Chromex Mining announces final results to the year ended September 30th 2009

Chromex Mining plc, the AIM listed dedicated chrome mining company focussed in southern Africa, is pleased to announce its results for the year ended 30 September 2009.

Overview

Cash generative profitable chrome producer operating in the world's key chrome area, the Bushveld complex in South Africa

Low-cost flexible business model of outsourcing operations delivering healthy margins

Commissioned the processing plant at the Stellite open cast chrome mine on time and within budget - August 2009

Achieved full plant design capacity at the chrome beneficiation plant at Stellite in November 2009

Restarted mining operations in January 2010 due to improved pricing and chrome market conditions

Granted positive amendment to the Stellite Mining Right to include PGEs and gold in March 2009 -  testwork on chrome tailings has shown positive results and scoping study relating to the economic recovery of the PGEs underway

Concluded a binding Heads of Agreement to acquire 49% of Falvect Mining a company owned and operating in Zimbabwe

Expect to develop the Mecklenburg Chrome Project following legal settlement

Strengthened Board and management team as part of a strategy to advance chrome projects in southern Africa

Significant growth potential - ideally placed to profit from the upturn in the markets as demand for chrome products begins to increase

Chromex CEO Russell Lamming said, "Chromex successfully commissioned its processing facility at the Stellite open cast Chrome mine (‘Stellite') and continued to invest in its mining operation, in spite of the chrome market in 2009 remaining under pricing pressure.  This investment has enabled Chromex to take advantage of the strengthening chrome market in the latter part of 2009 and the beginning of 2010, and although the strength of the South African Rand continues to hamper margins, the operation is still profitable.  Chromex firmly believes that operations must have the cost structures in place to be able to produce through the commodity cycles, and I am delighted to say that Stellite is now in that position.  With approximately 41 million tonnes of chrome resources under its control, cash generative production in place and a low-cost flexible business model generating healthy margins, I believe Chromex has a resilient investment case and is due for a value re-rating."

Chairman's Statement

It gives me great pleasure to report on your Company's progress as it continues to consolidate its position as a long term chrome producer in southern Africa. 

During 2009, Chromex completed the construction of the processing facility at the Stellite open cast chrome mine (‘Stellite') and achieved plant design capacity in November 2009.  The plant was commissioned using stockpiles mined in the early part of the financial year, which allowed mining operations at Stellite to be suspended for the most part of 2009, a period of adverse market conditions.  Based on strengthening demand, Chromex recommenced mining operations in January 2010.

In the latter part of 2009, Chromex concluded a binding Heads of Agreement to acquire 49% of Falvect Mining (Private) Limited (‘Falvect'), a company owned and operating in Zimbabwe.  The investment in Falvect is in line with our strategy of building a broad portfolio of chrome and related mineral assets across southern Africa.  The timing of the acquisition was linked to the lifting of the Zimbabwean ban on exports of chrome ore and fines as well as the continued economic recovery of the country.  

With these developments in mind, and despite the challenging chrome market we saw in 2009, we continued to invest in our operations and expand our geographic footprint in line with our core strategy of building our business and generating uplift in value for shareholders. 

Stellite

Chromex's main focus over the last year has been the development of Stellite, the 271 hectare project located on the Western Limb of the Bushveld Complex in South Africa.

The commissioning of the first phase of the Stellite chrome beneficiation plant was completed in August 2009 and by the beginning of November 2009 this facility was able to operate at full design capacity, producing 42% and 44% metallurgical grade chrome concentrates.  All plant feed was sourced from existing stockpiles at the Stellite mine.  Due to ongoing demand, we recommenced mining operations at Stellite in January 2010.

The plant was financed in part by a loan of ZAR 30 million (£2.5 million), of which ZAR 20 million (£1.67 million) has been drawn down and ZAR 10 million (£0.83 million) remains undrawn.

Stellite will initially produce approximately 20,000 run of mine (‘ROM') tonnes per month, increasing to 40,000 ROM tonnes per month when the dense media separation circuit (‘DMS') is installed at the beneficiation plant.  The DMS is expected to be completed during the third quarter of 2010 and will improve yields, margins and economic efficiencies.  Importantly, in addition to the capacity increase, Chromex will be in a position to market a sized lumpy chrome product as well as the chemical and metallurgical grade concentrates.

Both the operation of the plant and the mining activities are sub-contracted.  This has proved invaluable in enabling Chromex to react quickly to market changes.

Finally, and importantly, in March 2009, Stellite was granted a positive amendment to its Mining Right to include Platinum Group Elements (‘PGEs') and gold.  PGEs, comprising platinum, palladium and rhodium, are present in small concentrations in the chromite reefs.  Testwork on the chrome tailings since the plant's commissioning is showing positive results.  This testwork is ongoing and a scoping study relating to the economic recovery of PGEs is underway.  While it would not be economic to mine at Stellite solely to produce PGEs, their extraction in conjunction with chromite potentially increases revenues substantially going forward, in particular revenues from the reefs with lower chromite content.  

 Mecklenburg

Development of the Company's Mecklenburg project, located at the Mecklenburg farm on the Eastern Limb of the Bushveld Complex in the Limpopo Province of South Africa, has been deferred pending settlement of the legal issues referred to below.  Mecklenburg will be an underground mine, producing high grade ore from the LG6 and LG6A reefs, which outcrop at surface.  Access to the mine will be via an outcrop portal and access decline on the lower slopes of Serafa Hill, with on-reef development and a hybrid trackless/conventional stope mining method.  The Mecklenburg mine design will be completed once the legal dispute has been resolved.

In respect of legal and regulatory issues, I previously informed shareholders that Samancor Chrome Limited (‘Samancor') applied to the High Court in South Africa to set aside the decision to award Chromex a Mining Right, citing the Minister of Mines, the Department of Minerals and Energy of the Republic of South Africa (‘DME'), and the regional Director of the DME in Limpopo Province in its application and also Chromex Mining Company (Pty) Ltd., the holder of the Mining Right.  The challenge to Chromex's Mining Right at Mecklenburg remains unresolved, largely due to delays in the process of providing evidence for the court.  Chromex has complied with all requirements within the stipulated time scales, and, on the basis of our expert legal advice, the Board is confident that Chromex is the rightful owner of the New Order Mining Right granted by the DME in July 2008.

Board and Management

The Company has made a number of changes to its Board and management team as part of its strategy to assemble a powerful team with the relevant experience to develop its chrome mines in southern Africa and become a leading chrome producer.

Phoevos Pouroulis and Guy Gibbons stepped down from the Board in June 2009.  Phoevos, who was responsible for marketing and sales, is establishing a new multi-commodity trading company, which will include chrome.  His resignation is solely to avoid any potential conflicts of interest as his new company acts as a sales agent for Chromex.  Finance Director Guy Gibbons, who was employed by Chromex for one third of his time, decided to seek a full time position, which Chromex was unable to offer.  To compensate for Guy's resignation, Chromex strengthened the accounting function in South Africa, where all operations take place.  I assumed overall responsibility for finance.  The situation will be reviewed when the mine construction begins at Mecklenburg, but, should we decide to recruit a dedicated Finance Director at that time, the position is likely to be based in Johannesburg rather than London.

Graham Stacey, the Company's Chief Operating Officer based in the Johannesburg office, joined the Board in July 2009.  Graham is a qualified mining engineer who had been operating as a consultant prior to joining Chromex.

I would like to thank both Phoevos and Guy for their contributions towards the successful development of Chromex.  Russell Lamming, Nigel Wyatt, Graham Stacey and I remain as Executive Directors of the Company, while James Burgess, Vusi Nkosi and Robert Sinclair are Non-executive Directors.

The achievements of the last year have been due to the hard work and enthusiasm of the Directors and employees, and I would like to thank them on behalf of the Company.

Financial Results

The Group Income Statement shows a loss before tax of £151,000 (2008 - loss £1,406,000).  After adjusting for future tax benefits, there is a profit after tax of £195,000 (2008 - loss £1,406,000).  These results reflect the fact that much of the year was taken up with construction of the Stellite processing plant, while producing sufficient chrome to provide positive cash flow, and retaining valuable chrome resources in the ground pending an upturn in prices. 

Future Prospects

2009 was a difficult year for the South African chrome industry, combining general macro-economic uncertainty with unprecedented turbulence in demand and price.  In addition, the South African mining industry has been significantly impacted by a very strong Rand, increasing costs and continuing power constraints.  In spite of this, Chromex has continued to spend capital on its beneficiation facilities and mine, and will continue to do so in the future so as to retain operating flexibility in an ever-changing environment. 

Having recommenced mining operations at Stellite in January 2010, and with initiatives underway to increase its profitability, as well as a solid orebody containing circa 31.9 million tonnes of chromite to utilise, I believe we have the foundations in place to deliver an uplift in value for shareholders in 2010.

Additionally, our entry into the Zimbabwean chrome industry, through our acquisition of 49% of Falvect, is in line with our strategy of building our portfolio of chrome and related mineral assets across southern Africa.  Zimbabwe is host to significant high quality chrome resources and is a very exiting country to be getting involved in.  We look forward to consolidating and growing our chrome resources and processing capacity in Zimbabwe.

Overall the financial position of Chromex is strong.  With the exception of the plant construction loan described above, the Group has no debt.  It has approximately £0.8 million in cash resources, and expects to trade on a cash positive basis going forward.  By sub-contracting its mining and processing operations, Chromex has minimised its fixed costs, and the Directors consider it to be ideally placed to take advantage of the upturn in the markets.

Brian Moritz

(Chairman)

5 March 2010

Chromex Mining plc