District CouncilDecentralisation has been the bedrock of the rural development drive of the Sierra Leone government. To accelerate the government’s initiative the Company has been supporting some district councils to enable them to function autonomously in accordance with their mandates.

In October 2008 the Company donated a US$16,000 28-KVA generator to the Port Loko District Council Head Office in Port Loko to support the District Council by generating electric power to enable it to operate some of its projects, including an internet café, computer school and cinema complex.

Rural Transport Sector Support — Kalasongoia, Kafe Samiria & Samiaia Bendugu ChiefdomsIn support of the government’s initiative to improve rural transport service delivery, in October 2008 the Company donated a Toyota Land Cruiser Hardtop to communities hosting its flagship project at Tonkolili. The vehicle now services more than twelve communities along the Bumbuna-Samiaia Bendugu axis which before then had few, if any, transport links. The beneficiaries now include farmers, housewives, school children and the elderly.

Top:

Toyota Land Cruiser donated by the Company to communities at the Tonkolili Project Area

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Non-Executive Directors

Mark AshurstMark Ashurst was appointed to the Board on 22 January 2008. A senior investment banker with a broad range of corporate fi nance and broking skills gained from over 20 years experience in the City of London, Mark has worked for BZW Limited, Hoare Govett Limited and, most recently, Canaccord Adams Limited. He has advised both UK and overseas listed companies and has signifi cant expertise in IPOs, fund raisings and mergers and acquisitions. Mark graduated from Sheffi eld University with a degree in law and qualifi ed as a Barrister. He is also a member of the Institute of Chartered Accountants in England and Wales having qualifi ed as a Chartered Accountant with Price Waterhouse in London. Mark is currently the Chief Financial Offi cer of a private oil and gas company. Mark chairs the

Company’s Audit Committee.

Peter TruscottLord Truscott of St James’s is an independent peer. He joined the Board on 8 April 2008. He was a member of the House of Lords European Union Committee, Sub Committee C (Foreign Affairs, Defence and Development Policy) and a former departmental liaison peer to the Ministry of Defence. Between 2006 and 2007 Lord Truscott was Parliamentary Under-Secretary of State for Energy at the Department of Trade and Industry and the DTI Government Spokesperson in the House of Lords. He represented Hertfordshire in the European Parliament from 1994 to 1999, and was Labour’s Foreign Affairs and Defence spokesperson, a member of the Foreign Affairs Committee and Vice-President of the Security Sub Committee.

Following his doctorate from Oxford University, he has written extensively on foreign and security policy. He was visiting Research Fellow with the Institute for Public Policy Research from 1999 to 2000 and was recently an Associate Fellow at the Royal United Services Institute for Defence and Security Studies. Lord Truscott has regularly appeared as a political

analyst on the BBC, CNN and Sky TV.

Christopher DuffyChris Duffy joined the Board on 1 February 2009. He is a partner in Clyde & Co, an international fi rm of lawyers based in the City of London. He joined Clyde & Co in 1986, becoming a partner in that fi rm in 1989. Chris is a highly experienced corporate lawyer who has advised numerous companies in relation to their activities in the UK and many other jurisdictions including, in particular, the African continent. Chris graduated from Newcastle University with a degree in law and qualifi ed as a Solicitor in 1983.

16Directors and Senior ManagementExecutive Directors

Directors who held office in 2008

Frank Timis

Roy Pitchford(resigned 4 February 2009)

Jamie Alpen

Gibril Bangura

Bruce Kirk (resigned 30 November 2008)

David Gadd-Claxton (resigned 21 January 2008)

Mark Ashurst (appointed 22 January 2008)

Michael Wittet (resigned 8 April 2008)

Peter Truscott (appointed 8 April 2008)

Company Secretary

Nicholas J Hoskins M Q Services Ltd. Victoria Place31 Victoria StreetHamilton HM 10Bermuda

Vasile (Frank) TimisExecutive ChairmanFrank Timis has been the Executive Chairman of the Company since 19 December 2006. He is the founder and former Executive Chairman of Regal Petroleum plc, which is listed on AIM. He is the founder and former Executive Chairman of Gabriel Resources Limited, a company listed on the Toronto Stock Exchange. Mr Timis is also the founder and former Executive Chairman, President and Chief Executive Offi cer of European Goldfi elds Limited, a company listed on the TSX Exchange and on AIM.

Alan WatlingChief Executive Offi cerAlan Watling joined the Board on 1 February 2009. He has had an illustrious career in management of major international rail and port facilities. Until 11 November 2008 Mr Watling was Chief Operating Offi cer at Fortescue Metals Group (ASX: FMG) (“Fortescue”). Fortescue, a greenfi elds project, was established and listed in June 2003. Within fi ve years, the company explored and identifi ed a 1.6 Billion tonne iron ore resource, raised funds totalling A$3.3 Billion, completed the design and construction of its mine, railway and port facilities and, in May 2008, commenced shipping iron ore to Asia. Fortescue is now the world’s fourth largest iron ore producer and operates one of the heaviest haul railways in the world. Prior to being appointed COO of Fortescue Mr Watling held senior positions within Fortescue and other multi-national companies focused on heavy haul rail, port and mine operations.

Jamie AlpenChief Financial Offi cerJamie Alpen joined the Board on 1 January 2007. He qualifi ed as an accountant in Australia and has extensive international experience in the resource industry. He joined Cluff Resources in 1994 as Finance Manager on the Ayanfuri project in Ghana. After the acquisition of Cluff Resources by Ashanti Goldfi elds he joined Cluff Mining (now Ridge Mining plc) as Financial Controller — Africa in 1998 and in 2001 assumed the role of acting Finance Director at Cluff Platinum Management (SA) Pty Limited in South Africa. From 2002 Jamie worked as an analyst for the Rio Tinto Group at its coal and uranium operations in Australia and more recently was Finance Director at Cluff Gold plc, a company focused on gold exploration and production in

West Africa.

Gibril BanguraGeneral ManagerGibril Bangura has been a Director of the Company since 30 January 1998 and has been General Manager of the Company’s Sierra Leone subsidiaries since 1996. Mr Bangura was born in Sierra Leone. From 1993 to 1995, Mr Bangura was the Financial Controller of Regent Star International, a Freetown-based mining company, and from 1991 to 1993 he was the Deputy General Manager and a Director of Bond Tak Mining company, also of Freetown, Sierra Leone. He has an Advanced Level Certifi cate from the American College in Cairo, Egypt and attended Atlanta Junior College, Atlanta, Georgia as an associate of the Arts and Business Management Faculty.

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Senior Management

AuditorsShipleys LLP10 Orange StreetHaymarketLondon WC2H 7DQ

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

Joint BrokerMirabaud Securities Limited 21 St James SquareLondon SW1Y 4JP

PR AdvisorCitigate Dewe Rogerson 3 London Wall Buildings, London, EC2M 5SY

UK SolicitorsClyde & Co51 EastcheapLondon EC3M 1JP

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

Registered Offi ceVictoria Place31 Victoria StreetHamilton HM 10Bermuda

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

Company Number34816



Marcus RestonProject Manager — Tonkolili Iron Ore Marcus has over 20 years minerals exploration experience operating in Asia-Pacifi c, the Americas and Africa. He has held senior management and exploration roles with explorers based in Australia, including Western Mining Corporation. Marcus has a Bachelor of Science Honours degree in Earth Science and a Masters of Science in Geochemistry. He is a Fellow of the Geological Society and a Member of the Australian Institute of Geoscientists.

Steve AllardVice President, InfrastructureSteve joined African Minerals in 2009. He is a graduate of QUT, from which he holds an Honours Degree in Mechanical Engineering. Prior to joining AML Steve held a senior position as Head of Port, Fortescue Metals Group, where he carried responsibility for the successful transition from design and construction into operations. He has extensive experience in the mining industry holding senior positions with major mining companies as well as extensive knowledge and experience in the maritime and hydropower fi elds.

John BlanningVice President, Mine EngineeringJohn joined African Minerals in 2009. He is a Civil Engineer with over 23 years mining experience, having most recently been Head of Mining at Fortescue Metals Group where he had responsibility for the development and operation of all mining activities in Fortescue’s 45 mtpa Greenfi elds project. Prior to joining Fortescue John held senior managerial positions with major mining houses in Australia where he gained extensive open pit mining experience.

Ms Rui DuManager, China BusinessMs Du joined the Company in January 2009. She holds a Master’s Degree in Commerce from the University of Sydney, NSW. Before joining AML she was the Quality Control Manager — China Business and Head of Business Analysis, Procurement, at Fortescue Metals Group.

Ian DicksonGeneral CounselIan Dickson joined the Company on 19 November 2007. He is a qualifi ed Barrister and spent fi ve years in private practice before moving into industry in 1983. Since then he has held senior positions in the legal departments of a number of large multi-national companies, with a particular emphasis on construction, IT and manufacturing companies. He has also established and managed in-house legal functions in start-up companies. Ian is a graduate of the University of London and an accredited mediator with CEDR, the Centre for Effective Dispute Resolution.

William McAvockGroup Financial ControllerWilliam McAvock is a Chartered Certifi ed Accountant with eight years of experience in public practice and seven years as Financial Controller of international groups. Immediately before joining the Company, he spent over three years at Adastra Minerals Inc., which was acquired by First Quantum Minerals Limited in 2006.

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18Directors’ Report

The Directors present their annual report on the affairs of the Group, together with the financial statements and auditors’ report, for the year ended 31 December 2008.

Principal ActivitiesThe principal activities of African Minerals Limited (“the Company”) and its subsidiaries (together “the Group”) are the exploration for various minerals located in Sierra Leone. The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed at note 14.

Business ReviewA review of the business during the year and to date with comments on future developments is contained in the Chairman’s Statement and Review of Operations.

Results and DividendsThe results of the Group appear in detail in the financial statements. The Directors do not recommend the payment of a dividend and will not make such recommendation until they consider it prudent to do so, having regard to the need to retain sufficient funds to finance the development of the Group’s activities.

Post-Balance Sheet EventsDisclosed in Note 26.

DirectorsThe Directors who held office during 2008 were as follows:

Frank Timis (Executive Chairman)

Roy Pitchford (Chief Executive Officer) (resigned 4 February 2009)

Jamie Alpen (Chief Financial Officer)

Gibril Bangura (General Manager — Sierra Leone)

Bruce Kirk (President, Iron Ore & Base Metals) (resigned 30 November 2008)

David Gadd-Claxton (President, Diamond Exploration and Production) (resigned 21 January 2008)

Mark Ashurst (Non-Executive Director) (appointed 22 January 2008)

Michael Wittet (Non-Executive Director) (resigned 8 April 2008)

Peter Truscott (Non-Executive Director) (appointed 8 April 2008)

Directors’ Interests

The Directors who held office at 31 December 2008 had the following beneficial interests in the ordinary share

capital of the Company:

Number of shares held by: 31 December 2008 31 December 2007

Frank Timis(1) 41,375,002 40,875,002

Gibril Bangura 5,292,624 5,292,624

Roy Pitchford — —

Jamie Alpen — —

Mark Ashurst 61,350 —

Peter Truscott — —

Note:(1) On 14 May 2008 CA Nominees Limited exercised certain share purchase warrants as nominee for CA Fiduciary Services Limited

which as Trustee of the Timis Trust wholly owns Timis Diamond Corporation, and purchased 500,000 new common shares in the Company at an exercise price of CAD$0.75 per common share. Mr Frank Timis is a beneficiary of the Timis Trust.

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Directors’ Share OptionsDetails of Directors’ share options are provided in the Directors’ Remuneration Report.

Supplier Payment PolicyThe Group’s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, ensure that suppliers are made aware of the terms of payment and abide by the terms of payment.

Substantial ShareholdingsAs at 31 December 2008, shareholdings of 3% or more of the issued share capital notified to the Company were:

Name Number Holding

Timis Diamond Corporation Limited(1) 41,375,002 22.06%

Prudential plc group of companies 27,700,000 14.77%

BlackRock Investment Management (UK) Limited 21,259,942 11.33%

RAB Capital Special Situations (Master) Fund Limited 18,115,188 9.66%

Capital Research Global Investors 17,586,000 9.38%

Audley European Opportunities Master Fund 15,420,000 8.22%

ABD Investments Limited 10,548,187 5.62%

Forest Nominees Limited(2) 6,448,375 3.43%

Forest Nominees Limited(3) 5,292,624 2.82%

(1) Timis Diamond Corporation Limited is wholly owned by Safeguard Management Limited as sole trustee of the Timis Trust. Frank Timis is a beneficiary of the Timis Trust.

(2) Forest Nominees Limited held 6,448,375 Common Shares on behalf of various private clients, none of whom had a notifiable holding.

(3) Forest Nominees Limited held 5,292,624 Common Shares as nominee on behalf of Curatus Trust Company (Mauritius) Limited, the sole trustee of The Twin Trust. Gibril Bangura is a beneficiary of The Twin Trust.

AuditorsShipleys LLP have indicated their willingness to remain in office and a resolution to reappoint them as Auditors will be proposed at the Annual General Meeting.

By order of the Board

Ian DicksonGeneral Counsel

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20Corporate Governance

The Company’s shares were admitted to trading on the Alternative Investment Market (AIM) of the London Stock Exchange on 15 February 2005. The Company is therefore subject to the AIM Admission Rules of the London Stock Exchange and is consequently not required to comply with the best practice corporate governance provisions contained within the Combined Code appended to the Listing Rules of the Financial Services Authority. However, the Directors have considered the provisions of the 2003 Financial Reporting Council Combined Code and summarise below how the principles have been applied in the Company and the extent of current compliance.

Principles of Good Corporate Governance and Code of Best Practice (The Combined Code)The Board intends that, so far as it considers it appropriate having regard to the size of the Company, it will comply with the Combined Code. The Board has established appropriately constituted Audit and Remuneration Committees with formally delegated responsibilities.

The BoardAfrican Minerals Limited is led by a strong and experienced Board, including highly experienced Non-Executive Directors.

The Board retains full and effective control of the Company. This includes determining the Company’s strategy and approving short and medium term plans for achieving this strategy. As appropriate, the Board has delegated certain responsibilities to Board committees. Standing committees of the Board include the Audit Committee and the Remuneration Committee, with each committee consisting entirely of Non-Executive Directors. The Nominations Committee comprises the whole Board. The Audit Committee is responsible for ensuring that the financial performance of the Group is properly measured, controlled and reported on and for reviewing reports from the auditors relating to the accounts and internal controls systems. The Remuneration Committee is responsible for making recommendations on the Company’s framework of executive remuneration and for determining specific remuneration packages for each Executive Director. The Board as a whole determines the remuneration of Non-Executive Directors. The Nominations Committee leads the process for Board appointments and succession planning.

The Board met in full session three times during the year to 31 December 2008, with ad hoc meetings being held on an as-needed basis. Due to the disparate location of the Directors, the Board has scheduled four meetings for the year ending 31 December 2009, with further ad hoc meetings requested when necessary. At each scheduled meeting, there is an operational and financial review which incorporates detailed commentary and analysis.

Prior to each Board meeting, Directors are sent a meeting agenda and a set of Board papers to be discussed at the meeting. Additional information is provided as appropriate. While the Board retains overall responsibility for the control of the Company, daily management is conducted by the Executive Chairman, Chief Executive Officer and Chief Financial Officer in consultation with local executive management in Sierra Leone. They meet or hold regular discussions to review operational decisions, strategic plans and proposals to submit to the Board for approval.

Relations with ShareholdersThe Annual Report and Accounts contains information on the activities of the Company for the preceding year and is sent to each shareholder on the share register. The interim report is also sent to every shareholder. Management keep shareholders informed with regular news releases via the London Stock Exchange RNS.

The Annual General Meeting is the principal forum for dialogue with shareholders.

Statement of Directors’ ResponsibilitiesBermudan Company law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and the profit or loss for that year. The Directors are required to prepare the financial statements of the Company and Group on the going concern basis unless it is inappropriate to presume the Company and Group will continue in business.

The Directors confirm that suitable accounting policies have been used and applied consistently. They also confirm that reasonable and prudent judgements and estimates have been made in preparing the financial statements for the year ended 31 December 2008 and that applicable accounting standards have been followed.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and for ensuring that the financial statements comply with International Financial Accounting Standards. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Ian DicksonGeneral Counsel

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Remuneration CommitteeThe Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for all Executive Directors and senior employees. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such Directors and employees on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team.

The Remuneration Committee makes recommendations to the Board on the remuneration policy that applies to Executive Directors and senior employees. No Director plays a part in any decision about his or her own remuneration.

Remuneration Policy for Executive DirectorsThe Group’s remuneration policy for Executive Directors is to:

a) having regard to the Director’s experience and the nature and complexity of their work, pay a competitive salary that attracts and retains management of the highest quality;

b) link individual remuneration packages to the Group’s long term performance through the award of share options; and

c) provide employment related benefits including the provision of medical and accidental death or disability insurance.

There are four main elements of the remuneration package for Executive Directors and senior management:

� Basic annual salary;

� Discretionary bonus;

� Share option incentives; and

� Benefits-in-kind

Directors’ ContractsAll full-time Executive Directors have contracts of employment which can be terminated by the employee giving one month’s notice and the Company twelve months’ notice apart from Frank Timis who draws a nominal salary.

Remuneration of Non-Executive DirectorsThe Non-Executive Directors receive fees for their services, which are agreed by the Board as a whole.

Directors’ remuneration, including Non-Executive Directors, during the year was as follows:

Year to 31 December 2008 Year to 31 December 2007 Total (US$) Total (US$) 1,846,055 2,915,469

The remuneration of the highest-paid Director was as follows:

Year to 31 December 2008 Year to 31 December 2007 Total (US$) Total (US$) 422,878 1,951,973*

Note:* This includes the issue and allotment of 500,000 new common shares of US$0.01 each

Directors’ Remuneration Report

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Directors’ Interests in Share OptionsDetails of options over the Company’s ordinary shares held by Directors under the share option scheme (the ‘Share Option Plan’) are as follows:

At At Exercise 31 December 31 December Price Date of Grant Expiry Date 2008 2007

Gibril Bangura 50p 22 November 2004 20 November 2009 1,000,000 1,000,000

Roy Pitchford 165.5p 6 September 2007 5 September 2012 500,000 500,000

149.5p 4 December 2007 3 December 2012 1,000,000 1,000,000

Jamie Alpen 115p 29 January 2007 28 January 2012 1,000,000 1,000,000

Bruce Kirk 156p 9 November 2007 8 November 2012 1,721,154 1,721,154

Mark Ashurst 117p 28 January 2008 27 January 2013 500,000 —

Peter Truscott 194.5p 15 May 2008 14 May 2013 1,000,000 —

The following share options were exercised during the year:

Number of Date of options Exercise Price Date of Grant Exercise exercisedTimis Diamond Corporation for issue to David Gadd-Claxton 75p 30 March 2005 16 May 2008 750,000

Subject to the rules of the Share Option Plan and the requirements noted below, each of the outstanding options is exercisable as follows:

— one-third of the shares under option following the first anniversary of the date of grant,

— a further one-third of the shares under option following the second anniversary of the date of grant,

— the final one-third of the shares under option following the third anniversary of the date of grant,

provided that the option holder remains a Director of the Company, or if the option holder’s employment is terminated, within ninety days of the termination.

On behalf of the Board

Christopher Duffy

Chairman of the Remuneration Committee

Directors’ Remuneration Reportcontinued

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Independent Auditors’ Reportto the Shareholders of African Minerals Limited

We have audited the Group financial statements (the financial statements) of African Minerals Limited for the year ended 31 December 2008 which comprise the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related notes. These financial statements have been prepared under the accounting policies set out therein.

Our report has been prepared pursuant to the requirements of the Companies Act 1981 as enacted in Bermuda relating to the responsibilities of auditors and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of the Companies Act 1981 or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Respective responsibilities of Directors and Auditors

The Directors’ responsibilities for preparing the report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view in accordance with applicable law and IFRS as adopted by the European Union. We also report to you if, in our opinion, the Company has not kept proper accounting records or if we have not received all the information and explanations we require for our audit.

We read other information contained in the report to consider whether it is consistent with the audited financial statements. The other information comprises the Highlights for 2008, the Chairman’s Statement, the Review of Operations, the Social Development Projects in 2008, the Directors and Senior Management, the Directors’ Report, the Corporate Governance Statement and the Directors’ Remuneration Report. Our responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the Group financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the Group’s affairs as at 31 December 2008 and of its loss for the year then ended.

Shipleys LLPChartered Accountants and Registered Auditors10 Orange StreetHaymarketLondon WC2H 7DQ22 May 2009

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24Consolidated Income Statementfor the year ended 31 December 2008

Year ended Year ended

31 December 31 December

2008 2007

Note US$ US$

Revenue 1 2,213,905 7,492,811

Cost of sales (5,997,029) (16,535,455)

Gross loss (3,783,124) (9,042,644)

Impairment of intangible fi xed assets 12 (12,735,143) (15,969,396)

Net operating expenses 3 (36,945,937) (17,331,654)

Profi t on investment in subsidiary 4 28,763,034 —

Operating loss (24,701,170) (42,343,694)

Interest receivable 8 1,084,478 1,608,884

Loss before tax (23,616,692) (40,734,810)

Tax 9 — (1,520,562)

Loss for the year (23,616,692) (42,255,372)

Basic and diluted loss per share - cents 10 14.33 30.05

All activities are continuing operations.

There were no recognised gain and losses other than those stated above.

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Consolidated and Company Balance Sheetat 31 December 2008

Group Company Group Company

2008 2008 2007 2007

Note US$ US$ US$ US$

Non-current assets

Intangible fi xed assets 12 76,760,367 22,919,401 42,463,439 —

Tangible fi xed assets 13 14,655,954 816,449 22,830,262 —

Investments 14 — 1,002 — 502

Debtors 15 — 147,146,491 — 113,497,812

Total non-current assets 91,416,321 170,883,343 65,293,701 113,498,314

Current assets

Inventories 17 1,720,186 — 2,607,033 —

Trade and other receivables 15 22,492,416 903,892 3,582,248 2,451,899

Financial assets at fair value through profi t or loss 18 8,328,411 8,328,411 — —

Short term investments 19 — — 41,158,671 41,158,671

Cash and cash equivalents 20 28,859,165 24,044,166 3,002,816 1,945,210

Total current assets 61,400,178 33,276,469 50,350,768 45,555,780

Total assets 152,816,499 204,159,812 115,644,469 159,054,094

Equity

Share capital 21 1,875,174 1,875,174 1,552,582 1,552,582

Share premium account 209,136,256 209,136,256 161,811,643 161,811,643

Equity reserves 9,942,383 9,942,383 5,999,876 5,999,876

Profi t and loss account (82,302,856) (19,843,060) (58,968,839) (11,816,059)

Attributable to equity holders of the parent company 138,650,957 201,110,753 110,395,262 157,548,042

Minority interest 7,300,022 — — —

Total equity 145,950,979 201,110,753 110,395,262 157,548,042

Non-current liabilities

Provisions 23 1,165,364 — 669,587 —

Total non-current liabilities 1,165,364 — 669,587 —

Current liabilities

Trade and other payables 24 5,700,156 3,049,059 4,579,620 1,506,052

Total liabilities 6,865,520 3,049,059 5,249,207 1,506,052

Total equity and liabilities 152,816,499 204,159,812 115,644,469 159,054,094

The fi nancial statements were approved by the Board on 22 May 2009 and were signed on its behalf by:

Frank Timis

Director and Executive Chairman

Jamie Alpen

Director and Chief Financial Offi cer

Global Reports LLC

26Consolidated Cash Flow Statementfor the year ended 31 December 2008

Year ended Year ended


2008 2007

US$ US$

Loss for the year (23,616,692) (40,734,810)

Share-based payments 4,868,504 4,209,991

Depreciation of tangible fi xed assets 5,982,436 5,124,775

Amortisation of intangible fi xed assets 2,808,571 2,768,000

Impairment of intangible fi xed assets 12,735,143 15,969,396

Loss on disposal of tangible fi xed assets 3,445,398 20,121

Loss on disposal of intangible fi xed assets — 209,267

Profi t on investment in subsidiary (28,763,034) —

Increase in provisions 495,777 230,625

Unrealised foreign exchange loss 2,092,414 —

Interest received (1,084,478) (1,608,884)

Operating loss before working capital changes (21,035,961) (13,811,519)

Decrease/(increase) in inventories 886,847 (630,924)

Decrease/(Increase) in trade and other receivables 1,089,875 (3,322,331)

Decrease in fi nancial assets at fair value through profi t or loss 6,671,993 —

Increase in trade and other payables 1,120,536 3,373,951

Net cash fl ow from operating activities (11,266,710) (14,390,823)

Cash fl ows from investing activities

Interest received 1,084,478 1,608,884

Proceeds of sales of tangible assets 434,000 12,485

Payments to acquire tangible assets (1,687,526) (9,153,970)

Payments to acquire intangible assets (42,639,158) (18,461,011)

Payments to acquire fi nancial assets (1,443,850) —

Investment in subsidiary 4,667,288 —

Decrease/(increase) in short term deposits with banks 41,158,671 (19,620,236)

Net cash infl ow/(outfl ow) from investing activities 1,573,903 (45,613,848)

Cash fl ows from fi nancing activities

Proceeds of ordinary share issue 32,988,447 60,604,336

Proceeds of exercise of options 1,111,612 307,395

Proceeds of exercise of warrants 1,449,097 —

Net cash infl ow from fi nancing activities 35,549,156 60,911,731

Net increase/(decrease) in cash and cash equivalents 25,856,349 907,060

Cash and cash equivalents at beginning of year 3,002,816 2,095,756

Cash and cash equivalents at end of year 28,859,165 3,002,816

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Consolidated Statement of Changes in Equityfor the year ended 31 December 2008

Share Profi t and

Share premium Equity loss

capital account reserves account Total

Note US$ US$ US$ US$ US$

As at 1 January 2007 1,300,032 101,056,581 1,940,026 (16,767,727) 87,528,912

Allotments during the year 252,550 66,324,736 — — 66,577,286

Issue expenses - shares — (3,869,619) — — (3,869,619)

Issue expenses - warrants — (1,700,055) 1,700,055 — —

Share-based payments — — 2,414,055 — 2,414,055

Reserves transfer - options — — (54,260) 54,260 —

Loss for the year — — — (42,255,372) (42,255,372)

As at 31 December 2007 1,552,582 161,811,643 5,999,876 (58,968,839) 110,395,262

As at 1 January 2008 1,552,582 161,811,643 5,999,876 (58,968,839) 110,395,262

Allotments during the year 322,592 48,290,887 — — 48,613,479

Issue expenses - shares — (1,609,596) — — (1,609,596)

Issue expenses - warrants — (107,760) 107,760 — —

Share-based payments — — 4,868,504 — 4,868,504

Reserves transfer - options — — (241,725) 241,725 —

Reserves transfer - warrants — 751,082 (792,032) 40,950 —

Loss for the year — — — (23,616,692) (23,616,692)

As at 31 December 2008 21/22 1,875,174 209,136,256 9,942,383 (82,302,856) 138,650,957

Global Reports LLC

28Notes to the Financial Statementsfor the year ended 31 December 2008

1. Accounting Policies

African Minerals Limited is registered and domiciled in Bermuda and is listed on the AIM market of the London Stock Exchange.

Statement of compliance

The consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted

by the International Accounting Standards Board (IASB), and interpretations issued by the Standing Interpretations Committee of the IASB.

Basis of preparation

The Group fi nancial statements have been prepared in accordance with the historical cost basis and are presented in US dollars. All values

are rounded to the nearest dollar.

The preparation of fi nancial statements in conformity with IFRS requires management to make judgements, estimates and assumptions

that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated

assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of

which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the

period in which the estimate is revised if the revision only affects that period, or in the period of revision and future periods if the revision

affects both current and future periods.

The accounting policies set out below have been applied consistently to all periods presented in the fi nancial statements by all Group

entities.

Basis of consolidation

Subsidiaries

The consolidated fi nancial statements incorporate the fi nancial information of African Minerals Limited and its subsidiaries. Subsidiaries are

those entities over whose fi nancial and operating policies the Group has the power to exercise control. Where necessary, the accounting

policies of the subsidiaries are adjusted to ensure consistency with the policies adopted by the Group.

Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in

preparing the consolidated fi nancial statements.

Intangible fi xed assets

Exploration and evaluation costs arising following the acquisition of an exploration licence are capitalised on a project by project basis

pending determination of the technical feasibility and commercial viability of the project. Costs incurred include appropriate technical and

administrative overheads. Deferred exploration costs are carried at historical cost less any impairment losses recognised.

If an exploration project is successful, the related costs will be transferred to mining assets and amortised over the estimated life of mineral

reserves on a unit of production basis. Where a project is relinquished, abandoned, or is considered to be of no further commercial value to

the Company, the related costs are written off.

The recoverability of deferred exploration costs is dependent upon the discovery of economically recoverable mineral reserves, the ability of

the Company to obtain necessary fi nancing to complete the development of mineral reserves and future profi table production or proceeds

from the disposal thereof.

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Tangible Fixed Assets

Exploration costs are capitalised as intangible fi xed assets until a decision is made to proceed to development. Related costs are then

transferred to mining assets. Before reclassifi cation, exploration costs are assessed for impairment and any impairment loss recognised in

the profi t and loss account. Subsequent development costs are capitalised under mining assets, together with any amounts transferred

from intangible exploration assets. Mining assets are amortised over the estimated life of the commercial mineral reserves on a unit of

production basis.

Plant and machinery, fi xtures and fi ttings, motor vehicles and leasehold improvements are shown at cost less accumulated depreciation

and impairment losses. The cost of tangible fi xed assets is their purchase cost, together with any incidental cost of purchase.

Depreciation is charged to the income statement on a straight-line basis over the expected useful lives of the assets concerned. The

depreciation rates are as follows:

%

Plant and machinery 20-30

Fixtures and fi ttings 20-30

Subsequent expenditure relating to a fi xed asset item is capitalised when it is probable that future economic benefi ts from the use of the

asset will be increased. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. Repairs and

maintenance which neither materially add to the value of assets nor appreciably prolong their useful lives are charged against income.

Surpluses/(defi cits) on the disposal of fi xed assets are credited/(charged) to income. The surplus or defi cit is the difference between the

net disposal proceeds and the carrying amount of the asset.

Financial instruments

Trade and other receivables

Trade and other receivables are stated at cost less provision for doubtful debts.

Cash and cash equivalents

Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at the balance sheet date.

Short-term investments

Deposits with fi nancial institutions that are not repayable on demand without penalty are classifi ed as short-term investments and are

included within investing activities in the cash fl ow statement. Interest on short-term investments is recognised on an accruals basis

over the life of the investment.

Derivative instruments

Derivative instruments are measured at fair value.

Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of

impairment. An asset’s carrying value is written down to its estimated recoverable amount, being the higher of its net selling price and value

in use, if that is less than the asset’s carrying amount.

Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, as each project has the

potential to be an economically viable cash generating unit. An impairment review is undertaken when indicators of impairment arise but

normally when one of the following conditions apply:

— unexpected geological occurrences render a deposit uneconomic

— title to an asset is compromised

— variations in commodity prices render the project uneconomic

— variations in the currency of operation

— variations to the fi scal and tax legislation in the country of operation

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Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost

with any difference between the proceeds (net of transaction costs) and the redemption value recognised in the income statement over the

period of the borrowings using the effective interest rate method.

Revenue

Revenue comprises gross diamond sale proceeds less selling costs. Selling costs include marketing commissions and costs,

transportation, insurance and security costs and government royalty payments.

Operating leases

Payments made under operating leases are recognised on a straight-line basis over the term of the lease.

Net fi nancing costs

Net fi nancing costs comprise interest payable on borrowings calculated using the effective interest rate method and interest receivable on

funds invested.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the

fi nancial statements and the corresponding tax bases used in the computation of taxable profi t or loss. Deferred tax is provided using the

full liability method.

A deferred tax asset is recognised to the extent that it is probable that future taxable profi ts will be available against which the associated

unused tax losses and deductible temporary differences can be utilised.

Foreign currencies

Transactions denominated in foreign currencies are translated at the exchange rate ruling at the date of transaction. Monetary assets and

liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Any gain or loss arising

from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the profi t and loss

account.

Inventories

Inventories of rough diamonds have been valued at estimated market values prevailing at 31 December 2008, with the amounts so

determined reduced by the application of anticipated margins. The use of this method results in a carrying value of rough diamond inventory

which approximates to the lower of cost and net realisable value.

Provisions

Provisions are recognised when the Group has an obligation as a result of past events, for which it is probable that an outfl ow of resources

will be required to settle the obligation and the amount can be reliably estimated.

The estimated cost of environmental rehabilitation on mine closure is based on the present value of estimated costs and a provision is

raised accordingly.

Share-based payments

The Group issues equity-settled share-based payments to certain Directors, offi cers, employees and suppliers. Fully-paid shares are valued

at market value at the date of issue. Options and warrants are valued at fair value at the date of grant and are expensed on a straight-line

basis over the estimated vesting period.

Fair value is measured by use of the Black-Scholes pricing model. The estimated life of the instrument used in the model has been

adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Segment reporting

A segment is a component of the Group distinguishable by geographical location (geographical segment), or by its economic activity

(business segment), which is subject to risks and rewards that are different from those of other segments.

Notes to the Financial Statementsfor the year ended 31 December 2008 continued

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2. Segment Reporting

Gold and

Business Segments Iron Ore base metals Diamonds Infrastructure Corporate Total

2008 US$ US$ US$ US$ US$ US$

Revenue — — 2,213,905 — — 2,213,905

Operating loss (1,587,511) (23,203) (12,782,141) (15,981) (10,292,334) (24,701,170)

Interest receivable — — — — 1,084,478 1,084,478

Tax — — — — — —

Loss for the year (1,587,511) (23,203) (12,782,141) (15,981) (9,207,856) (23,616,692)

Segment assets 71,385,782 6,210,196 40,552,160 (50,582) 34,718,943 152,816,499

Segment liabilities 1,025,143 815,113 785,268 150,311 4,089,685 6,865,520

Cash utilised in operations 1,094,073 10,165,096 (469,709) 130,997 (22,187,167) (11,266,710)

Cash fl ows from investing (18,339,647) (15,137,751) (2,326,088) (3,022,931) 40,400,320 1,573,903

Cash fl ows from fi nancing — — — — 35,549,156 35,549,156

Net movement in cash

and cash equivalents (17,245,574) (4,972,655) (2,795,797) (2,891,934) 53,762,309 25,856,349

Capital expenditure on

tangible assets 661,683 103,492 89,372 — 832,979 1,687,526


intangible assets 29,546,736 7,832,775 2,236,716 3,022,931 — 42,639,158

Depreciation of tangible

fi xed assets 1,387,887 5,171 4,495,651 — 93,727 5,982,436

Amortisation of intangible

fi xed assets — — 2,808,571 — — 2,808,571

Impairment of tangible

fi xed assets — 9,743,953 2,991,190 — — 12,735,143

Geographical Segments Sierra Leone Canada Bermuda UK Guernsey Total

2008 US$ US$ US$ US$ US$ US$

Revenue 1,884,187 — 329,718 — — 2,213,905

Segment assets 116,070,206 2,103,091 34,093,921 524,552 24,729 152,816,499

Segment liabilities 3,071,560 488,704 3,049,059 254,752 1,445 6,865,520

Cash utilised in operations (672,146) 8,214,521 (15,532,915) (3,239,188) (36,982) (11,266,710)

Cash fl ows from investing (28,997,728) (9,828,689) 40,409,991 860 (10,531) 1,573,903

Cash fl ows from fi nancing — — 35,549,156 — — 35,549,156

Net movement in cash and

cash equivalents (29,669,874) (1,614,168) 60,426,232 (3,238,328) (47,513) 25,856,349


tangible assets 854,547 — 816,448 6,000 10,531 1,687,526


intangible assets 40,011,953 2,627,205 — — 42,639,158

Depreciation of tangible

fi xed assets 5,951,723 — — 30,073 640 5,982,436

Amortisation of intangible

fi xed assets 2,808,571 — — — — 2,808,571

Impairment of tangible

fi xed assets 4,906,454 7,828,689 — — — 12,735,143

Global Reports LLC

32Notes to the Financial Statementsfor the year ended 31 December 2008 continued

2. Segment Reporting continued

Gold and

Business Segments Iron Ore base metals Diamonds Corporate Total

2007 US$ US$ US$ US$ US$

Revenue — — 7,492,811 — 7,492,811

Operating loss (97,135) (51,589) (34,065,801) (8,129,169) (42,343,694)

Interest receivable — — — 1,608,884 1,608,884

Tax — — (1,520,562) — (1,520,562)

Loss for the year (97,135) (51,589) (35,586,363) (6,520,285) (42,255,372)

Segment assets 18,145,074 855,383 50,202,635 46,441,377 115,644,469

Segment liabilities 724,522 271,065 690,666 3,562,955 5,249,207

Cash utilised in operations (182,671) 228,927 (10,993,660) (3,443,419) (14,390,823)

Cash fl ows from investing (15,605,919) (2,704,480) (9,185,454) (18,117,995) (45,613,848)

Cash fl ows from fi nancing — — — 60,911,731 60,911,731

Net movement in cash and cash equivalents (15,788,590) (2,475,554) (20,179,114) 39,350,318 907,060

Capital expenditure on tangible assets 5,973,203 46,308 3,015,331 119,128 9,153,970

Capital expenditure on intangible assets 9,632,716 2,658,172 6,170,123 — 18,461,011

Depreciation of tangible fi xed assets 39,943 9,451 4,990,763 84,618 5,124,775

Amortisation of intangible fi xed assets — — 2,768,000 — 2,768,000

Impairment of tangible fi xed assets — — 15,969,396 — 15,969,396

Geographical Segments Sierra Leone Bermuda UK Total

2007 US$ US$ US$ US$

Revenue 6,860,535 632,276 — 7,492,811

Segment assets 69,467,386 45,555,780 621,303 115,644,469

Segment liabilities 3,505,082 1,506,052 238,073 5,249,207

Cash utilised in operations (10,401,007) (2,137,933) (1,851,883) (14,390,823)

Cash fl ows from investing (27,526,587) (18,019,982) (67,279) (45,613,848)

Cash fl ows from fi nancing — 60,911,731 — 60,911,731

Net movement in cash and cash equivalents (37,927,594) 40,753,816 (1,919,162) 907,060

Capital expenditure on tangible assets 9,065,576 — 88,394 9,153,970

Capital expenditure on intangible assets 18,461,011 — — 18,461,011

Depreciation of tangible fi xed assets 5,083,201 — 41,574 5,124,775

Amortisation of intangible fi xed assets 2,768,000 — — 2,768,000

Impairment of tangible fi xed assets 15,969,396 — — 15,969,396

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2. Segment Reporting continued

Geographical Analysis of Net Operating Expenses

Sierra Leone Bermuda UK Guernsey Total

Year ended 31 December 2008 US$ US$ US$ US$ US$

Depreciation of tangible fi xed assets 5,951,723 — 30,073 640 5,982,436

Amortisation of intangible fi xed assets 2,808,571 — — — 2,808,571

Loss on disposal of tangible fi xed assets 3,017,912 416,000 11,486 — 3,445,398

Employee costs 380,436 499,811 1,816,664 — 2,696,911

Foreign exchange differences 29,517 4,341,158 70,326 3,045 4,444,046

Other operating charges 1,188,052 3,480,471 1,332,530 27,025 6,028,078

Financial assets at fair value through profi t

or loss - fair value losses — 6,671,993 — — 6,671,993

Share-based payments — 4,868,504 — — 4,868,504

13,376,211 20,277,937 3,261,079 30,710 36,945,937

Sierra Leone Bermuda UK Guernsey Total

Year ended 31 December 2007 US$ US$ US$ US$ US$

Depreciation of tangible fi xed assets 5,083,201 — 41,574 — 5,124,775

Amortisation of intangible fi xed assets 2,768,000 — — — 2,768,000

Loss on disposal of tangible fi xed assets — — 20,121 — 20,121

Loss on disposal of intangible fi xed assets 209,267 — — — 209,267

Employee costs — 715,556 814,419 — 1,529,975

Foreign exchange differences 46,698 (609,166) (2,631) — (565,099)

Other operating charges 1,238,460 1,603,420 1,192,744 — 4,034,624

Share-based payments — 4,209,991 — — 4,209,991

9,345,626 5,919,801 2,066,227 — 17,331,654

3. Net Operating Expenses

2008 2007

US$ US$

Depreciation of tangible fi xed assets 5,982,436 5,124,775

Amortisation of intangible fi xed assets 2,808,571 2,768,000

Loss on disposal of tangible fi xed assets 3,445,398 20,121

Loss on disposal of intangible fi xed — 209,267

Employee costs 2,696,911 1,529,975

Foreign exchange differences 4,444,046 (565,099)

Other operating charges 6,028,078 4,034,624

Financial assets at fair value through profit

or loss - fair value losses 6,671,993 —

32,077,433 13,121,663

Share-based payments:

Options (See Note 22) 4,868,504 2,414,055

Fully-paid shares — 1,795,936

4,868,504 4,209,991

36,945,937 17,331,654

Net operating expenses include:

2008 2007

US$ US$

Auditors’ remuneration:

— audit services 125,713 150,000

— other services 18,175 24,549

Operating leases payments 525,442 391,107

assets

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4. Profi t on Investment in Subsidiary

During the year, Cape Lambert Iron Ore Limited (“CLIO”) made an investment in the company’s subsidiary, Marampa Iron Ore Limited of

US$36,063,056 (comprising shares in CLIO of US$11,395,725 and funding for a feasibility study of the Marampa project of US$24,667,331

in cash (US$20,000,000 deferred)) in return for receiving new shares in Marampa Iron Ore Limited representing 30% of the total share

capital of Marampa Iron Ore Limited. The profi t made by African Minerals Limited on the investment by CLIO amounted to US$28,763,034.

5. Directors’ Emoluments

2008 2007

US$ US$

Aggregate emoluments 1,846,055 2,915,469

Detailed disclosures of the Directors’ remuneration and interests in shares and options over the Company’s shares are shown in the Report

of the Remuneration Committee.

No Director has retirement benefi ts accruing to him as a result of his services to the Group.

6. Employee Information

The number of employees at the various mining and exploration operations (excluding the Non-Executive Directors of the Group) at the end

of the year was 870 (2007: 748).

7. Employee Costs

2008 2007

US$ US$

Wages and salaries 6,800,869 8,779,354

Social security costs 406,312 315,047

7,207,181 9,094,401

Staff costs include an amount of US$3,313,562 capitalised to intangible assets (2007: US$3,170,576).

8. Interest Receivable

2008 2007

US$ US$

Interest receivable on short term investments 1,084,478 1,608,884

9. Taxation

2008 2007

US$ US$

Deferred tax charge/(credit) — 1,520,562

10. Loss Per Share

2008 2007

US$ US$

Loss for the year (23,616,692) (42,255,372)

Shares Shares

Basic weighted average number of common shares in issue 164,695,368 140,590,557

Basic loss per share - cents 14.33 30.05

Given the Group’s loss for the year, the diluted loss per share is the same as the basic loss per share.

Notes to the Financial Statementsfor the year ended 31 December 2008 continued

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11. Parent Company Result for the Financial Year

The result for the year for African Minerals Limited was a loss of US$8,309,676 (2007: loss US$3,687,270).

12. Intangible Fixed Assets

Total

US$

Cost

At 1 January 2007 30,747,662

Additions 18,461,011

Disposals (209,267)

Transfer from tangible assets 12,201,429

As at 31 December 2007 61,200,835

At 1 January 2008 61,200,835

Additions 49,840,642

As at 31 December 2008 111,041,477

Amortisation

At 1 January 2007 —

Charge for the year 2,768,000

Impairment 15,969,396

As at 31 December 2007 18,737,396

At 1 January 2008 18,737,396

Charge for the year 2,808,571

Impairment 12,735,143

As at 31 December 2008 34,281,110

Net book value

At 1 January 2007 30,747,662

At 31 December 2007 42,463,439

At 1 January 2008 42,463,439

At 31 December 2008 76,760,367

Intangible fi xed 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 writes off any deferred

exploration expenditure that it believes to be unrecoverable. The Board of Directors undertook an impairment review of the Group’s

intangible assets as at 31 December 2008. The resultant impairment charges and rationales are as follows:

Net book value Net book value

as at as at


2008 before 2008 after

impairment Impairment impairment

charge charge charge

Project US$ US$ US$

White River Resources1 9,828,689 7,828,689 2,000,000

Konama Alluvial2 22,991,190 2,991,190 20,000,000

Gori Hills3 5,915,264 1,915,264 4,000,000

Total 38,735,143 12,735,143 26,000,000

1. Steep decline in nickel prices during 2008, early stage exploration, no further exploration programme currently scheduled and

company focus presently on iron ore assets in Sierra Leone.

2. Steep decline in rough diamond prices during 2008, exploration activities currently on hold due to iron ore focus and reducing carrying

value to recent external valuation.

3. Steep decline in nickel prices during 2008 and further exploration activities currently on hold due to iron ore focus. However,

prospectivity for lateritic nickel at the project remains high and exploration work has been carried out on only a relatively small area

within the relevant exploration licence.

costs

Global Reports LLC


12. Intangible Fixed Assets continued

A signifi cant part of this year’s impairment charge to intangible assets relates to the purchase of White River Resources Inc. (“WRR”), for

which the Company issued its own shares, as opposed to cash, as consideration for the net assets (mainly intangible fi xed assets) of WRR.

The Directors are of the opinion that, after these impairment reviews and associated write-downs, the carrying value of the tangible and

intangible assets in relation to the Company’s projects are stated at a fair value. The carrying values will be subject to an ongoing review, as

the Company forms future strategic alliances and partnerships and market conditions that impact the Company’s operations and

activities change.

13. Tangible Fixed Assets

Mining Plant & Fixtures &

Assets machinery fi ttings Total

US$ US$ US$ US$

Cost

At 1 January 2007 12,201,429 22,515,678 975,016 35,692,123

Additions — 8,775,991 377,979 9,153,970

Transfer to intangible assets (12,201,429) — — (12,201,429)

Disposals — (28,326) (40,340) (68,666)

As at 31 December 2007 — 31,263,343 1,312,655 32,575,998

At 1 January 2008 — 31,263,343 1,312,655 32,575,998

Additions — 1,568,166 119,360 1,687,526

Disposals — (5,160,281) (861,502) (6,021,783)

As at 31 December 2008 — 27,671,228 570,513 28,241,741

Depreciation

At 1 January 2007 — 4,331,701 325,320 4,657,021

Charge for the year — 4,839,222 285,553 5,124,775

Disposals — (17,138) (18,922) (36,060)

As at 31 December 2007 — 9,153,785 591,951 9,745,736

At 1 January 2008 — 9,153,785 591,951 9,745,736

Charge for the year — 5,740,058 242,378 5,982,436

Disposals — (1,818,896) (323,489) (2,142,385)

As at 31 December 2008 — 13,074,947 510,840 13,585,787

Net book value

At 1 January 2007 12,201,429 18,183,977 649,696 31,035,102

At 31 December 2007 — 22,109,558 720,704 22,830,262

At 1 January 2008 — 22,109,558 720,704 22,830,262

At 31 December 2008 — 14,596,281 59,673 14,655,954

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14. Investments

Company Company

2008 2007

US$ US$

Cost and net book value

At 1 January 502 2

Additions 500 500

At 31 December 1,002 502

The undertakings in which the Group’s interest at the year end is more than 20% are as follows:

Class of Percentage Percentage

Country share held held

Subsidiary undertaking of incorporation capital held Principal activity 2008 2007

African Minerals (UK) Ltd England Ordinary Service and 100% 100%

holding company

SLDC Management Ltd Sierra Leone Ordinary Holding company 100% 100%

African Minerals (SL) Ltd* Sierra Leone Ordinary Diamond exploration 100% 100%

and service company

Tonkolili Iron Ore Ltd Bermuda Ordinary Holding company 100% 100%

Marampa Iron Ore Ltd Bermuda Ordinary Holding company 70% 100%

Sierra Leone Gold Ltd Bermuda Ordinary Holding company 100% 100%

Sierra Leone Hard Rock Ltd Bermuda Ordinary Holding company 100% 100%

Gori Hills Nickel Ltd Bermuda Ordinary Holding company 100% 100%

Tonkolili Iron Ore (SL) Ltd Sierra Leone Ordinary Iron ore exploration 100% 100%

Marampa Iron Ore (SL) Ltd Sierra Leone Ordinary Iron ore exploration 70% 100%

Sierra Leone Gold (SL) Ltd Sierra Leone Ordinary Gold and base 100% 100%

metals exploration

Sierra Leone Hard Rock (SL) Ltd Sierra Leone Ordinary Diamond exploration 100% 100%

Gori Hills Nickel (SL) Ltd Sierra Leone Ordinary Nickel exploration 100%

Nimini Hills Nickel Ltd Bermuda Ordinary Holding company 100%

Nimini Hills Nickel (SL) Ltd Sierra Leone Ordinary Nickel exploration 100%

Lovetta Uranium Ltd Bermuda Ordinary Holding company 100%

Lovetta Uranium (SL) Ltd Sierra Leone Ordinary Uranium exploration 100%

African Minerals (Guernsey) Ltd Guernsey Ordinary Service company 100%

White River Resources Ltd Bermuda Ordinary Holding company 100%

White River Resources Inc Canada Ordinary Nickel exploration 100%

African Railway & Port Services Ltd Bermuda Ordinary Holding company 100%

African Railway & Port Services (SL) Ltd Sierra Leone Ordinary Infrastructure company 100%

African Power Ltd Bermuda Ordinary Holding company 100%

*The company changed its name from SLDC Exploration Limited on 28 April 2008.

Global Reports LLC


15. Trade and Other Receivables


31 December 31 December 31 December 31 December

2008 2008 2007 2007

US$ US$ US$ US$

Non-current

Amounts owed by Group companies — 147,146,491 — 113,497,812

— 147,146,491 — 113,497,812

Current

Trade receivables 10,239 — 2,317 —

VAT Recoverable 185,522 — 68,261 —

Other debtors 20,323,700 307,395 307,403 307,395

Prepayments and accrued income 1,972,955 596,497 3,204,267 2,144,504

22,492,416 903,892 3,582,248 2,451,899

As at 31 December 2008, other debtors of the Group included US$20,000,000 deferred funding to undertake a feasibility study of the

Marampa project (see note 4).

16. Deferred Taxation

Asset Liability Net

Recognised deferred tax asset and liabilities 2008 US$ US$ US$

Property plant and equipment — — —

Employee benefi t plan — — —

Site restoration provision — — —

Tax loss carry forward — — —

— — —

Opening Recognised in Recognised Closing

balance profi t & loss in equity balance

Movement in temporary timing differences 2008 US$ US$ US$ US$

Property plant and equipment — — — —

Employee benefi t plan — — — —

Site restoration provision — — — —

Tax loss carry forward — — — —

— — — —

Asset Liability Net

Recognised deferred tax asset and liabilities 2007 US$ US$ US$

Property, plant and equipment — — —

Employee benefi t plan — — —

Site restoration provision — — —

Tax loss carry forward — — —

— — —

Opening Recognised in Recognised Closing

balance profi t & loss in equity balance

Movement in temporary timing differences 2007 US$ US$ US$ US$

Property, plant and equipment 11,200,838 (11,200,838) — —

Employee benefi t plan (78,439) 78,439 — —

Site restoration provision (53,250) 53,250 — —

Tax loss carry forward (12,589,711) 12,589,711 — —

(1,520,562) 1,520,562 — —

Global Reports LLC

39



16. Deferred Taxation continued

2008 2007

Deferred Tax Account US$ US$

Balance brought forward — (1,520,562)

Charge/(credit) for the year — 1,520,562

— —

17. Inventories


2008 2007

US$ US$

Diamonds held for resale 237,448 1,884,187

Gold 414,899 285,092

Consumables and stores 1,067,839 437,754

1,720,186 2,607,033

18. Financial Assets at Fair Value through Profi t or Loss



2008 2008 2007 2007

US$ US$ US$ US$

Listed securities:

Equity securities - UK 1,002,037 1,002,037 — —

Equity securities - Australia 7,236,374 7,236,374 — —

8,238,411 8,238,411 — —

Financial asset at fair value through profi t or loss are presented within ‘operating activities’ as part of changes in working capital in the cash

fl ow statement.

Changes in fair values of fi nancial assets at fair value through profi t or loss are recorded in ‘Net operating expenses’ in the Income

Statement.

19. Short Term Investments



2008 2008 2007 2007

US$ US$ US$ US$

Short term deposits with banks — — 41,158,671 41,158,671

— — 41,158,671 41,158,671

Global Reports LLC


20. Financial Instruments

The Group uses fi nancial instruments comprising cash, liquid resources and items such as short term debtors and creditors that arise from

its operations. The principal risks relate to currency exposure and liquidity. Short term debtors and creditors have been excluded from the

following disclosures.

The Group uses fi nancial instruments to maximise returns from funds held on deposit. The Group’s policy is to raise cash in advance of

when it is required by analysing the costs and benefi ts of equity and debt fi nancing.

The breakdown of the Group and Company fi nancial assets as at 31 December 2008 is shown below:



2008 2008 2007 2007

US$ US$ US$ US$

Cash and bank balances 28,859,165 24,044,166 3,002,816 1,945,210

Short term investments:

Short term deposits with banks — — 41,158,671 41,158,671

28,859,165 24,044,166 44,161,487 43,103,881

In respect of monetary assets and liabilities held in currencies other than US dollars, the Group ensures that net exposure is kept to an

acceptable level by buying or selling foreign currencies at spot rates where necessary to address short term imbalances. Foreign exchange

differences on retranslation of such assets and liabilities are taken to the income statement.

Financial assets consist of short-term deposits in US dollars and pounds sterling which earn market interest rates.

21. Share Capital

2008 2007

Number of 2008 Number of 2007

shares US$ shares US$

Authorised

Common shares of US$0.01 each 350,000,000 3,500,000 250,000,000 2,500,000

Preference shares of US$0.001 each 100,000,000 100,000 100,000,000 100,000

Issued and fully paid

At 1 January 155,258,241 1,552,582 130,003,241 1,300,032

Allotments during the year 32,259,200 322,592 25,255,000 252,550

At 31 December 187,517,441 1,875,174 155,258,241 1,552,582

i. On 11 April 2008, 150,000 new common shares were issued for consideration of US$341,895 on the exercise of share purchase

warrants.

ii. On 14 April 2008, 1,500,000 new common shares with a value of US$4,741,812 were issued to Umbono Capital Partners LLC

(“Umbono”) on the completion of the acquisition of 100% of the issued share capital of White River Resources Inc. (“WRR”). A further

500,000 new common shares with a value of US$1,580,604 were issued to Umbono on the same day as part of a Management

Agreement for Umbono to manage WRR on behalf of the Group. An additional 750,000 new common shares with a value of

US$879,068 were issued on 13 October 2008 to Umbono as deferred purchase consideration on the purchase of certain mineral

rights interests.

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41



21. Share Capital continued

iii. On 29 April 2008, 50,000 new common shares were issued for consideration of US$128,830 on the exercise of share purchase

warrants.

iv. On 8 May 2008, 150,000 new common shares were issued for consideration of US$340,895 on the exercise of share purchase

warrants.

v. On 13 May 2008, 1,142,500 new common shares with a value of US$4,253,243 were issued on the completion of the acquisition

of 10% of the issued share capital of Baobab Resources plc.

vi. On 15 May 2008, 500,000 new common shares were issued for consideration of US$378,075 on the exercise of share purchase

warrants.

vii. On 23 May 2008, 750,000 new common shares were issued for consideration of US$1,111,612 on the exercise of share options.

viii. On 16 June 2008, 100,000 new common shares were issued for consideration of US$259,402 on the exercise of share purchase

warrants.

ix. On 10 October 2008, 26,666,700 new common shares were issued by way of a placing for gross proceeds of US$34,598,043 before issue expenses of US$1,609,596.

22. Equity Reserves

a.) Options

The 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 were as follows:

2008 2007

Weighted 2008 Weighted 2007

average price Number average price Number

Outstanding at beginning of year 103.8p 10,601,154 63.5p 5,825,000

Lapsed during year 82.8p (2,380,000) 74.1p (605,000)

Exercised during year 75.0p (750,000) 75.0p (200,000)

Granted during year 164.1p 2,450,000 141.7p 5,581,154

Outstanding at end of year 126.1p 9,921,154 103.8p 10,601,154

Exercisable at end of year 4,115,387 3,841,667

The fair value of options granted during the year was estimated using the Black-Scholes pricing model with the following signifi cant

assumptions:

Expected life (years) 5.0

Risk-free interest rate 4.59%

Volatility 59%

Weighted average fair value per option US$1.75

The stock-based compensation recognised as an expense in the year to 31 December 2008 was US$4,868,504 (2007: US$2,414,055).

A transfer of US$241,725 (2007: US$54,260) was made from the equity reserves to the profi t and loss reserves during the year. This

represented the reversal of the charge made through the Income Statement in prior years for options exercised during the current year.

Global Reports LLC


22. Equity Reserves continued

Total options existing at 31 December 2008 over US$0.01 common shares in the Company are summarised below:

At At


Date of grant Exercise Price Expiry Date Note 2008 2007

21 November 2004 50.0p 21 November 2009 1 1,000,000 1,000,000

21 November 2004 50.0p 21 November 2009 2 600,000 800,000

31 March 2005 75.0p 31 March 2010 2 — 1,000,000

19 July 2005 75.0p 19 July 2010 2 100,000 100,000

7 September 2005 75.0p 7 September 2010 2 400,000 400,000

1 November 2005 50.0p 1 November 2010 2 — 1,000,000

28 February 2006 50.0p 28 February 2011 2 75,000 75,000

5 April 2006 75.0p 5 April 2011 2 500,000 500,000

16 October 2006 120.0p 16 October 2008 3 — 250,000

29 January 2007 115.0p 28 January 2012 2 1,300,000 1,300,000

1 May 2007 129.0p 30 April 2012 2 175,000 755,000

6 September 2007 165.5p 5 September 2012 2 500,000 500,000

9 November 2007 156.0p 8 November 2012 2 1,721,154 1,721,154

4 December 2007 149.5p 3 December 2012 2 1,200,000 1,200,000

8 January 2008 136.5p 7 January 2013 2 125,000 —

28 January 2008 117.0p 27 January 2013 2 500,000 —

19 February 2008 129.5p 18 February 2013 2 50,000 —

4 March 2008 163.5p 3 March 2013 2 400,000 —

18 March 2008 140.0p 17 March 2013 2 25,000 —

15 May 2008 194.5p 15 May 2013 2 1,000,000 —

24 June 2008 172.5p 23 June 2013 2 250,000 —

9,921,154 10,601,154

Note 1:

Subject to the rules of the Share Option Plan each of these options were fully vested on 10 May 2005.

Note 2:

Subject to the rules of the Share Option Plan and the requirements noted below, each of the outstanding options is exercisable as follows:

— one-third of the shares under option following the fi rst anniversary of the date of grant,

— a further one-third of the shares under option following the second anniversary of the date of grant,

— the fi nal one-third of the shares under option following the third anniversary of the date of grant,

provided that the option holder remains a Director of the Company or, if the option holder’s employment is terminated, within ninety days of

the termination.

Note 3:

Subject to the rules of the share option scheme, these share options became fully vested during 2006.

Global Reports LLC

43



22. Equity Reserves continued

Details of share options exercised and lapsed during the year are as follows:

Exercise Number of options

price Date of grant Date of exercise exercised/lapsed

Senior management 75.0p 30 March 2005 23 May 2008 750,000

50.0p 22 November 2004 Lapsed 200,000

75.0p 30 March 2005 Lapsed 250,000

50.0p 1 November 2005 Lapsed 1,000,000

120.0p 16 October 2008 Lapsed 250,000

129.0p 1 May 2007 Lapsed 580,000

134.5p 17 January 2008 Lapsed 100,000

b.) Warrants

Movements in warrants over US$0.01 common shares in the Company in the year were as follows:

2008 2007

Number Number

As at 1 January 2,325,000 1,100,000

Warrants granted in the year 266,667 1,225,000

Warrants lapsed in the year (300,000) —

Warrants exercised in the year (950,000) —

As at 31 December 1,341,667 2,325,000

The fair value of warrants included as a share issue cost and charged to the Share Premium Account was US$107,760

(2007: US$1,700,055). During the year, a transfer of US$751,082 (2007: US$nil) was made from the equity reserve to the share

premium account, representing the reversal of the charge made against the share premium account for warrants exercised and

lapsed in 2008. Also in the year, a transfer of US$40,950 (2007: US$nil) was made from the equity reserve to the profi t and loss

account reserve, representing the reversal of the charge made through the Income Statement in prior years for warrants exercised

during the current year.

The fair value of warrants issued in the year was estimated using the Black-Scholes pricing model with the following signifi cant

assumptions:

Expected life (years) 1.5

Risk-free interest rate 4.13%

Volatility 62%

Weighted average fair value per warrant US$0.41

Total warrants existing at 31 December 2008 over US$0.01 common shares in the Company are summarised below:

Number Exercise Expiry

Date of grant of warrants price US$ date

July 2007 1,075,000 1.88 January 2009

October 2008 266,667 1.09 April 2010

1,341,667

Global Reports LLC


23. Provisions



2008 2008 2007 2007

US$ US$ US$ US$

Employee benefi t provision 690,210 — 419,587 —

Alluvial mine restoration 475,154 — 250,000 —

1,165,364 — 669,587 —

24. Trade and Other Payables



2008 2008 2007 2007

US$ US$ US$ US$

Trade creditors 5,228,930 2,933,227 3,100,605 1,283,075

Other taxes and social security 295,516 — 409,745 —

Accruals 175,710 115,832 1,069,270 222,977

5,700,156 3,049,059 4,579,620 1,506,052

25. Operating Lease Commitments

At 31 December, the Group had annual commitments under non-cancellable operating leases expiring:

Land & Plant & Land & Plant &

buildings equipment buildings equipment

2008 2008 2007 2007

US$ US$ US$ US$

Within one year 120,465 — — —

Between two and fi ve years — — 491,891 —

26. Post Balance Sheet Events

On 22 January 2009, the Company announced that it had entered into a further agreement with Cape Lambert Iron Ore Limited

(“CLIO”) (ASX: CFE) to increase CLIO’s investment in the Company’s iron ore project at Marampa, Sierra Leone (the “Marampa

Project”). The Company acquired 17,000,000 fully-paid ordinary shares in CLIO (the “CLIO Shares”), representing approximately

3.25% of the enlarged issued share capital of CLIO. The acquisition was in consideration of the issue to CLIO of new shares (the

“Marampa Shares”) in Marampa Iron Ore Limited (“Marampa”), AML’s Bermuda registered subsidiary which holds AML’s mineral

interests in the Marampa Project. The issue of the CLIO Shares took the Company’s interest in CLIO to approximately 11.6%.

Following the issue of the Marampa Shares to CLIO, which represented 7.14% of the enlarged Marampa share capital, CLIO holds

approximately 35% of the issued share capital of Marampa.

On 20 February 2009, the Company announced a restructuring of its Share Option Scheme and the grant of share options to

Company Directors under the Company’s share option plan. The Board of the Company recognised that the exercise price of all

share options previously in issue was well above the Company’s then share price. In order to provide more effective incentives

to Directors and senior management, the Company offered certain option holders a choice of either retaining their existing share

options (with higher exercise prices but a shorter term to expiry) or cancelling their existing options and accepting the grant of

new share options with an exercise price of 50p and an expiry date fi ve years after the date of grant. The exercise price of 50p

represented an 82% premium over 27.5p, being the closing market price of the shares at 19 February 2009.

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45



27. Acquisition of White River Resources

On 14 April 2008, the Company fi nalised its acquisition of 100% of the issued share capital of White River Resources Inc. The following

table sets out the book values of the identifi able assets and liabilities acquired and their fair value to the Group:

Book Fair

value at Fair value value to

acquisition adjustments Group

US$ US$ US$

Intangible assets 858,381 4,746,909 5,605,290

Current assets 30,531 30,531

Total 888,912 4,746,909 5,635,821

Current liabilities (14,941) — (14,941)

Total liabilities (14,941) — (14,941)

Net assets 873,971 4,746,909 5,620,880

Consideration satisfi ed by:

Shares issued 5,620,880

28. Reporting Jurisdictions

The Company is a reporting issuer in certain Canadian jurisdictions. However, the Company is a “designated foreign issuer” as defi ned 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, fi nancial 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.

assets

Global Reports LLC

46Glossary of Terms

Aeromagnetic survey An aircraft-borne geophysical survey using a magnetometer to measure magnetic fi eld strength, often used to differentiate rock units.

Alumina Al2O3

Alluvial Sedimentary material from running water which is deposited in river beds, fl ood plains, lakes or at the foot of mountain slopes.

Alluvial diamonds Diamonds found in river sediments.

Anomaly Any departure from the norm which may indicate the presence of mineralisation in the underlying bedrock.

Assay A chemical test performed on a sample of ores or minerals to determine the amount of valuable metals contained.

Banded Iron Formation A bedded deposit of iron minerals.

Base metal Any non-precious metal (e.g. copper, lead, zinc, nickel, etc.).

BIF Banded Iron Formation.

Bulk sample A large sample of mineralised rock, frequently hundreds of tonnes, selected in such a manner as to be representative of the potential orebody being sampled. Used to determine metallurgical characteristics.

Carat Unit of measurement for gemstones, equal to 200 milligrams or 0.2 grams. For smaller gems, 100 points is equal to one carat.

Concentrate A fi ne, powdery product of the milling process containing a high percentage of valuable metal.

Core The long cylindrical piece of rock, about an inch in diameter, brought to surface by diamond drilling.

Diamond The hardest known mineral, composed of pure carbon; low-quality diamonds are used to make bits for diamond drilling in rock.

Diamondiferous Containing diamonds.

Diamond drill A rotary type of rock drill that cuts a core of rock that is recovered in long cylindrical sections, 2 cm or more in diameter.

Direct Reduced Iron Produced from the direct reduction of iron ore (in(DRI) form of lumps, pellets or fi nes) by a reducing gas

produced from natural gas or coal. Direct Reduced Iron is richer in iron than pig iron, typically 90-94% Total Iron, as opposed to about 93% for molten pig iron, and an excellent feedstock for the electric furnaces used by mini mills, allowing them to use lower grades of scrap for the rest of the charge.

Direct Shipping Ore Iron ore that can be shipped directly to a steel(DSO) furnace.

DT Davis Tube consists of an extremely powerful electromagnet and is used to determine the magnetic content in iron ore samples from exploration drilling programmes.

DTMR % Davis Tube magnetic weight recovery from original sample material measured as a percentage.

Exploration Prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore.

Exploration drilling Drilling done in search of new mineral deposits, on extensions of known ore deposits, or at the location of a discovery up to the time when the Company decides that suffi cient ore reserves are present to justify commercial exploitation. Assessment drilling is reported as exploration drilling.

Fe% Iron content measured as a weight percentage.

Gangue Sand, rock and other impurities surrounding the mineral of interest in an ore.

Geochemistry The study of the chemical properties of rocks.

Geology The science concerned with the study of the rocks which compose the earth.

Geophysical survey A scientifi c method of prospecting that measures the physical properties of rock formations. Common properties investigated include magnetism, specifi c gravity, electrical conductivity and radioactivity.

Grade Number of units of mineral weight within a physical unit of ore, usually expressed in units per tonne or a percentage.

Greenstone Belt An area underlain by metamorphosed volcanic and sedimentary rocks, usually in a continental shield.

Hematite A non-magnetic oxide of iron with chemical formula Fe2O3 and one of that metal’s most common ore minerals.

Intrusive A body of igneous rock formed by the consolidation of magma intruded into other rocks, in contrast to lavas, which are extruded upon the surface.

JORC Joint Ore Reserves Committee — Australasian Code for Reporting of Identifi ed Resources and Ore Reserves.

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47





Kimberlite Uneven-grain, ultramafi c rock in which the visible minerals may include olivine, phlogopite, pyrope garnet, picro-ilmenite and chrome/diopside, which are cemented by a groundmass that may include serpentine, calcite, and chromite. Kimberlite and olivine lamproite (a similar type of rock) are the only known types of intrusive rock (primary source rocks) that may carry diamonds from the depths of the earth to the surface and may form primary diamond deposits.

Laterite A residual solid, usually found in tropical countries, out of which the silica has been leached. May form orebodies of iron, nickel, bauxite and manganese.

Mafi c Igneous rocks composed mostly of dark, iron- and magnesium-rich minerals.

Magnetic separation A process in which a magnetically susceptible mineral is separated from gangue minerals by applying a strong magnetic fi eld; ores of iron are commonly treated in this way.

Magnetite Black, magnetic iron ore oxide with chemical formula Fe3O4.

Metallurgy The study of extracting metals from their ores.

Mineral A naturally occurring homogeneous substance having defi nite physical properties and chemical composition and, if formed under favourable conditions, a defi nite crystal form.

Mineral resource A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specifi c geological evidence and knowledge.

Mineralisation Mineral or ore-bearing rock.

Ore A mixture of ore minerals and gangue from which at least one of the metals can be extracted at a profi t.

P% Phosphorous content measured as a percentage of weight.

Pellet A marble-sized ball of iron ore fused with clay for transportation and use in steelmaking.

Pipe A common term for a vertical cylindrical or column-like mass of rock that cooled and solidifi ed in the neck of a volcano.

ppb Parts per Billion; used to specify low concentrations (by volume) of metals.

ppm Parts per Million; used to specify concentrations (by volume) of metals. One ppm = 1 gram per tonne.

Primary BIF Unweathered banded iron formation.

Prospect A mining property, the value of which has not yet been determined by exploration.

Quality The degree of excellence of a diamond, measured by its weight, colour, purity or clarity and its perfection of proportions and fi nish.

Quartz Common rock-forming mineral consisting of silicon and oxygen.

RC Reverse Circulation (as relating to drilling), a drilling technique in which the cuttings are recovered through the drill rods thus minimising sample losses and contamination.

Recovery The percentage of valuable metal in the ore that is recovered by metallurgical treatment.

Resource The calculated amount of material in a mineral deposit, based on limited drill information.

Rock Any natural combination of minerals; part of the earth’s crust.

Rough diamonds Untreated stones in run-of-mine form, which have been boiled and cleaned

Sample A small portion of rock or a mineral deposit taken so that the metal content can be determined by assaying.

Sampling Selecting a fractional but representative part of a mineral deposit for analysis.

Scintillometer An instrument used to detect and measure radioactivity by detecting gamma rays; more sensitive than a geiger counter.

Silica Silicon dioxide. Quartz is a common example.

SiO2% Silicon dioxide content measured as a percentage.

Sulphide A compound of sulphur and some other element.

Tailings Material rejected from a mill after most of the recoverable valuable minerals have been extracted.

Trench A long, narrow excavation dug through overburden, or blasted out of rock, to expose a vein or ore structure.

Ultramafi c rocks Rock with generally low silica and high magnesium contents.

Weathered BIF Weathered Banded Iron Formation.

Weathering A process of chemical change to rocks brought about by their exposure to oxygen and water.

Zone An area of distinct mineralisation.

Global Reports LLC

48Shareholder notes

Global Reports LLC

African MINERALS

Sierra Leonea developing country.

� Mineral rich, largely unexplored

� Highly prospective geology

� Sierra Leone established as British Crown Colony in 1808

� Independence from Britain in 1961

� Constitutional Democracy, stable democratic government

� Well established Mining Law & Legal System (based on English system)

� Offi cial language is English

� Population approximately 6.2 Million

� Low sovereign risk as rated by the World Bank

� GDP growth forecast to be 8.1% by 2010, and 7.8% by 2015

� New Acts of Parliament to support overseas investment in Sierra Leone



Picture:

View across Freetown

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ExplorationDiscoveryDevelopment

Guernsey Offi ce

Block F

Hirzel Court

Hirzel Street

St Peter Port

Guernsey

Channel Islands

GY1 2NW

Tel:+44 (0) 1481 726833

Registered Offi ce

Victoria Place

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