AnnualReport2010 - Sierra Rutile Limited · 2017. 11. 16. · SIERRA RUTILE ANNUAL REPORT JHIH M Forlonger-termgrowth,thesecondstageofthestrategicreviewhasnowcommencedandisaimedatidentifyingthe

Annual Report 2010

TITANIUM RESOURCES GROUP LTD ANNUAL REPORT 2008 3

We aim to deliver maximum long-term shareholder valuethrough the sustainable and efficient operation of the world-class Sierra Rutile mine.

Our VisionTo create a national champion for Sierra Leone, recognised as a global leader in the production ofmineral sands, by:

Releasing the significantvalue contained in theCompany’s deposits byincreasing production andexpanding both reserveand resource bases.

Improving operationalperformance through thestrengthening of thecompany’s managementteam and the applicationof best practicemanagement structures.

Working in partnershipwith local communitiesand the Government ofSierra Leone to ensurethe company maintainsand builds upon its sociallicence to operate.

Identifying and capturingnew market opportunitiesthrough the developmentof additional products,such as rare earths.

2 Our Values: Health & Safety

3 Chairman’s Statement

6 Chief Executive’s Review

10 Our Values: Operations

11 Business Review

15 Our Values: Community

16 Our Values: Environment

18 Social responsibility

19 Principal Risks

24 Board of Directors

26 Directors’ Report

31 Auditors’ Report

32 Financial Statements

36 Notes to the Financial Statements

SIERRA RUTILE ANNUAL REPORT 2010 1

Freetown

Nitti Port

SherbroIsland

Sierra Rutile mining area

Sierra Leone Africa

2010 Highlights

� Sales increased 11.7% to US$41.1 million in the year (2009: US$36.8 million)

� US$9.2 million cash generated from operating activities (2009: US$1.8 million)

� 6.8% increase in rutile production to 68,198 tonnes (2009: 63,864 tonnes)

� 18,206 tonnes of ilmenite and 7,092 tonnes of zircon concentrate also produced in the year

(2009: 15,161 tonnes of Ilmenite and 5,560 tonnes of zircon concentrate)

� Production of rutile and ilmenite for 2011 to be in line with 2010, with significant increasesexpected in 2012

� Strategic review into expansion of production, and potential for rare earth production at SierraRutile progressing well, with conclusions expected in the fourth quarter of 2011

� Subsequent to the end of 2010, revised JORC-compliant resource statement released of over600 million tonnes of rutile

� All forecast H1 2011 rutile production fully allocated, at on average a 20% increase over2010 prices

� The strong mineral sands market is expected to continue for some time, as a result of supplyconstraints and increasing demand.

Kyran Ganda, Senior Chemist testing product

samples at SRL’s minesite laboratory


Sierra Rutile experienced a challenging 2010. Historical underinvestment in Sierra Rutile’s assets resulted in production

being severely constrained, and the dispute with the Government of Sierra Leone during the year was a major distraction

for management. Despite this backdrop, during the latter part of 2010 many positive steps were made to put Sierra Rutile

on the right track, including the initiation of a two-phase strategic review and initial capital expenditures to address much-

needed maintenance requirements.

Corporate Social ResponsibilityThe health and safety of our workforce is the Company’s first and foremost consideration in all we do. In 2010, the Company

outperformed its target of a 25% reduction in lost time injuries by reducing lost time injuries by 64% compared to 2009.

Sierra Rutile is also committed to being a positive force in its community. Accordingly, the Company pursues a number of

initiatives and partnerships, including the Sierra Rutile Foundation, which are designed to improve the lives and

employment opportunities of the people living in the communities around our operation. The enrolment of the first

students in the Sierra Rutile Technical Institute during 2010 represents a significant step in improving the long-term

employment prospects for the people living around the Sierra Rutile mine.

Corporate DevelopmentsDuring 2010, the Board of Sierra Rutile was strengthened considerably to provide the necessary blend of experience,

skill and enthusiasm to drive Sierra Rutile to achieve its goals. Prior to my appointment as a Non-Executive Director,

Walter Kansteiner stepped down as Non-Executive Chairman of the Company in June 2010 after spending over five years

with the Company. Wayne Malouf was appointed Executive Chairman in August 2010 and became Non-Executive Chairman

in January 2011 before leaving the Company in February 2011. I joined the Board in September 2010 as a Non-Executive

Director, and was appointed Non-Executive Chairman in February 2011.

Additionally, during 2010, Rod Baker and Raju Jaddoo stepped down as Non-Executive Directors and Michael Brown,

Charles Entrekin and Michael Barton joined the Board as Non-Executive Directors. In February 2011 Jean Lindberg Charles

stepped down as an Executive Director.

Chairman’s Statement

4 SIERRA RUTILE ANNUAL REPORT 2010

In addition, during 2010 the dispute with the Government of Sierra Leone was settled and, subsequent to the year-end,

Sierra Rutile’s financial position was strengthened with a successful US$18 million capital raising, the proceeds of which

were used to make an early repayment of Sierra Rutile’s loan from the Government of Sierra Leone. Sierra Rutile now has

no capital or interest payments to make on its loan from the Government of Sierra Leone until 2013, allowing it to focus

entirely on operations during this crucial time of development.

Finally, during early 2011, the Company changed its name to Sierra Rutile Limited, to mark the Company’s rebirth and as a

sign of its commitment to its stakeholders in Sierra Leone. It was under the “Sierra Rutile” name that the Company

operated as one of the world’s largest producers of rutile for many years.

Operational ImprovementsThe most significant event for Sierra Rutile’s operations during 2010 was the resumption of funding to the operations to allow

essential capital investment, maintenance expenditure and re-stocking of critical spares. As a result, during the second half of

2011 we expect to see reduced downtime and increased availability of Sierra Rutile’s production assets.

Subsequent to the end of 2010, Sierra Rutile also released an updated, JORC-compliant resource of over 600 million tonnes,

confirming Sierra Rutile’s as one of the largest natural rutile deposits in the world. Furthermore, Sierra Rutile also identified

rare earth mineralization in its resources that are concentrated to an attractive grade during the rutile and production process.

Looking to the futureSierra Rutile believes that the current strong mineral sands market will continue as the supply deficit increases, driven by

continued global economic growth adding further demand for our products. At the same time, supply side fundamentals

remain constrained in the short to medium term and barriers to entry remain high. As a result, the Company expects that

rutile prices will continue to increase significantly as demand continues to outstrip supply in 2011 and 2012.

While 2011 will be a transition year for the Company, with production levels similar to 2010 as a whole, the Company

expects to begin seeing the effects of the operational improvements and capital investments that commenced in the fourth

quarter of 2010 during the second half of 2011. Indeed, the effect of the ongoing strategic review and capital expenditures,

continuing throughout 2011, should position Sierra Rutile well for 2012 and onwards against a very positive backdrop for

rutile, ilmenite and zircon prices.

Chairman’s Statement


For longer-term growth, the second stage of the strategic review has now commenced and is aimed at identifying the

potential for the long-term expansion of production at Sierra Rutile. The Company has appointed a consortium of specialist

consultants headed by Snowden Group, and including CPG Resources – Mineral Technologies and Titan Salvage, to conduct

an extensive study into optimization and expansion options including: the rehabilitation of Dredge 2, completion of Dredge

D3 or construction of a new dredge, supplementing production through dry mining high-grade ore pockets, re-mining of

high-grade historic tailings, on-stream processing of zircon to a finished or semi-finished product, recovery and separation

of rare earth oxides and upgrading the mineral separation plant to match increased production.

The studies are expected to be finalized in Q4 2011 and will provide a focus for prioritisation, development and engineering

to the specific areas of the study. The Company has identified a number of areas within the study scope that it believes

have the potential to provide near-term value and could be fast-tracked within the overall scope of the project.

The Company is also currently developing life of mine plans and revised five-year financial forecasts, as well as formalising

governance policies and upgrading monitoring systems.

In conclusion, while there remains much to do, the board and management of Sierra Rutile are dedicated to realizing the

full potential of the Company’s world class asset. By combining our strong commitment to our workforce and local

communities with a methodical approach to value creation, focused on sound planning and risk management, we believe

we are laying the foundation for the delivery of long-term value for all our stakeholders.

Jan CastroNon-Executive Chairman

Chief Executive’s Review

Overview2010 saw significant developments at the Company which have continued into 2011 and, despite significant challenges, much

has been achieved. We have expanded our management team, adding the necessary skills and experience to both turn around

our existing operations and to undertake the expansion projects we expect to embark upon during 2012. We are now well

placed to complete the operational changes we require in the remainder of 2011, positioning us strongly for 2012.

ProductionIn 2010, the Company produced 68,198 tonnes of rutile compared to production of 63,864 tonnes of rutile in 2009, which was

towards the upper end of the Company’s August 2010 revised annual production target. The Company also produced 18,206

tonnes of ilmenite and 7,092 tonnes of zircon concentrate compared to 15,161 tonnes and 5,560 tonnes respectively in 2009.

The Company faced several operational problems during the first half of the year which had a significant negative impact on

production levels. Dredge availability was reduced in H1 2010, as a result of a fire on Dredge 1, longer than anticipated

downtime following a planned move of the Dredge 1 wet plant and problems with slimes in the dredge pond.

Additionally, a planned Dredge 1 move to a new part of the current ore body and associated pond lowering exercise will

reduce the Company’s ability to make up production in the remainder of 2011. As a result, we expect production of rutile and

ilmenite for 2011 to be in line with 2010. Zircon production will also be lower in 2011 than 2010 due to the strategic decision

to limit zircon production until the second stage of the strategic review is completed.

The Company has now addressed a significant number of the dredge availability and maintenance problems through a major

capital expenditure programme following the recommendations of the first stage of the strategic review. Due to equipment

delivery times and the significant nature of these works, however, they will not be fully implemented until the end of 2011

Alusine Samura, Chief Chemist testing product samplesat SRL's minesite laboratory Dredge D1 at the Sierra Rutile mine


and their full benefit will not be realized until 2012. The Company expects production levels for rutile and Ilmenite in 2012 to

be significantly above 2010 and anticipated production 2011 levels, as Sierra Rutile begins to realise the full benefit of the

capital expenditure program on its existing operations.

FinancialsCash PositionThe Company had a cash balance of US$28.3 million as at 31 December 2010 (US$25.9 million as at 31 December 2009).

The US$25 million gross proceeds raised during 2009 remained largely undrawn as at the Balance Sheet date. Following the

end of the period, the Company has begun deploying these funds for essential capital investment, maintenance expenditure

and re-stocking of critical spares.

TurnoverRutile and ilmenite sales of US$41.1 million in 2010 were above the US$36.8 million achieved in 2009, predominantly as

a result of increased production and pricing levels. 2010 rutile and ilmenite sales were supplemented by the sale of

US$2.7 million of zircon concentrate, which was not sold in significant quantities in 2009.

Cost of SalesCost of sales increased from US$38.4 million in 2009 to US$48.6 million in 2010 due to increased production levels, non-cash

inventory adjustments and an increase in operating overheads. The increase in operating overheads was largely a result of

costs associated with the outsourcing of security and the implementation of the Government of Sierra Leone’s Goods and

Services Tax which came into effect on 1 January 2010.

Administrative and marketing expensesAdministrative expenses went up by US$2.1 million from US$4.3 million in 2009 to US$6.4 million in 2010 predominantly due

to ongoing costs associated with the capsize of Dredge D2 and merger and acquisition costs incurred during early stage

discussions with a third party.

Exceptional itemsIn 2010 the Company recorded a net exceptional loss of US$3.1 million comprising of a one off US$4.7 million exceptional

net gain from the resolution of the insurance claim relating to the capsize of Dredge D2 and a US$7.8 million loss on the

write-down of the partially constructed dredge – D3.


Chief Executive’s Review

The write down of the dredge comes as a result of the initial findings of the strategic review committee, which suggest that

the original unified configuration of D3 is unlikely to present the economically or technically optimal solution for mining

Sierra Rutile’s near term reserves. Accordingly the capital spent on the dredge up until December 31, 2010 (US$9.9 million)

has been written down to the amount which will likely be used going forwards (US$2.1 million) creating an exceptional loss

of US$7.8 million.

As at June 1, 2011 the Company retains the majority of the $25 million of cash raised in November 2009, which was to be

used to complete the construction of D3. The Company will now deploy this capital on projects that improve the

performance of the existing dredge (D1) and to finance the outcome of the strategic review.

Finance CostsThe reduction in finance costs to US$0.3 million in 2010 from US$7.5 million in 2009 was as a result of the effect of

favourable foreign exchange movements on the €35 million loan which created a US$4.5 million gain in 2010 compared to a

US$3.8 million loss in 2009.

MarketingIn line with the rest of the industry, we have continued to see strong increased demand and increased prices for our

products. In addition to the previously announced contract price increases between 19% and 25% for 22,000 tonnes of 2011

rutile production, the Company has recently concluded negotiations for a further 16,000 tonnes of 2011 standard grade

rutile production at a 40% premium to 2010 prices. Sierra Rutile remains contracted to deliver in 2011 approximately 34,000

tonnes of standard grade rutile production against 2010 agreed delivery contracts.

The Company’s forecast H1 2011 industrial grade rutile production has now been fully allocated, at on average a 20%

increase over 2010 prices.

The Company has also achieved a 70% price increase over 2010 levels for a 6,000 tonne zircon concentrate shipment which

was shipped in February.

Management ChangesIn addition to the board changes, the Company has significantly strengthened its senior management team during 2010 and

since the year-end.


Joseph Connolly was appointed Chief Financial Officer in March 2011. Joseph is a chartered accountant, having begun his

career at Deloitte. Prior to joining Sierra Rutile, Joseph was Director of Business Development at Clipper Windpower plc.

Jean Lindberg Charles, Sierra Rutile’s former CFO has remained with the Company as Director Corporate Controls, a role

charged with improving the financial and operational controls of Sierra Rutile’s operations in Sierra Leone.

Andrew Taylor joins from DeBeers Consolidated Mines after a career of over 20 years with DeBeers and Anglo American in a

variety of roles, notably in the areas of mining and processing. He has significant experience of operating in Africa, including

managing the construction and commissioning of the Voorspoed Mine in South Africa from 2005 to 2010.

Mark Button, the Company’s former Chief Operating Officer, has been appointed Director of Mineral Resource Development

and will focus on strategic resource development as well as the optimal utilisation of the Company’s reserves. Sahr Wonday

has been appointed the Director of Strategic Projects, charged with delivering the long-term production growth of Sierra

Rutile through the second phase of the Strategic Review. Sahr has enormous experience at the Company, having worked for

Sierra Rutile Ltd in its various forms for 25 years.

The Company has also appointed Desmond Williams as Operations Manager. Desmond is a Sierra Leonean national with over 20

years of international mining experience having previously worked with SNC Lavelin and Worley Parsons. At SNC Lavelin Desmond

held senior management positions on numerous international projects including the Bald Mountain Gold Project for Barrick Gold

Corporation and the Kabanga Nickel Project. Previously, Desmond spent 10 years with Sierra Rutile between 1988 and 1998.

As part of the strengthening of the management team, Sierra Rutile has amended remuneration policies in order to align

them more closely with the performance of Sierra Rutile through the implementation of a Key Performance Indicator (“KPI”)

driven bonus programme and to reward long-term commitment to Sierra Rutile through a revised share option scheme.

OutlookAs a result of the funding, management changes and concluding financial arrangements with the Government, Sierra Rutile is a

revitalized company. The significant activity aimed at improving our current operating platform is matched by the aspiration

inherent within the second phase of the Strategic Review. Our optimism for a much enhanced operation for the future is

however tempered by the need to meaningfully utilize our revised financial and operating base.

John Bonoh SisayChief Executive

Rutile storage dome at Niti Port


Business Review

Company overviewSierra Rutile Limited owns and operates the Sierra Rutile mine in the south west of Sierra Leone. Mining at Sierra Rutile

began in 1967 and the mine operated continuously between 1983 and 1995.

In August 2005, the Company listed on the AIM market of the London Stock Exchange and during the first half of 2006 the

Company successfully restarted operations at the Sierra Rutile mine.

SRL currently operates a single bucket-line dredge, Dredge D1. As part of the second stage of the Company’s ongoing

strategic review, it is currently assessing the most cost effective method to expand long term production and expects to

announce the review’s findings later this year.

Mission, Vision and ValuesMissionWe aim to deliver maximum long-term shareholder value through the sustainable and efficient operation of the world-class

Sierra Rutile mine.

VisionTo create a national champion for Sierra Leone; recognised as a global leader in the production of mineral sands, by:

� Releasing the significant value contained in the Company’s deposits by increasing production and expanding both

reserve and resource bases;

� Improving operational performance through the strengthening of the Company’s management team and the application

of best practice management structures;

� Working in partnership with local communities and the Government of Sierra Leone to ensure the Company maintains

and builds upon its social licence to operate; and

� Identifying and capturing new market opportunities through the development of additional products, such as rare earths.

ValuesHealth & Safety: The health and safety of our workforce is the Company’s first and foremost consideration in all we do.

Our approach to health and safety is based on the principle of recording zero harm for our employees, and we aim to

implement a policy that is consistent with leading global standards.

Community: Sierra Rutile is committed to being a positive force in not only the communities around the minesite but Sierra

Leone as a whole. The Company pursues a number of initiatives and partnerships, including the Sierra Rutile Foundation,

which are designed to improve the lives and employment opportunities of the people of Sierra Leone.

Environment: The Company aims to minimise the environmental impact of its mining operations and is committed to the

rehabilitation of land affected by current and historical mining activity.

Operations: The Company seeks to maximise production and operational efficiency at the Sierra Rutile mine. The expansion

and optimisation of production will allow the Company to delivery long term profitability and capitalise on the unique

potential of the Sierra Rutile resource.

Sierra Rutile mineThe Sierra Rutile mine is located in the south west of Sierra Leone near the Imperri Hills, some 30 km from the Atlantic

Ocean, on low lying coastal plains about 135 km southeast of the capital Freetown. SRL holds mining leases over a land area

of 580 sq. km in which nineteen separate rutile deposits have been identified.

The mining concession is one of the largest natural rutile deposits known in the world. In February 2011, the Company

produced an upgraded JORC-Compliant Mineral Resource for the Sierra Rutile mine, which estimated that total measured,

indicated and inferred resources at SRL were over 600 million tonnes.

In compiling the Mineral Resource, the Company also identified the presence of potentially value enhancing rare earths in

the High Tension Tailings (“HTTs”) produced as a by-product of the Company’s ongoing mining activities. In March 2011 a

further study of the HTTs confirmed the presence of rare earths at grades of 2.2% in the tailings stream. The Company has

now commenced a study to evaluate processing requirements to further separate and recover rare earths in order to

assess its commercial viability.

The mine currently employs bucket ladder dredges and conventional mineral processing methods to produce rutile,

ilmenite and small amounts of zircon concentrate.


Business Review


The mine is self-sufficient. SRL generates its own power through its HFO power plant commissioned in 2009, operates its

own port, maintains local road infrastructure, has its own hospital and generally provides and maintains its own

infrastructure and ancillary services.

During 2010, the Company continued with its exploration programme to extend the mine life of its operations. Drilling was

completed across a number of areas of the deposit including stockpiles to identify potential extensions to the existing

mineral resource. Geological drilling was also completed at the Gangama deposit in order to assist with future dredge design

requirements.

Additionally during the year the Company applied for two reconnaissance licences for potentially high grade areas which are

adjacent to the current mining licence area.

The Company has a new drilling programme planned for 2011 and 2012, which will concentrate on the existing mining licence area

to optimise SRL’s dredge deployment strategy, improve mine planning and identify any further expansions to the ore reserve.

Key Performance Indicators Units of Measurement 2006 2007 2008 2009 2010

Rutile Production MT 73,802 82,527 78,908 63,864 68,198

Ilmenite Production MT 13,819 15,750 17,258 15,161 18,206

Turnover US$ million 51.30 67.85 49.42 36.85 43.91

Gearing* 14.4% 15.5% 28.2% 29.9% 27.4%

Assets Turnover** 20.0% 23.6% 30.3% 20.9% 27.9%

EBITDA US$ million 6.0 (2.8) (30.4) 9.7 (3.8)

Cash & Cash Equivalents US$ million 52.4 25.7 7.4 25.9 28.4

Capital Expenditure US$ million 37.2 57.4 31.9 8.7 4.0

Lost Time Injuries 30 25 9

*Gearing, is calculated as debt to debt plus equity**The asset turnover ratio, measures the efficiency of a company’s use of its assets in generating sales revenue


Health & Safety2010 saw a strong improvement in health safety performance at Sierra Rutile, with the Company outperforming its target of

a 25% reduction in lost time injuries by cutting lost time injuries by 64% compared to 2009. The Company also achieved its

target of no fatalities.

Key EHS Indicators 2008 2009 2010

Number of:

Fatalities 3 0 0

Lost Time Injuries 30 25 9

We remain committed to continue improving our performance in this vital area. The first stage of the Company’s strategic

review identified a number of areas where SRL can improve its health and safety policies and as a result the Company is

currently completing a comprehensive first aid training programme to cover all locations and shifts, conducting a formal

baseline health and safety risk assessment and developing a formal system of health and safety standards, training, auditing

and management accountability.

Occupational Health & HIV/AIDSSierra Rutile continued its successful partnership with NGOs, the Mine Workers Union and the National AIDS Secretariat of

Sierra Leone to address the prevention of HIV/AIDS in 2010, and we will continue to support them in the year ahead. Our

health personnel are trained to administer antiretroviral drugs and conduct voluntary testing and counselling. The Sierra

Rutile Clinic, which supports all ongoing initiatives, treated approximately 1,700 people a month, the majority of whom are

our employees and their families, however we also run additional weekly clinics in local communities to provide basic and

emergency public healthcare.

CommunitySierra Rutile is committed to being a positive force in not only the communities around the minesite but Sierra Leone as a

whole. The Company pursues a number of initiatives and partnerships, including the Sierra Rutile Foundation, which are

designed to improve the lives and employment opportunities of the people of Sierra Leone.

Social Responsibility

Children at a local school funded by SRL

Test pond for SRL's trial aquaculture project


Training and recruiting the next generation of skilled employees is an important part of SRL’s long-term business strategy.

Growing competition for skilled labour in Sierra Leone, the ageing nature of the Company’s workforce and the need to help

improve the lives of the local populace mean it is increasingly important to support education initiatives in the areas around

the mine. To which end, 2010 marked the opening of the Sierra Rutile Technical Institute in partnership with a former

shareholder and Africare.

The Institute will teach relevant technical and engineering skills to young people in the communities around the mine site.

The Institute currently offers diploma level courses in civil, electrical, mechanical and automobile engineering and is finalising

plans to begin teaching certificate level courses in business studies and information technology in the near future. It is hoped

that the Institute will significantly improve the long term employment prospects for the people living around the Sierra Rutile

mine and allow the Company to increase recruitment of local Sierra Leoneans and lower its reliance on ex-patriot workers.

There are currently twelve staff and over 80 students enrolled in the Institute’s various courses.

In addition, Sierra Rutile’s partnership with the charity Forgotten Diamonds continues to progress and deliver improved

standards of literacy in local communities. The Ruby Rose Educational Resource Centre and Library created by the partnership

is used by over 20 local primary schools to encourage learning and literacy. In addition to this, there are over 115 people

enrolled in the centres adult education programme.

Access to clean water is one of the most important factors in ensuring the health and wellbeing of the communities around

the mine site, and in 2010 the Company distributed over 1.5 million gallons of fresh clean treated drinking water to local

villages. In addition to distributing clean water, the Company is also rehabilitating old wells and constructing new ones in

order to provide a long term solution for local villagers water needs.

Sierra Rutile FoundationThe Company aims to contribute US$100,000 annually to the Sierra Rutile Foundation, which was set up in 2006 to finance

sustainable community development initiatives in the in the areas surrounding the Company’s operations. The Foundation is

managed by an independent board of trustees. In 2010, after consultation with representatives from chiefdoms in the area of

the mine, the Foundation identified a number of development projects to support, including: the construction of a resource

centre and a radio station in the Imperri chiefdom and the construction of a clean waterwell with hand pump and sanitation

facilities for the Jong, Upper and Lower Banta chiefdoms.


Social Responsibility

EnvironmentThe Company aims to minimise the environmental impact of its mining operations and is committed to the rehabilitation of

land affected by current and historical mining activity. The mining processes used at Sierra Rutile have a relatively limited

impact on the environment as no chemicals are used in the processing of ore and no large-scale mining pits are created.

However, the creation of large dredge ponds and sandy tailings areas can impact relatively large areas of land and require

the resettlement of communities.

During 2010, Sierra Rutile continued with a number of initiatives to minimise the environmental impact of its mining activities

by developing a strategy for the rehabilitation of current and historic mine works as part of the SRL Rehabilitation and

Biodiversity Conservation Strategy.

The various types of trees that were planted in previous years on former mine works, as part of both the Darwin Initiative

and the Company’s own projects have all been relatively successful, and the Company will continue to observe their growth

rates to determine the best strategy going forward for land rehabilitation. In 2010, SRL rehabilitated 55 acres of sand

tailings in Lanti and 6 acres of dry mined areas in Pejebu, through the planting of various types of trees including cashew,

guava, acacia, oil palm, mango and almond. It is intended that the trees will, in due course, provide the basis for local

communities to develop agribusiness opportunities.

The Company’s trial aquaculture project for the rehabilitation of mined out dredge ponds continued in 2010, and in two

separate crops comprising a total of 4,346 brooders and 59,038 juvenile fish were stocked in six ponds.


Exploration and development riskMineral exploration and development involves a high degree of risk. Success in exploiting mineral resources and reserves is

the result of a number of factors, including the level of geographical and technical expertise, the quality of land available

for exploration and other factors. The economics of developing mineral properties are affected by many factors including

the cost of operations, variations in grade, fluctuation in prices, fluctuation in exchange rates and others.

Operating risksThe activities of the group are subject to all of the hazards and risks normally associated with exploration, development and

operation of natural resource projects. These risks and uncertainties include environmental hazards, industrial accidents,

labour disputes, mechanical failures of the dredges or other key plant or machinery, grade problems, periodic interruptions

due to inclement or hazardous weather conditions and other acts of God. Should any of the risks affect the Group, it may

significantly reduce production for prolonged periods and cause the cost of production to increase to a point where it

would no longer be economic to continue operations.

Estimates of mineral reserves and resourcesMineral reserves and resources estimates for projects are based on the interpretation of geological data obtained from drill

holes and other sampling techniques and feasibility studies which derive estimates of costs based upon anticipated tonnage

and grades to be mined and processed. There are numerous uncertainties inherent in estimating ore reserves and

assumptions that are valid at the time of estimation may change significantly when new information becomes available.

Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the

economic status of reserves and may, ultimately, result in the reserves being restated.

InsuranceCommon to other mining companies, Sierra Rutile is subject to risk which could result in damage to or destruction of mineral

properties and operating assets, personal injury or death, environmental damage, delays in extraction and possible legal liability.

Accordingly, Sierra Rutile may suffer losses, liabilities or damages against which it cannot insure or against which it may

elect not to insure because it is too expensive relative to the perceived risk. Should such liabilities or damages arise, they

could reduce or eliminate any future profitability, result in increased costs and the loss of the Group’s assets and a decline

in the value of the Company’s securities.

Principal Risks


Principal Risks

In April 2010, the Company reached a final Settlement Agreement with all insurers in relation to the Company’s outstanding

claims relating to the capsize of Dredge D2 in July 2008.

CompetitionThe mining industry is competitive in all of its phases. The Group faces strong competition from other mining companies in

connection with the acquisition of mineral properties, as well as for the recruitment and retention of qualified employees.

Larger companies, in particular, may have access to greater financial resources, operational experience and technical

capabilities than the Group which may give them a competitive advantage.

Volatility of mineral pricesThe future profitability of the Group will depend on the market price of rutile. Mineral prices fluctuate widely and are

affected by numerous factors beyond the Group’s control, including global supply and demand, political and economic

conditions, advancements in mineral processing and currency exchange fluctuations. The effect of these factors on the

price of rutile cannot accurately be predicted.

Political riskThe Group’s properties are located in Sierra Leone and its operations may be affected in varying degrees by political and

economic instability, crime, fluctuations in currency exchange rates and inflation. Whilst there can be no certainty about

the future stability of the country, we note that there was a successful transfer of power following the national elections in

August 2007.

Protection of assets and personnelThe Company is confident that it will be able to maintain effective security in connection with its assets or personnel in

Sierra Leone. Unless the Government can provide the necessary degree of peace, order and security, the cost to, and the

ability of, the Group to maintain effective security over its assets in Sierra Leone will be adversely affected. In 2009 the

Group appointed a specialist security service to manage the Company’s security needs. The primary focus of the team is on

loss prevention, and the appointment of the specialist security service is showing a positive impact through a reduction in

levels of theft.


Title to propertiesThe Company is satisfied that it has taken reasonable measures to ensure that proper title to the mining leases of SRL has

been obtained and that all grants of mineral rights for the Group’s properties have been registered in the appropriate

deeds offices. No assurance can be given, however, that any lease, licence or permit held by the Group will not be

challenged or impugned in the future.

Government regulationThe Group’s mining operations are located in Sierra Leone and are subject to its laws and regulations governing

expropriation of property, health and worker safety, employment standards, waste disposal, protection of the

environment, mine development, land and water use, prospecting, mineral production, exports, taxes, the protection of

endangered and protected species and other matters.

While the Group believes that it is in substantial compliance with all material laws and regulations currently affecting its

activities, future changes in applicable laws, regulations, agreements or changes in their enforcement or regulatory

interpretation could result in changes in legal requirements or in the terms of existing permits and agreements applicable

to the Group or its properties, which could have a material adverse impact on the Group’s current operations or future

development projects. Where required, obtaining necessary permits and licences can be a complex, time-consuming

process and the Group cannot assure whether any necessary permits will be obtainable on acceptable terms, in a timely

manner or at all.

Environmental regulationEnvironmental and safety legislation (e.g. in relation to reclamation, disposal of waste products, protection of wildlife and

otherwise relating to environmental protection) may change in a manner that may require stricter or additional standards

than those now in effect, a heightened degree of responsibility for companies and their directors and employees and more

stringent enforcement of existing laws and regulations. There may also be unforeseen environmental liabilities resulting

from mining activities, which may be costly to remedy. If the Group is unable to fully remedy an environmental problem,

it may be required to stop or suspend operations or enter into interim compliance measures pending completion of the

required remedy. The potential exposure may be significant and could have a material adverse effect on the Group.


RehabilitationCosts associated with rehabilitating land disturbed during the mining process and addressing environmental, health and

community issues are estimated and provided for based on the most current information available. Estimates may, however,

be insufficient and/or further issues may be identified.

Energy cost and supplyThe Group’s operations are energy intensive and, as a result, the Group’s costs and earnings could be adversely affected by

rising energy costs or by supply disruptions. The following factors could materially adversely affect the Group’s energy

position: the unavailability of energy due to a variety of reasons including significant increases in costs of supplied fuel,

interruptions in energy supply due to equipment failure or other causes.

Currency riskWhile the Group’s revenue and expenditures are principally in US dollars, a significant portion of the Group’s expenses

incurred in connection with the projects are in Sierra Leone’s local currency, the Leone. In addition, the Government of

Sierra Leone loan facility is in Euros and the November 2009 fund raising was in British Pounds. As a result, fluctuations in

currency exchange rates could have a material adverse effect on the financial condition, results of operation or cash flow of

the Group. The Group has not entered into any hedging arrangements with respect to foreign currencies.

Dependence on key personnel, contractors, experts and other advisersThe success of the operations of the Group is dependent to a significant extent on the efforts and abilities of its management,

outside contractors, experts and other advisers. The Company has a small management team and the loss of a key individual

could affect the Group’s business. While the Company has entered into service agreements with certain of its key executives,

the retention of their services cannot be guaranteed. Accordingly, the loss of any key executive or manager of the Group may

have an adverse effect on the future of the Group’s business.

Principal Risks


Board of Directors

DirectorsJan Castro Non-Executive ChairmanMr. Castro is the founder and Chief Executive Officer of Pala Investments AG, the exclusive advisor to Pala Investments

Holdings Ltd., an investment company dedicated to investing in, and creating value across, the mining sector. Pala seeks to

assist companies in which it has long-term shareholdings by providing strategic advice and innovative financing solutions.

Prior to founding Pala in July 2006, Mr. Castro was Senior Vice President of Investments and Corporate Affairs for Mechel

OAO, a NYSE-listed company and one of Russia's largest mining and metals companies listed on the New York Stock

Exchange. Mr. Castro currently serves on the Boards of Alacer Gold (TSX:ASR), Nevada Copper (TSX:NCU), Churchill Mining

PLC (AIM:CHL), Gemcom Software International Inc., Norcast Wear Solutions and Dumas Contracting Ltd. Mr. Castro was

nominated to the Board as a representative of Pala Investment Holdings Limited.

John Bonoh Sisay Chief ExecutiveMr. Sisay has accumulated considerable experience within the African mining sector having worked in over ten African

countries. Mr. Sisay started his career as a graduate trainee at the Central Selling Organization (CSO) of De Beers Consolidated

Mines, Ltd where he learned the contours of the mining industry, in particular with regards to diamonds. After working at the

CSO, Mr. Sisay joined America Minerals Fields, now part of First Quantum, and worked on new acquisitions for the company,

particularly in the Democratic Republic of Congo. Additionally he has served as President of the Sierra Leone Chamber of

Mines and as a Non-Executive Director for Diamond Fields International and Vimetco S.L. Mr. Sisay joined SRL in 2001,

and periodically serves as an advisor to the Government of Sierra Leone on mining related issues.

Michael Barton Non-Executive DirectorMr. Barton is currently Senior Vice President of Pala Investments AG, the exclusive advisor to Pala Investments Holdings

Limited. Whilst at Pala Investments AG, he has been involved in many of Pala's largest transactions, including Pala's

investments in Anatolia Minerals Development Corporation, Avoca Resources Limited, Dumas Contracting Limited and

Norcast Wear Solutions. Previously Mr. Barton was Vice President at Hatch Corporate Finance, a company specialising in

providing corporate finance advisory services to the metals and mining industry. He currently serves on the boards of

Peninsula Energy Ltd (ASX:PEN), WDS Limited (ASX:WDS), Dumas Contracting Limited and Norcast Wear Solutions.

Mr Barton is a qualified chartered accountant and a member of the Securities and Investment Institute. Mr. Barton was

nominated to the Board as a representative of Pala Investment Holdings Limited.


Michael Brown Non-Executive DirectorMr. Brown is the Chief Operating Officer of De Beers Consolidated Mines Ltd (“DBCM”), the South African mining operation

of the De Beers Group. Mr. Brown has worked at De Beers since 1990, holding a number of senior positions including Head

of Strategic Business Development at DBCM, General Manager of the Finsch Mine and Mine Manager at NAMDEB. He has

been a director of De Beers Marine since 2008. He has held his current position since June 2008, and is accountable to the

Managing Director and DBCM Board for all operations in South Africa, including: production at 5 separate mines, the

delivery of construction projects, strategic business development and health, safety and environmental control. Mr. Brown

has managed a number of significant projects at De Beers including the restructuring of DBCM in 2009 in response to the

global financial crisis, the construction and early delivery of the R1.3 billion Voorspoed mine and the design and

implementation of a new business model for DBCM. Mr. Brown has over 25 years experience working across the African

mining sector, having graduated from the University of the Witwatersrand with a B.Sc. in Mining Engineering. Mr. Brown is

a registered Professional Engineer (Pr. Eng) with the South African Council of Professional Engineers and a member of the

South African Institute of Mining and Metallurgy. Mr. Brown was nominated to the Board as a representative of Pala

Investment Holdings Limited.

François Colette Non-Executive DirectorMr. Colette has more than 25 years experience in mining in Africa having worked for Gécamines as Technical Manager for the

West Group and AMFI-Adastra as Congo country manager. While at AMFI-Adastra he was in charge of their copper, cobalt and

zinc projects, including Kolwezi Tailings. Between 1990 and 1996, Mr Colette worked mostly as a consultant to Sofremines

(France) in relation to a number of copper, cobalt, zinc and gold projects in Romania, Russia, Kazakhstan, Zaire, and Cuba.

Dr. Charles Entrekin Ph.D. Non-Executive DirectorCharles Entrekin has over 35 years of experience in the mining and metals sector, acting both as an executive officer level

and as a consultant. He currently acts as an international consultant for numerous metal producers and financial houses

and is also currently a director of Coalcorp Mining Inc. and Formation Metals Inc. Previous executive positions include

President and Chief Operating Officer of Titanium Metals Corporation, a NYSE listed producer of primary titanium and its

alloys, as well as President and Chief Executive Officer of Timminco Ltd., a TSX listed magnesium, silicon and aluminium

company. Through his career Dr. Entrekin has led and implemented many successful restructurings and turnarounds of

mining and metals companies in both North America and internationally. Dr. Entrekin holds a B.Sc. from Lehigh University

and a MBA from the University of Delaware in addition to a M.Sc. and Ph.D from Drexel University.

Board of Directors


Alex B. Kamara Non-Executive DirectorMr. Kamara has considerable experience in the mining industry and in mechanical and electrical engineering. Mr. Kamara

was Head of Engineering at SRL from 1982 to 1995, and head of the management team at the Sierra Leonean National

Power Authority from 2000-2002. Mr. Kamara is a Sierra Leonean national and has been awarded the Order of Commander

of the Rokel by the Government of Sierra Leone, a high civilian award in recognition of his contribution to engineering in

Sierra Leone. Mr. Kamara is the Chairman of Standard Chartered Bank Sierra Leone Limited and a Non-Executive Director of

Cemmats Group, a Sierra Leonean company which has a number of contracts with Sierra Rutile Limited. Mr. Kamara was

appointed as a Non-Executive Director in March 2008.


Directors’ Report

The Directors submit their report and the audited financial statements of the Company for the year ended 31 December 2010.

Results and dividendThe results of the Company are shown on page 31. The Directors have not declared a dividend during the year (2009: $nil).

Principal activities and review of the businessThe Company’s principal activity is exploring for, producing and marketing industrial minerals, primarily rutile, in Sierra Leone,

West Africa. The Company owns the Sierra Rutile mine in Sierra Leone.

Health, Safety, Environment and CommunitiesThe Company has agreed to take on the same performance obligations as members of the International Council on Mining &

Metals and seeks continual improvement in non-financial performance so as to enhance shareholder value.

Employee Policies and InvolvementOur operations aim to record zero accidents causing harm to any individual through the following standards:

� We provide adequate control of health and safety risks and regular monitoring to assess the appropriateness of these risks

over time;

� We provide appropriate training, equipment and maintenance to prevent accidents;

� We consult with employees at all levels to ensure that their instruction, supervision and levels of competency are

appropriate to their position;

� We review and report on health and safety at our operations as part of internal management practice and external

communications; and

� The SRL mine site has a fully staffed and equipped clinic which is funded by the Company and provides free healthcare for

employees, their dependants and the local population.

Corporate GovernanceThe Directors intend, where practicable for a company of Sierra Rutile Limited’s’ size and nature, to comply with the

Combined Code.


The Directors have established audit, remuneration and governance committees. In addition a strategic review committee has

been established to assess the strategic review. The Company has departed from certain aspects of the guidelines set out in

the Combined Code and the Corporate Governance Guidelines for AIM companies published by the QCA in that the Non-

Executive Directors have been granted options. However, the options are not subject to performance criteria. In the opinion of

the Directors, these options are not considered to be material enough to either the Company or each Non-Executive Director

concerned to impair the independence of the Company’s Non-Executive Directors.

At 31 December 2010, the Board comprised two Executive Directors and five Non-Executive Directors.

Remuneration CommitteeThe remuneration committee, which is chaired by Mr. Barton, and includes Mr. Kamara and Mr. Brown (all Non-Executive

Directors), determines the terms and conditions of service, including the remuneration and grant of Options to Directors (both

Executive and Non-Executive) and others under the Share Option Scheme and any other future share option schemes and

arrangements adopted by the Company. The remuneration committee meets at least once a year.

Directors RemunerationDirectors Remuneration – Cash and Non cash (US$) Pension Contributions (US$) Total (US$)

Executive DirectorsWayne Malouf (appointed on 10 August 2010) 30,000 – 30,000

John Bonoh Sisay 309,527 – 309,527

Jean Lindberg Charles 175,722 – 175,722

Non-Executive DirectorsWalter Kansteiner (resigned on 3 June 2010) 135,000 – 135,000

Rod Baker (resigned on 15 September 2010) 84,000 – 84,000

François Colette 44,578 – 44,578

Raju Jaddoo (resigned on 16 November 2010) 119,459 – 119,459

Alex Kamara 85,167 – 85,167

Jan Castro (appointed on 30 September 2010) 7,500 – 7,500

Michael Barton (appointed on 30 September 2010) 8,946 – 8,946

Michael Brown (appointed on 14 October 2010) 6,847 – 6,847

Dr. Charles Entrekin (appointed on 10 December 2010) 2,049 – 2,049


Directors’ Report

Audit CommitteeThe audit committee, which is chaired by Mr. Barton, and includes Dr. Entrekin and Mr. Colette, (all Non-Executive Directors),

has primary responsibility for monitoring the quality of internal controls, for ensuring that the financial performance of the

Company is properly measured and reported on and for reviewing reports from the Company’s auditors relating to the

Company’s accounting and internal controls. The audit committee meets at least three times a year. The Company has

adopted a code for Directors’ dealings appropriate for a company with shares admitted to trading on AIM and will take all

reasonable steps to ensure compliance by the Directors and any relevant employees.

Governance CommitteeThe governance committee, which is chaired by Jan Castro, and includes Dr. Entrekin and Mr. Colette, has primary responsibility

for keeping the Board informed of current best practices in corporate governance; reviewing corporate governance trends for

their applicability to the Company and updating the Company's corporate governance principles and governance practices.

Strategic Review CommitteeThe strategic review Committee, which is chaired by Jan Castro, and includes Michael Brown and Alex Kamara, has primary

responsibility in overseeing the assessment and implantation of the findings of the Strategic Review.

Directors and their interestsThe names of the Directors who held office during the year and after the year end are listed below.

Mr. Jan Castro (appointed 30 September 2010 and became Non-Executive Chairman 21 February 2011)

Mr. Wayne Malouf (appointed Executive Chairman 10 August 2010 became Non-Executive Chairman 1

January 2011, resigned 21 February 2011)

Mr. Walter Kansteiner (resigned 3 June 2010)

Mr. John Bonoh Sisay (appointed 10 March 2008 and became CEO on 3 February 2009)

Mr. Jean Lindberg Charles (resigned 21 February 2011)

Mr. Raju Jaddoo (resigned 16 November 2010)

Mr. Rod Baker (resigned 15 September)

Mr. Alex Kamara (appointed 10 March 2008)

Mr. François Colette (appointed 11 May 2009)

Mr. Michael Barton (appointed 30 September 2010)

Mr. Michael Brown (appointed 14 October 2010)

Dr. Charles Entrekin (appointed 10 December 2010)


None of the Directors held shares as at December 31, 2010. Directors hold the following options to subscribe for common

shares as at 31 December 2010.

Exercise price Date of Grant Date of Expiry Number of Options

Mr John Sisay 75.50p 13 February 2008 13 February 2013 100,000

Share CapitalDetails are set out in the notes to financial statements.

Substantial ShareholdersSo far as the Directors are aware, the following shareholders had an interest in 3% or more of the voting capital of the

Company as at 31 December 2010:

Holder No. of common shares Percentage Holding

Pala Investment Holdings Limited AG 114,981,497 29.80%

M&G Investment Management Limited 61,500,000 15.93%

JPMorgan Asset Management Limited 34,700,276 8.99%

Leopard Titanium Limited 31,459,856 8.15%

Going ConcernThe Board, after making suitable enquiries, is satisfied that the Company has adequate resources to continue in operational

existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the

financial statements.

Annual General MeetingThe AGM of the Company will be held at 10 am (British Summer Time) on 6 July at 90 High Holborn, London, WC1V 6XX.

The notice convening the meeting is being sent to shareholders with this report. Resolutions relating to the meeting are set

out in the Notice of Meeting.


Proxy VotingProxy cards will be distributed to shareholders with the Notice of the AGM.

Statement of Directors’ ResponsibilitiesThe Directors are required to prepare financial statements that give a true and fair view of the state of affairs of the

Company at the end of its financial year and of the profit or loss of the Company for the year. In preparing these financial

statements, the Directors are required to:

� Select suitable accounting policies and apply them consistently;

� Make judgments and estimates that are reasonable and prudent;

� State whether applicable accounting standards have been followed, subject to any material departures disclosed and

explained in the financial statements; and

� Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will

continue in business.

The Directors are also responsible for keeping proper accounting records, which disclose with reasonable accuracy at any

time the financial position of the Company and to enable them to ensure that the financial statements comply with the

provisions in the International Accounting Standards and International Financial Reporting 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.

AuditorsA resolution for the appointment of auditors of the Company is to be proposed at the forthcoming annual general meeting.

John Bonoh SisayChief Executive

3 June 2011

Directors’ Report


Independent Auditors’ Report to theMembers

This report is made solely to the members of Sierra Rutile Limited (the “Company”) (formerly known as Titanium Resources Group Ltd), as abody. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to themin an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyoneother than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Report on the Financial StatementsWe have audited the financial statements of Sierra Rutile Limited and its subsidiaries (the “Group”) on pages 32 to 72 which comprise thestatements of financial position at December 31, 2010 and the statements of comprehensive income, statements of changes in equity andstatements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ Responsibility for the Financial StatementsThe directors are responsible for the preparation and fair presentation of these financial statements in accordance with InternationalFinancial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance withInternational Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Theprocedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to thegroup’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as wellas evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements on pages 32 to 72 give a true and fair view of the financial position of the Group at December 31,2010 and of their financial performance and their cash flows for the year then ended in accordance with International Financial ReportingStandards.

Report on Other Legal and Regulatory RequirementsWe have no relationship with or interests in the Group other than in our capacity as auditors, tax and business advisers and dealings inthe ordinary course of business.

We have obtained all information and explanations we have required.

In our opinion, proper accounting records have been kept by the Group as far as it appears from our examination of those records.

BDO & Co Chartered AccountantsPort Louis, Mauritius. Per Afsar Ebrahim F.C.A


2010 2009Note USD’000 USD’000

ASSETSNon-current assetsProperty, plant and equipment 5 109,940 123,933Intangible assets 6 13,180 13,243Non-current receivables 9 727 753

123,847 137,929

Current assetsInventories 11 13,591 16,088Trade and other receivables 12 13,661 16,806Cash and cash equivalents 30(c) 28,373 25,902

55,625 58,796

Total assets 179,472 196,725

EQUITY AND LIABILITIESCapital and reservesShare capital 13(a) 251,963 251,963Revenue deficit (123,343) (130,995)

Owners’ interest 128,620 120,968Non-controlling interests (18,064) –

Total equity 110,556 120,968

LIABILITIESNon-current liabilitiesBorrowings 15 43,398 51,638Retirement benefit obligations 16 729 659Provisions for liabilities and charges 17 3,261 3,261

47,388 55,558

Current liabilitiesTrade and other payables 18 16,165 20,014Current tax liabilities 19(d) 275 175Borrowings 15 5,088 10

21,528 20,199

Total liabilities 68,916 75,757

Total equity and liabilities 179,472 196,725

These financial statements have been approved for issue by the Board of Directors on:-

John Bonoh Sisay Alex B. Kamara

The notes on pages 36 to 72 form an integral part of these financial statements.Auditors’ Report on page 31.

Consolidated Statements of Financial PositionDECEMBER 31, 2010


2010 2009Note USD’000 USD’000

Sales 2(o)/21 43,914 36,849Cost of sales 22 (48,642) (38,443)

Gross loss (4,728) (1,594)Administrative and marketing expenses 22 (6,395) (4,342)Other income 24 171 2,187

(10,952) (3,749)Exceptional items 25 (3,075) 3,698Finance income/(costs) 26 256 (7,514)

Loss before taxation 20 (13,771) (7,565)Taxation 19(a) (159) (302)

Loss for the year (13,930) (7,867)

Other comprehensive income – –

Total comprehensive income for the year (13,930) (7,867)

Loss attributable to:Owners of the parent (12,357) (7,867)Non-controlling interests (1,573) –

(13,930) (7,867)

Total comprehensive income attributable to:Owners of the parent (12,357) (7,867)Non-controlling interests (1,573) –

(13,930) (7,867)

Loss per share (USD)– basic 28(a) (0.032) (0.031)

– diluted 28(b) (0.024) (0.031)

The notes on pages 36 to 72 form an integral part of these financial statements.Auditors’ report on pages 31.

Consolidated Statements of Comprehensive IncomeFOR THE YEAR ENDED DECEMBER 31, 2010


NonShare Revenue controlling Totalcapital deficit Total interests equity

Note USD’000 USD’000 USD’000 USD’000 USD’000

Balance at January 1, 2010 251,963 (130,995) 120,968 – 120,968Total comprehensive income for the year – (12,357) (12,357) (1,573) (13,930)Movements – 18,837 18,837 (16,491) 2,346Gain on disposal of shares in subsidiary – 1,172 1,172 – 1,172

At December 31, 2010 251,963 (123,343) 128,620 (18,064) 110,556

Balance at January 1, 2009 238,026 (123,128) 114,898 – 114,898Total comprehensive income for the year – (7,867) (7,867) – (7,867)Adjustment for employee share options 13(a) (11,282) – (11,282) – (11,282)Issue of share capital 13(a) 25,219 – 25,219 – 25,219

At December 31, 2009 251,963 (130,995) 120,968 – 120,968


Consolidated Statements of Changes in EquityFOR THE YEAR ENDED DECEMBER 31, 2010


2010 2009Note USD’000 USD’000

Cash flows from operating activitiesCash generated from operations 30(a) 9,264 1,814Interest received 71 16Interest paid (2,455) (12)Tax paid (59) (57)

Net cash from operating activities 6,821 1,761

Cash flows from investing activitiesPurchase of property, plant and equipment 5 (3,986) (8,658)Proceeds from disposal of plant – 30

Net cash used in investing activities (3,986) (8,628)

Cash flows from financing activitiesIssue of ordinary shares 13(a) – 25,219

Net cash from financing activities – 25,219

Net increase in cash and cash equivalents 2,835 18,352

Movement in cash and cash equivalentsAt January 1, 25,892 7,354Increase 2,835 18,352Effect of foreign exchange rate change (459) 186

At December 31, 30(c) 28,268 25,892


Consolidated Statements of Cash FlowFOR THE YEAR ENDED DECEMBER 31, 2010


1. GENERAL INFORMATION

Sierra Rutile Limited (formerly known as Titanium Resources Group Ltd) is a public limited liability company incorporated and domiciled inthe British Virgin Islands. The address of its registered office is at P.O.Box 4301, Trinity Chambers, Road Town, Tortola, British Virgin Islands.Throughout the financial statements, SRX refers to Sierra Rutile Limited (formerly known as Titanium Resources Group Ltd) and SRL refersto Sierra Rutile Limited (the Sierra Leone based subsidiary).

These financial statements will be submitted for consideration and approval at the forthcoming Annual Meeting of shareholders of theCompany.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have beenconsistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparationThe financial statements of Sierra Rutile Limited have been prepared in accordance with International Financial Reporting Standards (IFRS).Where necessary, comparative figures have been amended to conform with change in presentation in the current year. The financialstatements are prepared under the historical cost convention, except that available-for-sale investments are stated at their fair value.

Standards, Amendments to published Standards and Interpretations effective in the reporting periodIAS 27, ‘Consolidated and Separate Financial Statements’ (Revised 2008), requires the effects of all transactions with non-controllinginterests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses.The revised standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, anda gain or loss is recognised in profit or loss. This IAS will not have any impact on the Group’s financial statements.

IFRS 3, ‘Business Combinations’ (Revised 2008), continues to apply the acquisition method to business combinations, with some significantchanges. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingentpayments classified as debt subsequently remeasured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree at fair value or at the non-controlling interest’s proportionateshare of the acquiree’s net assets. All acquisition related costs should be expensed. This IFRS will not have any impact on the Group’sfinancial statements.

Amendments to IAS 39, ‘Eligible hedged items’, prohibit designating inflation as a hedgeable component of a fixed rate debt. In a hedge ofone-sided risk with options, it prohibits including time value in the hedged risk. The amendment is not expected to have any impact on theGroup’s financial statements.

Amendments to IFRS 1 and IAS 27, ‘Cost of an Investment in a Subsidiary’, clarify that the cost of a subsidiary, jointly controlled entity orassociate in a parent’s separate financial statements, on transition to IFRS, is determined under IAS 27 or as a deemed cost. Dividends froma subsidiary, jointly controlled entity or associate are recognised as income. There is no longer a distinction between pre acquisition andpost–acquisition dividends. The cost of the investment of a new parent in a group (in a reorganisation meeting certain criteria) is measured

Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED DECEMBER 31, 2010


2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Basis of preparation (continued)at the carrying amount of its share of equity as shown in the separate financial statements of the previous parent. The amendment is notexpected to have any impact on the Group’s financial statements.

IFRIC 17, ‘Distributions of Non-cash Assets to Owners’, clarifies that a dividend payable is recognised when appropriately authorised and nolonger at the entity’s discretion. An entity measures distributions of assets other than cash when it pays dividends to its owners, at the fairvalue of the net assets to be distributed. The difference between fair value of the dividend paid and the carrying amount of the net assetsdistributed is recognised in profit or loss. This IFRIC will not have any impact on the Group’s financial statements.

IFRIC 18, ‘Transfers of Assets from Customers’, addresses the treatment for assets transferred from a customer in return for connection to anetwork or ongoing access to goods or services, or both. It requires the transferred assets to be recognised initially at fair value and therelated revenue to be recognised immediately; or, if there is a future service obligation, revenue is deferred and recognised over therelevant service period. This IFRIC will not have any impact on the Group’s financial statements.

Amendments to IFRS 1, ‘Additional Exemptions for First-time Adopters’ exempt entities that use the full cost method for oil and gasproperties from retrospective application of IFRSs. It also exempts entities with existing leasing contracts from reassessing the classificationof those contracts in accordance with IFRIC 4, ‘Determining whether an arrangement contains a lease’. The amendment is not expected tohave any impact on the Group’s financial statements.

Amendments to IFRS 2, ‘Group Cash-settled Share-based Payment Transactions’. In addition to incorporating IFRIC 8, ‘Scope of IFRS 2’, andIFRIC 11, ‘IFRS 2 – Group and treasury share transactions’, the amendments expand on the guidance in IFRIC 11 to address the classificationof group arrangements that were not covered by that interpretation. This amendment is not expected to have any impact on the Group’sfinancial statements.

Improvements to IFRSs (issued May 22, 2008)IFRS 5 (Amendment), ‘Non-current Assets Held for Sale and Discontinued Operations’, clarifies that all of a subsidiary’s assets and liabilitiesare classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary ifthe definition of a discontinued operation is met. The amendment will not have an impact on the Group’s operations.

Improvements to IFRSs (issued April 16, 2009)IAS 1 (Amendment), ‘Presentation of Financial Statements’. The amendment clarifies that the potential settlement of a liability by the issueof equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendmentpermits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cashor other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by thecounterparty to settle in shares at any time. This amendment is not expected to have any impact on the Group’s financial statements.IAS 7 (Amendment), ‘Statement of Cash Flows’, clarifies that only expenditure that results in a recognised asset in the statement of financialposition can be classified as a cash flow from investing activities. This amendment is unlikely to have an impact on the Group’s financialstatements.



(a) Basis of preparation (continued)IAS 17 (Amendment) ‘Leases’, clarifies that when a lease includes both land and buildings, classification as a finance or operating lease isperformed separately in accordance with IAS 17’s general principles. Prior to the amendment, IAS 17 generally required a lease of land withan indefinite useful life to be classified as an operating lease, unless title passed at the end of the lease term. A lease newly classified as afinance lease should be recognised retrospectively. The amendment will not have an impact on the Group’s operations.

IAS 18 (Amendment), ‘Revenue’. An additional paragraph has been added to the appendix to IAS 18, providing guidance on whether anentity is acting as principal or agent.

IAS 36 (Amendment), ‘Impairment of Assets’, clarifies that for the purpose of impairment testing, the cash-generating unit or groups ofcash-generating units to which goodwill is allocated should not be larger than an operating segment (as defined by IFRS 8, ‘Operatingsegments’) before aggregation. The amendment will not have an impact on the Group’s operations.

IAS 38 (Amendment), ‘Intangible Assets’, clarifies guidance in measuring the fair value of an intangible asset acquired in a businesscombination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. Theamendment removes the exceptions from recognising intangible assets on the basis that their fair values cannot be reliably measured.Intangible assets acquired in a business combination that are separable or arise from contractual or other legal rights should be recognised.The amendment specifies different valuation techniques that may be used to value intangible assets where there is no active market. Theamendment is unlikely to have an impact on the Group’s financial statements.

IAS 39 (Amendment), ‘Financial Instruments: Recognition and Measurement’ clarifies that the scope exemption within IAS 39 only applies toforward contracts that will result in a business combination at a future date, as long as the term of the forward contract does ‘not exceed areasonable period normally necessary to obtain any required approvals and to complete the transaction’. The amendment removesreference to transactions between segments as being hedgeable transactions in individual or separate financial statements and clarifies thatamounts deferred in equity are only reclassified to profit or loss when the underlying hedged cash flows affect profit or loss. Theamendment is not expected to have an impact on the Group’s statement of comprehensive income.

IFRS 2 (Amendment), ‘Share-based Payment’, confirms that, transactions in which the entity acquires goods as part of the net assetsacquired in a business combination as defined by IFRS 3 (2008) Business Combinations, contribution of a business on formation of a jointventure and common control transactions are excluded from the scope of IFRS 2 Share-based Payment. The amendment will not have animpact on the Group’s operations.

IFRS 5 (Amendment), ‘Non-current Assets Held for Sale and Discontinued Operations’. The amendment clarifies that IFRS 5 specifies thedisclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It alsoclarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and paragraph 125(sources of estimation uncertainty) of IAS 1. The amendment will not have an impact on the Group’s operations.

IFRS 8 (Amendment), ‘Operating Segments’, clarifies that the requirement for disclosing a measure of segment assets is only required whenthe Chief Operating Decision Maker reviews that information. This amendment is unlikely to have an impact on the Group’s financialstatements.




(a) Basis of preparation (continued)IFRIC 9 (Amendment), ‘Reassessment of Embedded Derivatives’, clarifies that embedded derivatives in contracts acquired in a combinationbetween entities or businesses under common control or the formation of a joint venture are outside the scope of IFRIC 9. This amendmentis unlikely to have an impact on the Group’s financial statements.

IFRIC 16 (Amendment), ‘Hedges of a Net Investment in a Foreign Operation’, clarifies that hedging instruments may be held by any entity orentities within the group. This includes a foreign operation that itself is being hedged. This amendment is unlikely to have an impact on theGroup’s financial statements.

Standards, Amendments to published Standards and Interpretations issued but not yet effectiveCertain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periodsbeginning on or after January 1, 2011 or later periods, but which the Group has not early adopted.At the reporting date of these financial statements, the following were in issue but not yet effective:Classification of Rights Issues (Amendment to IAS 32) (Effective February 1, 2010)IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (Effective July 1, 2010)Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IAS 24 Related Party Disclosures (Revised 2009)Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS1)Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)FRS 9 Financial InstrumentsDisclosures – Transfers of Financial Assets (Amendments to IFRS 7)Amendment to IFRS 1 Limited Exemption from Comparatives IFRS 7 Disclosures for First-time Adopters (Effective July 1, 2010)

Improvements to IFRSs (issued May 6, 2010)IFRS 1 First-time Adoption of International Financial Reporting StandardsIFRS 3 Business Combinations (Effective July 1, 2010)IFRS 7 Financial Instruments: DisclosuresIAS 1 Presentation of Financial StatementsIAS 27 Consolidated and Separate Financial Statements (Effective July 1, 2010)IAS 34 Interim Financial ReportingFRIC 13 Customer Loyalty Programmes

The Group is still evaluating the effect that these amendments to published Standards, Standards and Interpretations issued but not yeteffective, on the presentation of its financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree ofjudgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4.



(b) Investment in subsidiariesConsolidated financial statementsSubsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operatingpolicies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rightsthat are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fullyconsolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for theacquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group.The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Grouprecognises any non-controlling interests in the acquiree either at fair value or at the non-controlling interests’ proportionate share of theacquiree’s net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initialrecognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition-date fair valueof any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded asgoodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference isrecognised directly in the statement of comprehensive income.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses arealso eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted bythe Group.

Transactions and non-controlling interestsThe Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets ofthe subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Property, plant and equipmentProperty, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads and costs directlyattributable to bringing the assets to a working condition for its intended use. Cost also includes environmental decommissioning costs andthe cost of dismantling and removing the items and restoring the site on which they are located. These costs are recognised as a liability.

Depreciation is provided on a straight line basis over the estimated useful lives of the assets.




(c) Property, plant and equipment (continued)Where an item of property, plant and equipment comprises major components with different useful lives, the components are accountedfor as separate items of property, plant and equipment.

Subsequent expenditure relating to an item of property, plant or equipment is capitalised when it is probable that the future economicbenefits from the use of the asset will increase by more than the expenditure incurred. All other subsequent expenditure is recognised asan expense in the period in which it is incurred.

Deposit, exploration, evaluation, mine development expenditure and deferred project expenditureIn respect of deposit, minerals, exploration, evaluation, and deferred project, expenditure is charged to the statement of comprehensiveincome as incurred except where:– it is expected that the expenditure will be recouped by future exploitation or sale; or– substantial exploration and evaluation activities have identified a mineral resource but these activities have not reached a stage whichpermits a reasonable assessment of the existence of commercially recoverable reserves in which case the expenditure is capitalised.

Expenditure relating to both deposit and dam development and mine development are accumulated separately for each identifiable area ofinterest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure.

Expenditure is carried forward when incurred in areas where economic mineralisation is indicated, but activities have not yet reached astage which permits reasonable assessment of the existence of economically recoverable reserves, and active and significant operations inrelation to the area are continuing. Each such project is regularly reviewed. If the project is abandoned or it is considered unlikely that theproject will proceed to development, accumulated costs to that point are written off immediately.

Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation. Projectsare advanced to development status when it is expected that accumulated and future expenditure can be recouped through projectdevelopment or sale.

Expenditure relating to other expenses consists primarily of costs which provides benefit to the development of the mine in general and isnot specifically identifiable to a particular project.

Mining leasesPayments made under operating leases are recognised in the profit or loss on a straight line basis over the term of the lease. Leaseincentives received are recognised as an integral part of the total lease expense, over the term of lease.

The Group’s mining leases are of sufficient duration (or convey a legal right to renew for sufficient duration) to enable all reserves on theleased properties to be mined in accordance with current production schedules.



(d) Amortisation and depreciationAmortisation of deferred project expenditure is based on the estimated useful life of the asset to which the expenditure relates.

Depreciation is provided at rates calculated to write off the cost of fixed assets to their residual value over their estimated useful lives asfollows:Buildings and infrastructure – 20 to 40 yearsPlant, machinery & equipment – 3 to 20 yearsVehicles – 3 to 5 yearsMineral rights – Based on the estimated life of reservesExploration, evaluation and mine development – Based on the estimated life on proven and expenditure, and expenditure on mineral

rights probable reserves

Changes in estimates are accounted for over the estimated remaining economic life of the remaining commercial reserves of each projectas applicable.

(e) Intangible assets(i) GoodwillGoodwill represents the excess of cost of acquisition over the Group’s interest in the fair value of the net identifiable assets of the acquiredsubsidiaries at the date of acquisition.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Any net excess of the Group’s interest in the net fair value ofacquiree’s net identifiable assets over cost is recognised in the statement of comprehensive income.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. On disposal of a subsidiary, theattributable amount of goodwill is included in the determination of the gains and losses on disposal.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(ii) Computer softwareAcquired computer software licences are capitalised on the basis of costs incurred to acquire and bring to use the specific software and areamortised over their estimated useful lives estimated to be five years.

(f) Impairment of assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject toamortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount.The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment,assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).




(g) Foreign currencies(i) Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using United States Dollars, the currency of theprimary economic environment in which the entity operates (“functional currency”). The consolidated financial statements are presented inUnited States Dollars, which is the Group’s functional and presentation currency. All financial information presented in United States Dollarshave been rounded up to the nearest thousand.

(ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions.Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates ofmonetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of thetransaction.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date the fair valuewas determined.

(h) Financial instruments(i) Financial assetsCategories of financial assetsThe Group classifies its financial assets as available-for-sale financial assets.

The classification depends on the purpose for which the investments were acquired. Management determines the classification of itsfinancial assets at initial recognition.

(a) Available-for-sale financial assetsAvailable for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the othercategories. They are included in non-current assets unless management intends to dispose of the investment within twelve months ofthe end of the reporting period.

Initial measurementPurchases and sales of financial assets are recognised on trade date, the date on which the Group commits to purchase or sell theasset. Investments are initially measured at fair value plus transaction costs for all financial assets except those that are carried at fairvalue through profit or loss.



(h) Financial instruments (continued)Subsequent measurementAvailable-for-sale financial assets are subsequently carried at their fair values.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliablymeasured are measured at cost.

Unrealised gains and losses arising from changes in the fair value of financial assets classified as available-for-sale are recognised inequity. When financial assets classified as available for sale are sold or impaired, the accumulated fair value adjustments are included inthe statement of comprehensive income as gains and losses on financial assets.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Groupestablishes fair value by using valuation techniques. These include the use of recent arm’s length transactions and reference to otherinstruments that are substantially the same.

Impairment of financial assetsThe Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assetsis impaired. In the case of financial assets classified as available for sale, a significant or prolonged decline in the fair value of the security belowits cost is considered in determining whether the securities are impaired. If any such evidence exists for available for sale financial assets, thecumulative loss – measured as the difference between acquisition cost and the current fair value, less any impairment loss on that financialasset previously recognised in equity – is removed from equity and recognised in the statement of comprehensive income.

If the fair value of a previously impaired debt security increases and the increase can be objectively related to an event occurring afterthe impairment loss was recognised, the impairment loss is reversed and the reversal recognised in the statement of comprehensiveincome. Impairment losses for an investment in an equity instrument are not reversed through the statement of comprehensive income.

(ii) Long term receivablesLong term receivables with fixed maturity terms are measured at amortised cost using the effective interest rate method, less provision forimpairment. The carrying amount of the asset is reduced by the difference between the asset’s carrying amount and the present value ofestimated cash flows discounted using the effective interest rate. The amount of loss is recognised in the statement of comprehensiveincome. Long term receivables without fixed maturity terms are measured at cost. If there is objective evidence that an impairment loss hasbeen incurred, the amount of impairment loss is measured as the difference between the carrying amount of the asset and the presentvalue (PV) of estimated cash flows discounted at the current market rate of return of similar financial assets.




(h) Financial instruments (continued)(iii) Trade receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that theGroup will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is thedifference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interestrate. The amount of provision is recognised in the statement of comprehensive income.

(iv) Trade payablesTrade payables are stated at fair value and subsequently measured at amortised cost using the effective interest method.

(v) BorrowingsBorrowings are recognised initially at fair value being their issue proceeds net of transaction costs incurred.

Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemptionvalue is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method.Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preferenceshares are recognised in the statement of comprehensive income as interest expense.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at leasttwelve months after the end of the reporting period.

(vi) Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with originalmaturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statementof financial position.

(vii) Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity asdeduction, net of tax, from proceeds.

(i) InventoriesInventories comprise of stock piles of rutile, ilmenite and zircon and other consumables and are measured at the lower of cost and netrealisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completionand selling expenses.

The cost of inventories is based on the weighted average method and comprises of all cost of purchase and other production overheadsattributable to the production of the rutile and ilmenite based on normal operating capacity and other costs incurred in bringing theinventories to their present location and condition. Obsolete, redundant and slow moving consumable stocks are identified on a regularbasis and are written down to their estimated net realisable values.



(i) Inventories (continued)Stock piles comprise of rutile, zircon and ilmenite sand that have been extracted from the mine and which have been processed, and themeasurement thereof is subject to significant estimate and judgement. Stock piles are measured by using tonnage estimation procedures asfollows:

(i) Tonnage in SilosEach 750 mt capacity silo is dipped using a string with weight attached to it and the tonnage corresponding to the length of the string whichgoes down the silo before it touches the ore in it is read off the attached Silo/Dome Conversion Charts. This gives the tonnage of productheld in silo.

(ii) Tonnage in BargesAt present there are 5 operational coastal type barges at the Sierra Leone based company viz Olga G, Marion L, Beatrice B, Sue S, and IrishW. Olga G can be loaded up to a maximum of 1,800 MT whilst the rest are loaded up to a 1,100 MT maximum. After loading each barge,the draft is taken at six different positions (three positions along each longitudinal side of the barge) and the average calculated. Thetonnage corresponding to the calculated draft is read off the Barge Displacement Charts taking into consideration the specific gravity of thewater in which the barge is immersed. Tonnage of product in the barge is then obtained by subtracting the empty barge weight from theloaded barge weight (the empty barge weight is obtained by taking its draft weight when it is empty).

(iii) Tonnage in Rutile Warehouse and zircon and Ilmenite DomeTonnage of standard rutile product in rutile warehouse and tonnage of ilmenite product in the ilmenite dome are obtained by volumetricsurvey which is carried out by the Sierra Leone based company’s surveyors. The volume of each product in these areas is multiplied by itscorresponding density to obtain its tonnage.

(iv) Tonnage of Industrial Grade Rutile Product Bags1 MT and 2 MT capacity bags are loaded with industrial grade rutile product. The total tonnage of product in these bags is obtained byphysical bag count.

(v) Tonnage in Rutile and Ilmenite Product Haulage TrucksEach of 4 no. rutile product haulage trucks can hold a maximum of 44 MT while the 1 no. ilmenite product haulage truck can hold amaximum of 42 MT.

Consumable stock comprises fuel stock and spare parts. Fuel stock is measured using the volume dip reading method whilst spare parts aremeasured using physical unit count and average price per unit.




(i) Inventories (continued)Inventories are stated at the lower of cost or net realisable value where cost is defined as follows:–Titanium bearing minerals and zircon – Production cost and attributable overheadsConcentrates – Production costStockpiles – Production costMaterials – Average costFuel and sundry expenses – Purchase costGoods-in-transit – Invoice cost excluding freight

(j) Deferred income taxesDeferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the financial statements. However, if the deferred income tax arises from initial recognition of anasset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nortaxable profit or loss, it is not accounted for.

Deferred income tax is determined using tax rates that have been enacted by the end of the reporting period and are expected to apply inthe period when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which deductibletemporary differences can be utilised.

(k) Agricultural Development FundThe Group commits the higher of 0.1% (one tenth of one percent) of gross sales revenue in US dollars for each year, based on gross salesfree alongside ship at the Sierra Leone Port of Shipment, or USD 75,000 and this shall be used exclusively for the development ofagriculture in the areas affected by operations under the mining lease or in areas adjacent thereto within the same chiefdom. The annualamounts are paid over to the separate fund set up and controlled by the GOSL, chiefdom representatives, and the Group’s representatives.

(l) Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised until such time as theassets are substantially ready for their intended use or sale. Other borrowing costs are expensed.

(m) Retirement benefit obligationsShort-term employee benefitsThe cost of all short-term employee benefits is recognised during the period in which the employees render the related service.



(m) Retirement benefit obligations (continued)Long-term employee benefitsThe Group does not operate any retirement benefit plan for its employees. For the Sierra Leone based Company, the Company makes acontribution of 10% of the employees basic salary to the National Social Security and Insurance Trust for payment of pension to staff onretirement. The employees also contribute 5% of their basic salary to the Trust. The Sierra Leone based Company also provides for end ofterm benefits based on the provisions contained in the Collective Bargaining Agreements; these benefits are paid to employees fallingunder this category when they leave the Company.

Share options schemeThe Group operates a share option scheme. The fair value of the employee services received in exchange for the grant of the options wasrecognised as an expense up to May 16, 2007, date on which the conditions pertaining to “consideration to be paid on exercise of theoption” were changed. Henceforth, the consideration values of the options vesting are accounted as receivables. The total amount to beexpensed over the vesting period is determined by reference to the fair value of the options granted. At the end of each reporting period,the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revisionof original estimates, if any, in the statement of comprehensive income, and a corresponding adjustment to equity over the remainingvesting period.

(n) Provision for restoration and rehabilitationIn accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration and rehabilitation inrespect of disturbed and contaminated land, and the related expense, is recognised when the land is contaminated or disturbed. Changes inestimates of the site restoration and rehabilitation provision are recognised as an expense in statement of comprehensive income.

Costs of reclamation and rehabilitation are assessed on a regular basis and estimated costs are provided over the life of the Mine. Theexpenditure and provisions include costs of labour, materials, and equipment required to rehabilitate disturbed areas, cost of reclamation,plant and infrastructure closure and subsequent environmental monitoring. The estimates are not discounted and are based on currentcosts, legislature and community requirements and technology. Expenditure relating to ongoing rehabilitation and restoration programmesis charged against the provisions made.

(o) Revenue recognitionRevenue from the sale of rutile, zircon and ilmenite is measured at the fair value of the consideration received or receivable, which isusually the invoice value of rutile, zircon and ilmenite and excludes sales and value added taxes. Revenue is recognised when the significantrisks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs andpossible return of goods can be estimated reliably. There is no continuing management involvement with the goods and the amount ofrevenue can be measured reliably.




(o) Revenue recognition (continued)Tranfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales of rutile, zircon and ilmeniteproducts, usually transfer occurs according to the terms of the contract and with reference to Incoterms 2000.

Other income earned by the Group is recognised on the following basis:� Interest income – on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the

carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate, andcontinues unwinding the discount as interest income. Interest income on impaired loans is recognised either as cash is collected or on acost recovery basis as conditions warrant; and

� Dividend income – when the shareholder’s right to receive payment is established.

(p) ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is probable that anoutflow of resources, that can be reliably estimated, will be required to settle the obligation.

Provisions for restructuring costs are recognised when the Group has a detailed formal plan for the restructuring which has been notified toaffected parties and comprise lease termination penalties and employee termination payments. Provisions are not recognised for futureoperating losses.

(q) Segment reportingSegment information presented relate to operating segments that engage in business activities for which revenues are earned andexpenses incurred.

(r) Exceptional itemsExceptional items are events or transactions which, by virtue of their size or nature, have been disclosed in order to improve a reader’sunderstanding of the financial statement.

3. FINANCIAL RISK MANAGEMENT

3.1 Financial risks factorsThe Group’s activities expose it to a variety of financial risks:(a) market risk (including currency risk, fair value interest risk and price risk);(b) credit risk;(c) liquidity risk; (d) cash flow interest-rate risk; and(e) country risk.

The Group’s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimisepotential adverse effects on the Group’s financial performance.

A description of the significant financial risk factors is given below together with the risk management policies applicable.


3. FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1 Financial risks factors (continued)(a) Market riskCurrency riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respectto Leone (SLL), Euro and GBP. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and netinvestments in foreign operations. The Group places any excess of liquidity in stable currencies as a means to hedge its exposure to foreigncurrency risks.

At December 31, 2010, if the USD had weakened/strengthened by 5% against the Euro, with all other variables held constant, post-tax lossfor the year would have been USD 2,419,000 (2009: USD 2,582,000) higher/lower, mainly as a result of foreign exchange losses/gains ontranslation of Euro denominated borrowings.

(b) Credit riskThe Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of financial position arenet of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and the current economicenvironment.

The Group has no significant credit risk for the time being, as sales are based on off-take agreements with corporate customers. The Grouphas policies in place to ensure that sales of products and services are made to customers with an appropriate credit history.

(c) Liquidity riskPrudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount ofcommitted credit facilities. The Group aims at maintaining flexibility in funding by keeping committed credit lines available.

The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period atthe end of the reporting period to the contractual maturity date.

Less than Between 1 Between 2 Over1 year and 2 years and 5 years 5 years

USD’000 USD’000 USD’000 USD’000

At December 31, 2010Bank borrowings – overdraft 105 – – –Government of Sierra Leone loan 4,983 9,644 28,932 4,822Trade and other payables 16,165 – – –

21,253 9,644 28,932 4,822

At December 31, 2009Bank borrowings – overdraft 10 – – –Government of Sierra Leone loan – 5,164 30,983 15,491Trade and other payables 20,014 – – –

20,024 5,164 30,983 15,491




(d) Cash flow and fair value interest rate riskAs the Group has significant interest-bearing assets, its income and operating cash flows are substantially dependent of changes in marketinterest rates. The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group tocash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

Group policy is to maintain all its borrowings in fixed rate instruments. At year end, all borrowings were at fixed rates.

(e) Country riskThe Group has an operating subsidiary, namely Sierra Rutile Limited, based at Sierra Leone. The Group does not have an insurance cover tomitigate exposure to the risks present there.

3.2 Fair value estimationThe nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. Thefair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current marketinterest rate that is available to the Group for similar financial instruments.

3.3 Capital risk managementThe Group’s objectives when managing capital are:� to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits

for other stakeholders, and� to provide an adequate return to shareholders by pricing products commensurately with the level of risk.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in thelight of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capitalstructure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sellassets to reduce debt.

Consistently with others in the industry, the Group monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculatedas net debt to adjusted capital. Net debt is calculated as total debt (as shown in the statement of financial position) less cash and cashequivalents. Adjusted capital comprises all components of equity (i.e. share capital, share premium, minority interest, retained earnings, andrevaluation surplus) other than amounts recognised in equity relating to cash flow hedges, and includes some forms of subordinated debt.



3.3 Capital risk management (continued)During 2010, the Group’s strategy, which was unchanged from 2009, was to maintain the debt-to-capital ratio at the lower end of the range5% to 25%, in order to secure access to finance at a reasonable cost. The debt-to-capital ratios at December 31, 2010 and at December 31,2009 were as follows:

2010 2009USD’000 USD’000

Total debt (note 15) 48,486 51,648Less: cash in hand and bank balance (note 30 (c)) (28,373) (25,902)

Net debt 20,113 25,746

Total equity 110,556 120,968

Debt-to-capital ratio 18% 21%

The decrease in the debt-to-capital ratio during 2010 resulted primarily from a fall in net loss for the year. Besides, USD improved vis a visthe Euro and additions to property, plant and equipment decreased by USD.4.6m. As a result, cash and cash equivalent increased.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continuously evaluated and are based on historical experience and other factors, including expectations offuture events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal therelated actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year are discussed below.

(a) Estimated impairment of goodwillThe Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2(e)(i).These calculations require the use of estimates (note 6).

(b) Pension benefitsThe present value of the pension obligations depend on a number of factors that are determined on an actuarial basis using a number ofassumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in theseassumptions will impact the carrying amount of pension obligations.

The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine thepresent value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriatediscount rate, the Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which thebenefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.



4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(c) Limitation of sensitivity analysisSensitivity analysis in respect of market risk demonstrates the effect of a change in a key assumption while other assumptions remainunchanged. In reality, there is a correlation between the assumptions and other factors. It should also be noted that these sensitivities arenon-linear and larger or smaller impacts should not be interpolated or extrapolated from these results.

Sensitivity analysis does not take into consideration that the Group’s assets and liabilities are managed. Other limitations include the use ofhypothetical market movements to demonstrate potential risk that only represent the Group’s view of possible near-term market changesthat cannot be predicted with any certainty.

(d) Asset lives and residual valuesPlant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of theassets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such astechnological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments considerissues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to theextent of current profits and losses on the disposal of similar assets.

(e) Depreciation policiesPlant and equipment are depreciated to their residual values over their estimated useful lives. The residual value of an asset is theestimated net amount that the Group would currently obtain from disposal of the asset, if the asset were already of the age and incondition expected at the end of its useful life.

The directors therefore make estimates based on historical experience and use best judgement to assess the useful lives of assets and toforecast the expected residual values of the assets at the end of their expected useful lives.

(f) Impairment of available-for-sale financial assetsThe Group follows the guidance of IAS 39 on determining when an investment is other-than-temporarily impaired. This determinationrequires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which thefair value of an investment is less than its cost, and the financial health of and near-term business outlook for the investee, including factorssuch as industry and sector performance, changes in technology and operational and financing cash flow.


5. PROPERTY, PLANT AND EQUIPMENT

Plant, Mineral sandmachinery prospect Construction

and and mine work in DredgeInfrastructure equipment development progress D2 Exploration Total

USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000

(a) CostAt January 1, 2010 17,672 166,459 66,233 24,725 10,126 2,459 287,674Addition – 2,041 1,287 327 – 331 3,986Impairment charge – – – (7,844) – – (7,844)Transfer 12,057 (12,057) – – – – –

At December 31, 2010 29,729 156,443 67,520 17,208 10,126 2,790 283,816

DepreciationAt January 1, 2010 14,545 115,786 33,410 – – – 163,741Charge for the year 508 5,501 3,916 – – 210 10,135

At December 31, 2010 15,053 121,287 37,326 – – 210 173,876

Net book valueAt December 31, 2010 14,676 35,156 30,194 17,208 10,126 2,580 109,940

(b) CostAt January 1, 2009 17,672 161,234 51,018 37,069 10,521 2,055 279,569Addition – 5,263 2,838 153 – 404 8,658Transfer – 12,497 (12,497) – – – –Impairment charge – – (120) – (395) – (515)Disposal – (38) – – – – (38)

At December 31, 2009 17,672 166,459 66,233 24,725 10,126 2,459 287,674

DepreciationAt January 1, 2009 14,333 110,239 29,326 168 – – 154,066Charge for the year 212 5,547 3,916 – – – 9,675Transfer – – 168 (168) – – –

At December 31, 2009 14,545 115,786 33,410 – – – 163,741

Net book valueAt December 31, 2009 3,127 50,673 32,823 24,725 10,126 2,459 123,933



5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

(c) Expenditure capitalised in respect of the construction in progress amounted to USD 1.2m (2009: USD 2.4 m). Depreciation has not beencharged where the assets are presently not in the condition necessary to operate in the manner intended by management.

(d) Depreciation charge of USD 10,135,000 (2009: USD 9,675,000) has been charged in cost of sales.

(e) Initial findings of the strategic review committee suggest that the original unified configuration of Dredge D3 is unlikely to present theeconomically or technically optimal solution for mining Sierra Rutile's near term reserves. Accordingly, the capital spent on the dredge upuntil December 31, 2010 (USD 9.9m) has been written down to the amount which will likely be used going forwards (USD 2.1m) creating anexceptional loss of USD 7.8m.

Computer softwareGoodwill costs Total

6. INTANGIBLE ASSETS USD’000 USD’000 USD’000

(a) CostAt January 1, 2010 12,876 570 13,446Addition during the year – – –

At December 31, 2010 12,876 570 13,446

AmortisationAt January 1, 2010 – 203 203Charge for the year – 63 63

At December 31, 2010 – 266 266

Net book valueAt December 31, 2010 12,876 304 13,180

(b) CostAt January 1, 2009 12,876 570 13,446Addition during the year – – –

At December 31, 2009 12,876 570 13,446

AmortisationAt January 1, 2009 – 135 135Charge for the year – 68 68

At December 31, 2009 – 203 203

Net book valueAt December 31, 2009 12,876 367 13,243


6. INTANGIBLE ASSETS (CONTINUED)

(c) Amortisation charge of USD 63,000 (2009: USD 68,000) has been charged in cost of sales.

(d) Impairment tests for goodwill: goodwill is allocated to the Group’s cash-generating units identified according to country of operationand business activity.

7. INVESTMENTS IN SUBSIDIARY COMPANIES

(a) The list of the Company’s significant subsidiaries is as follows:

Proportion of Proportion ofClass of ownership interest voting power held Country of

Name shares held Year end Direct Indirect Direct Indirect incorporation Main business

2010Titanium Fields Ordinary December 31, 2010 100% – 100% – British Virgin Islands Intermediate holdingResources Ltd company

SRL Acquisition 1 ‘A’ share December 31, 2010 – 100% – 100% British Virgin Islands Intermediate holdingNo.1 Limited company

SRL Acquisition Ordinary December 31, 2010 – 100% – 100% British Virgin Islands Intermediate holdingNo.3 Limited company

The Natural Rutile Ordinary December 31, 2010 – 100% – 100% British Virgin Islands Marketing of RutileCompany Limited

Sierra Rutile Ordinary December 31, 2010 – 95.17% – 95.17% British Virgin Islands Intermediate holdingHoldings Limited company

Sierra Rutile Limited Ordinary December 31, 2010 – 95.17% – 95.17% Sierra Leone Extraction,concentration and saleof Rutile and Ilmenitesands

Agricultural Resources Ordinary December 31, 2010 100% – 100% – British Virgin Islands Agricultural projectsGroup Ltd

Biofuel Resources Ordinary December 31, 2010 100% – 100% – British Virgin Islands Biofuel projectsGroup Ltd



7. INVESTMENTS IN SUBSIDIARY COMPANIES (CONTINUED)

(a) The list of the Company’s significant subsidiaries is as follows:

Proportion of Proportion ofClass of ownership interest voting power held Country of

Name shares held Year end Direct Indirect Direct Indirect incorporation Main business

2009Titanium Fields Ordinary December 31, 2010 100% – 100% – British Virgin Islands Intermediate holdingResources Ltd company

SRL Acquisition 1 ‘A’ share December 31, 2010 – 100% – 100% British Virgin Islands Intermediate holdingNo.1 Limited company

SRL Acquisition Ordinary December 31, 2010 – 100% – 100% British Virgin Islands Intermediate holdingNo.3 Limited company

The Natural Rutile Ordinary December 31, 2010 – 100% – 100% British Virgin Islands Marketing of RutileCompany Limited

Sierra Rutile Ordinary December 31, 2010 – 96.12% – 96.12% British Virgin Islands Intermediate holdingHoldings Limited company

Sierra Rutile Limited Ordinary December 31, 2010 – 96.12% – 96.12% Sierra Leone Extraction,concentration and saleof Rutile and Ilmenitesands

Agricultural Resources Ordinary December 31, 2010 100% – 100% – British Virgin Islands Agricultural projectsGroup Ltd

Biofuel Resources Ordinary December 31, 2010 100% – 100% – British Virgin Islands Biofuel projectsGroup Ltd

(b) With the exception of the Sierra Leone based company (SRL), all the subsidiaries are incorporated in the British Virgin Islands (BVI) where there isno legal requirement for the preparation and filing of audited accounts. Sierra Rutile Limited (SRX) is quoted on the AIM market of the London StockExchange which requires the publication of annual audited financial statements.

(c) During the year ended December 31, 2010, further shares equivalent to 0.951% of the issued share capital of Sierra Rutile Holdings Limited weretransfered to the Government of Sierra Leone (GOSL) with regards to PAYE not remitted to GOSL by SRL in accordance with SRL Act and amendmentto the Act.


8. FINANCIAL ASSETS

Available-for-sale financial assetsCost Provision for impairment Net

(a) The movement in financial assets are as follows: USD’000 USD’000 USD’000

UnlistedAt January 1, 2009 2,200 (2,200) –Additions – – –At December 31, 2009 2,200 (2,200) –Additions – – –

At December 31, 2010 2,200 (2,200) –

(b) Financial assets represent 15/15 fractional interest in “Class B” Share of the subsidiary company, SRL Acquisition No.1 Limited, acquiredfrom Nord Resources Corporation in 2006. The “Class B” Share confers to the Group fixed dividend only and carries no voting rights. Sinceno other revenue is derived from SRL Acquisition No.1 Limited’s activities in addition to no voting rights, the investment in the “Class B”Share has thus not been accounted for as a subsidiary company as normally required by IAS 27.

2010 20099. NON–CURRENT RECEIVABLES USD’000 USD’000

Loan to the Government of Sierra Leone (see note (a) below) 727 727Other non-current receivables – 26

727 753

(a) This represents an amount loaned to Government of Sierra Leone (GOSL) to settle existing obligations to the International FinanceCorporation. The loan is unsecured and payment was due at the end of 1995.

10. DEFERRED INCOME TAX

Deferred income tax is calculated on all temporary differences under the liability method at 30%.

(a) There is a legally enforceable right to offset current tax assets against current tax liabilities and deferred income tax assets and liabilitieswhen the deferred income taxes relate to the same fiscal authority on the same entity. The following amounts are shown in the statementof financial position:

2010 2009USD’000 USD’000

Deferred tax assets – –Deferred tax liabilities – –

– –

At the end of the reporting period, the Group had unused tax losses of USD 498,034,000 (2009: USD 456,213,000) available for offsetagainst future profits. No deferred tax asset has been recognised in respect of such losses due to unpredictability of future profit streams.



10. DEFERRED INCOME TAX (CONTINUED)2010 2009

(b) The movement on the deferred income tax account is as follows: USD’000 USD’000

At January 1 – –Statement of comprehensive income (charge)/credit (note 19(a)) – –

At December 31 – –

(c) The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances withinthe same fiscal authority on the same entity, is as follows:

Accelerated taxdepreciation

USD’000

(i) Deferred tax liabilities: depreciationAt January 1, 2009 –Debited/(credited) to Statement of comprehensive income –

At December 31, 2009 –Debited/(credited) to Statement of comprehensive income –

At December 31, 2010 –

RetirementTax benefit

losses obligations Total(ii) Deferred tax assets: USD’000 USD’000 USD’000

At January 1, 2009 – – –Charged to Statement of comprehensive income – – –

At December 31, 2009 – – –Movement for the period 12,470 219 12,689Deferred tax assets not recognised (12,470) (219) (12,689)

At December 31, 2010 – – –

2010 200911. INVENTORIES USD’000 USD’000

(a) Rutile 2,918 3,671Ilmenite 560 1,020Zircon concentrate 1,415 2,474Consumables 8,698 8,923

13,591 16,088

(b) The cost of inventories recognised as expense and included in cost of sales amounted to USD 2,272,000 (2009: USD -ve 2,036,000).

(c) For the year under review, stock of consumables impaired amounted to USD 2,924,000.


2010 200912. TRADE AND OTHER RECEIVABLES (CONTINUED) USD’000 USD’000

Trade receivables 5,876 12,528Advances and prepayments 7,415 3,908Other receivable (see note (i) below) 370 370

13,661 16,806

(i) This represents the contingent element of the disposal proceeds arising on the disposal of three subsidiaries during the year endedDecember 31, 2008.

(ii) The carrying amount of trade and other receivables approximates their fair value. As of December 31, 2010, none of trade receivableswas impaired (2009: USD Nil). The amount of the provision was nil as of December 31, 2010 (2009: USD Nil).

As of December 31, 2010, trade receivables of USD 373,000 (2009: USD 3,703,000) were past due but not impaired. These relate toindependent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

2010 2009USD’000 USD’000

0 to 30 days 373 3,703

The carrying amount of the Group’s trade and other receivables are denominated in the following currency:2010 2009

USD’000 USD’000

US Dollar 12,879 16,008Sierra Leone Leone 9 12GB Pound 56 199Euro 250 495Australian Dollar 440 –South African Rand 27 92

13,661 16,806

A provision of USD 350,000 was made against prepayments. The other classes within trade and other receivables do not contain impairedassets.

The maximum exposure to credit risk at the end of the reporting period is the fair value of each class of receivable mentioned above.The Group does not hold any collateral as security.



Ordinary shares13. SHARE CAPITAL Number of shares USD’000

(a) Issued shares and optionsAt January 1, 2009 246,076,181 238,026Proceeds from new issues (See note (ii) below) 151,200,000 25,219Employee share option scheme:– Options vested 483,333 596– Adjustment for share options (11,895,439) (11,878)

At December 31, 2009 and 2010 385,864,075 251,963

(i) The total authorised number of ordinary shares is 500,000,000 shares (2009: 500,000,000 shares) with no par value. All issued shares arefully paid and are admitted on the AIM market of the London Stock Exchange.

(ii) At the end of November 2009, SRX made a new placement of 151,200,000 common shares. The placing with institutional investors at aprice of 10p per share raised £15,120,000 (USD 25.219 million) before expenses.

shares shares(iii) Reconciliation of number of shares Number of Ordinary USD’000

Issued shares 385,864,075 251,963Options vested but not yet exercised 11,895,439 11,832Adjustment for share options (11,895,439) (11,832)

385,864,075 251,963

(b) Share options – EmployeesShare options were granted to directors and to selected employees. The exercise price of the granted option was determined by the Boardbefore such grant. According to section 2.3 of the “Rules of SRX Unapproved Share Option Scheme”, the price should not be less than thehighest of the:� Nominal value of the shares;� Average of the middle market quotations of the shares as derived from the Official list for the 30 dealing days immediately preceding

the Grant date; and� Middle market quotation of the shares as derived from the Official list on the Grant date.

Exercise of the option was not subject to performance-related conditions. The options granted had exercise prices ranging from 47p to 78peach varying on the date of grant.

One third of the option granted vested immediately, one third vested on the first anniversary of the date of grant, and the remaining thirdvested on the second anniversary of the date of grant.

For the year ended December 31, 2009, 483,333 options (2008: 733,333 options) vested. At year ended December 31, 2009, the provisionfor the remaining 11,011,963 options were written back because management did not expect them to be exercised before the expiry dateas the exercise prices were by far higher than the market price.


13. SHARE CAPITAL

(c) Share options – Professional servicesIn 2005, in consideration of services given to the company by NabarroWells & Co Ltd, (NWCF LLP), the company also granted to NWCF LLP anoption to subscribe for 936,007 common shares of no par value at a subscription price of 47p each. In 2007, NWCF LLP exercised its optionand subscribed for 52,531 shares at 47p per share. The company issued these shares which were admitted on AIM market for trading. At yearended December 31, 2009, the provision for the remaining 883,476 options were written back because management did not expect them tobe exercised before the expiry date as the exercise prices were by far higher than the market price. These options expired in 2010.

14. MINORITY INTEREST

Pursuant to the First Amendment Agreement dated February 4, 2004, enterred by and between the Government of the Republic of SierraLeone (GOSL) and Sierra Rutile Limited (SRL) regarding PAYE taxes due from SRL (See note 32), during the year ended December 31, 2010,SRL Acquisition No.3 Limited transferred further 951 shares (2009: 1,416 shares) it held in Sierra Rutile Holdings Limited (SRHL) to GOSL,representing 0.951% (2009: 1.416%) ownership interest in SRHL and giving rise to a minority shareholder (GOSL). As at December 31, 2010,GOSL’s shareholding in SRHL amounted to 4.833%. In line with changes in IAS 27, ‘Consolidated and Separate Financial Statements’, theGroup has recognised non-controlling interests even if they have a deficit balance.

2010 200915. BORROWINGS USD’000 USD’000

(a) Non-current:Government of Sierra Leone loan 43,398 51,638

Current:Bank overdraft 105 10Government of Sierra Leone loan 4,983 –

5,088 10

Total borrowings 48,486 51,648

(i) The rates of interest on borrowings vary between 8% to 24%.

(ii) Government of Sierra Leone borrowing is subject to interest of 8% per annum and is repayable on June 15 and December 15 in eachyear commencing on the first payment date which is the earlier of 84 months after date of first disbursement or June 15, 2012. The interestis calculated on the basis of a 360 day year consisting of twelve months of thirty days.

The Group does not have any undertaking, nor is it contractually bound to create, any lien on or with respect to any of its rights or revenues.

Interest arising before March 1, 2008 was capitalised according to the terms of the Loan Agreement between SRL and the Government ofSierra Leone, the first interest payment shall not be made by the company until the earliest of the interest payment date occurring thirty –six months after the date of first disbursement, or June 15, 2008. During the year 2008, the Government of Sierra Leone and SRL signed amoratorium whereby all interests falling due after June 15, 2008 and upto June 15, 2010 would be capitalised. Payment of interestsresumed after June 15, 2010.



15. BORROWINGS (CONTINUED)

(b) The exposure of the Group’s borrowings to interest-rate changes and the contractual repricing dates are as follows:

6 months 6 to 12 1 to 5 Overor less months years 5 years Total

USD’000 USD’000 USD’000 USD’000 USD’000

At December 31, 2010Total borrowings 2,597 2,491 38,576 4,822 48,486

At December 31, 2009Total borrowings 10 – 36,147 15,491 51,648

2010 2009(c) The maturity of non-current borrowings is as follows: USD’000 USD’000

After one year and before five years 38,576 36,147After five years 4,822 15,491

43,398 51,638

2010 2009(d) Non-current borrowings can be analysed as follows: USD’000 USD’000

– After one year and before five yearsGovernment of Sierra Leone loan 38,576 36,147– After five yearsGovernment of Sierra Leone loan 4,822 15,491

43,398 51,638

2010 2009Euro Leone Euro

(e) The effective interest rates at the end of the reporting period were as follows: % % %

Government of Sierra Leone loan 8 – 8Bank overdraft 11.5 24 11.5

2010 2009(f) The carrying amounts of the Group’s borrowings are denominated in the following currencies: USD’000 USD’000

Leone 83 –Euro 48,403 51,648

48,486 51,648

(g) The carrying amounts of non-current borrowings are not materially different from their fair value.


2010 200916. RETIREMENT BENEFIT OBLIGATIONS USD’000 USD’000

Balance at January 1 659 485Current service costs 70 174

Balance at December 31 729 659

Actuarial assumptionsThe principal actuarial assumptions at the reporting dates were:Voluntary retirement age for men (in years) 60 60Voluntary retirement age for women (in years) 55 55Discount rate at the year-end 11% 10%Future salary increases 10% 10%The discount rate is the yield at the reporting date on Bank of Sierra Leone bond that matures in one year’s time.

2010 200917. PROVISION FOR LIABILITIES AND CHARGES USD’000 USD’000

At January 1 3,261 3,261Additional provision during the year – –

At December 31 3,261 3,261

RehabilitationCost of reclamation and rehabilitation are assessed on a regular basis and estimated costs are provided over the life of the Mine. Theexpenditure and provisions include costs of labour, materials, and equipment required to rehabilitate disturbed areas, cost of reclamation,plant and infrastructure closure and subsequent environmental monitoring. The estimates are not discounted and are based on currentcosts, legislature and community requirements and technology. Expenditure relating to ongoing rehabilitation and restoration programmesis charged against the provisions made. There was no additional provision during the year as a result of revision done to previouscomputation in view of reduction in costs. Thus, management considers the current provision to be adequate.

2010 200918. TRADE AND OTHER PAYABLES USD’000 USD’000

Trade payables 6,343 6,909Other payables and accrued expenses 9,822 10,760Consolidation adjustment on disposal of 4.833% (2009: 3.882%) shares in subsidiary – 2,345

16,165 20,014

Included in other payables and accrued expenses is an amount of USD 1,007,000 (2009: USD 1,173,000) relating to remaining shares to betransferred to the GOSL (see note 32).

The carrying amounts of trade and other payables approximate their fair value.



2010 200919. INCOME TAX USD’000 USD’000

(a) Current tax on the adjusted loss for the year at 0% – 30% – –Deferred income tax (Note 10) – –Minimum turnover tax for the year (159) (302)

Charge to statement of comprehensive income (159) (302)

(b) The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the basic tax rate of the Group asfollows:

2010 2009USD’000 USD’000

Loss before tax (13,771) (7,565)

Tax calculated at 0% – –Effect of different tax rates in different countries (7,362) (9,338)Investment allowance (6,660) (526)Income not subject to tax (1,507) (1)Expenses not deductible for tax purposes 3,059 1,473Tax losses on which no deferred income tax asset was recognised 12,470 8,392Minimum turnover tax for the year 159 302

Tax charge 159 302

(c) Under the provisions of the Sierra Rutile Agreement (Ratification) Act 2002, tax is charged at an amount not less than 3.5% of the turnoveror more than 37.5% of the profits of the business in any financial year. A subsequent agreement was reached in June 2003 with the GOSL toreduce the rate to 0.5% of the turnover of the business through the year 2014.

The Group, through its subsidiary SRL, is entitled to unutilised tax losses brought forward and capital allowances in respect of fixed assetacquisitions.

2010 2009(d) Current tax liabilities USD’000 USD’000

At January 1 175 (70)Charged to the statement of comprehensive income (see note 19(a) above) 159 302Paid during the year (59) (57)

At December 31 275 175


2010 200920. LOSS BEFORE TAXATION USD’000 USD’000

Loss before taxation is arrived at after:Charging:Depreciation on property, plant and equipment (note 5)– owned assets 10,135 9,675Amortisation of intangible assets (note 6) 63 68Impairment of property, plant and equipment 7,844 515Auditors’ remuneration – Audit and other services 114 58Employee benefit expense (note 23) 7,549 6,888

2010 200921. SALES USD’000 USD’000

Revenue represents the invoiced amount in respect of sales of rutile, ilmenites, bauxite and zircon extracted during the period excludingsales discount and consists of the following:

2010 2009USD’000 USD’000

Rutile 38,514 35,461Ilmenite 2,653 1,330Zircon 2,747 58

43,914 36,849

2010 200922. EXPENSES BY NATURE USD’000 USD’000

Depreciation (note 5) 10,135 9,675Amortisation (note 6) 63 68Changes in inventories of finished goods and work in progress 2,272 (2,036)Production and shipping costs 23,740 24,245Operating overheads 8,670 5,742Royalties, mining leases and rent 838 749Provision for obsolete stocks and write offs 2,924 –Administrative and marketing expenses 1,163 982Other expenses associated with accidented dredge 726 –Non-current receivable written off 26 –Prepayment written off 350 –Other provisions 270 –Merger and acquisition charges 939 –Directors fees and remuneration 987 943Insurance cost 1,498 2,025Accounting and audit fee 121 80Meeting, travel and other expenses 315 312

Total cost of sales and administrative and marketing expenses 55,037 42,785



2010 200923. EMPLOYEE BENEFIT EXPENSE USD’000 USD’000

Wages, salaries and benefits, including termination benefits 6,444 6,003Payroll Oncost, including social security costs 1,105 885

7,549 6,888

2010 200924. OTHER INCOME USD’000 USD’000

Interest income 71 16Loss from disposal of plant – (8)Profit on disposal of 1.416% shares in subsidiary – 1,971Sundry income 100 208

171 2,187

2010 200925. EXCEPTIONAL ITEMS USD’000 USD’000

Professional and other costs associated with disposal of subsidiaries – 760Impairment of property, plant and equipment 7,844 515Placement cost – 1,715Adjustment for employee share options – (6,397)Proceeds from insurance claim (7,500) (3,500)Costs associated with insurance claim 2,731 3,209

3,075 (3,698)

2010 200926. FINANCE INCOME/(COSTS) USD’000 USD’000

Interest expense:– Government of Sierra Leone loan (4,040) (3,664)– Bank overdrafts (150) (12)– Others (88) –Total borrowing costs (4,278) (3,676)Net foreign exchange transaction gains/(losses) (note 27) 4,534 (3,838)

256 (7,514)

2010 200927. NET FOREIGN EXCHANGE GAINS/(LOSSES) USD’000 USD’000

The exchange differences credited/(charged) to the statement of comprehensiveincome are included as follows: Finance costs (note 26) 4,534 (3,838)


2010 200928. LOSS PER SHARE USD USD

(a) Basic loss per shareLoss attributable to owners of the parent (thousand) (12,357) (7,867)

Weighted average number of ordinary shares in issue 385,864,075 257,635,328

Basic loss per share (0.032) (0.031)

(b) Diluted loss per shareLoss attributable to owners of the parent used to determine diluted loss per share (thousand) (12,357) (7,867)Number of sharesWeighted average number of ordinary shares in issue 385,864,075 257,635,328Adjustments for : – New placement (see note 33(i)) 113,660,925 –– Share options (see note 33(iii)) 15,925,000 –

Weighted average number of ordinary shares for diluted loss per share 515,450,000 257,635,328

Diluted loss per share (0.024) (0.031)

29. BUSINESS COMBINATIONS

(a) DisposalPursuant to the First Amendment Agreement dated February 4, 2004, entered by and between the Government of the Republic of SierraLeone (GOSL) and SRL regarding PAYE taxes due from SRL (See note 32), on October 1, 2009, SRL Acquisition No.3 Limited transferred anadditional 951 shares (2009: 1,416 shares) it held in Sierra Rutile Holdings Limited (SRHL) to GOSL, representing 0.951% (2009: 1.416%)ownership interest in SRHL, a subsidiary incorporated in British Virgin Islands. SRHL acts as an intermediate holding company.

2010 2009The details of assets acquired and liabilities disposed and the disposal consideration are as follows: USD’000 USD’000

Accounts receivables 2,597 3,672Accounts payables (2,596) (2,514)

Net assets 1 1,158Profit on disposal credited to statement of comprehensive income – 1,971Profit on disposal credited to retained earnings 1,172 –

Total consideration 1,173 3,129



2010 200930. NOTES TO THE STATEMENTS OF CASH FLOW USD’000 USD’000

(a) Cash generated from operationsLoss for the year (13,771) (7,565)Adjustments for:Depreciation on property, plant and equipment 10,135 9,675Amortisation of intangible assets 63 68Interest income (71) (16)Interest expense 4,278 3,676Exchange (gain)/loss on borrowings (4,993) 2,901Loss on disposal of plant – 8Foreign currency translation difference 459 (186)Impairment of dredge D2 7,844 395Impairment of other property, plant and equipment – 120Share option scheme – Employee – (6,397)Profit on disposal of 1.416% shares in subsidiary – (1,971)Prepayments written off 26 –Increase in provision for retirement benefit obligations 70 174

4,040 882Changes in working capital (excluding the effects of acquisition of subsidiaries)– inventories 2,497 (1,606)– trade and other receivables 3,145 1,565– trade and other payables (418) 973Cash generated from operations 9,264 1,814

(b) Non cash transactionsIn 2009, the principal non cash transaction was the vesting of options granted to directors and selected employees pursuant to shareoption plan described in note 13(b). As a result, equity increased by USD 596,000 in respect of 483,333 option shares which vested.

2010 2009(c) Cash and cash equivalents USD’000 USD’000

Cash in hand and at bank 6,836 2,218Short term bank deposits 21,537 23,684

Cash and cash equivalents 28,373 25,902

Cash and cash equivalents and bank overdraft include the following for the purpose of the statement of cash flows:2010 2009

USD’000 USD’000

Cash and cash equivalents 28,373 25,902Bank overdrafts (105) (10)

28,268 25,892


2010 200931. CAPITAL COMMITMENTS USD’000 USD’000

Property, plant and equipment acquisition contracted for at the end of thereporting period but not yet incurred: 2,146 1,100

Details of capital commitments are as follows:(i) spirals for dredge 1 for an amount of USD 1,431,000 (2009: USD nil).

(ii) other capital expenditures USD 715,000 (2009: USD 1,100,000).

32. AGREEMENT WITH THE GOVERNMENT OF THE REPUBLIC OF SIERRA LEONE

According to the First Amendment Agreement dated February 4, 2004, entered by and between the Government of the Republic of SierraLeone and SRL, the Government assigned to SRL A 3 all its right, title and interest in, to, and under the future PAYE taxes due from SRL tothe Government in an amount not exceeding USD 37m. In consideration for the foregoing assignment, SRL A 3 agreed to transfer up to a30% equity interest in Sierra Rutile Holdings Ltd to the Government, within 60 days of the end of the calendar year commencing on the“Refurbishment Start Date” (i.e April 1, 2005), equal in value to the PAYE amounts accrued during such calendar year.

As at December 31, 2010, 4,833 shares (As at December 31, 2009: 3,882 shares) were already transferred and PAYE accrued for the year inSRL amounted to USD 1,007,000 (2009: USD 1,173,000).

33. EVENTS AFTER THE REPORTING PERIOD

Events after the reporting period are disclosed only to the extent that they relate directly to the set of financial statements and are materialin effect. As at the date of issuing this set of financial statements, there were no material events after the reporting period to discloseexcept the following:

(i) At the end of February 2011, SRX made a new placement of 113,660,925 common shares. The placing with institutional investors at aprice of 10p per share raised £11.4m (USD 18.3m) before expenses. All the new shares have been admitted to trading on AIM. Followingthe placement, the total number of ordinary shares in issue amounts to 499,525,000.

(ii) On March 11, 2011, out of the proceeds of USD 18.3m raised above, USD 18m was utilised to fund SRL to enable it to make a part-payment of the loan outstanding to the GOSL. Following this early repayment, an agreement has been reached with the GOSL such that thenext principal repayment of the loan will be in June 2013. Subsequently, the interest repayments in 2012 will now be lower by USD 1m.

(iii) On March 3, 2011, SRX granted 15,700,000 options to senior management employees and directors of SRX. The options were grantedpursuant to SRX’s Share Option Plan, and are exercisable at 20p per share from the date of vesting. The options will vest quarterly in fourequal portions, on March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, subject to continued employment withSRX. The options will expire on the third anniversary of grant. The total number of outstanding vested and unvested options as of March 3,2011 was 15,925,000.



33. EVENTS AFTER THE REPORTING PERIOD (CONTINUED)

(iv) In February 2011, it was resolved that the Company:(a) be authorised to issue an unlimited number of shares;(b) changes its name from Titanium Resources Group Ltd (TRG) to Sierra Rutile Limited (SRX).(c) disapplies Part IV Schedule 2 of The BVI Business Companies Act, 2004 (as amended) and adopts a new Memorandum and Articles of

Association of the Company.

34. SEGMENT REPORTING

Reportable segments are strategic business units that offer different products and services. They are managed separately because eachbusiness requires different technology and marketing strategies. The Group has only one geographical (Sierra Leone) and reportingsegment. As a result, the statement of financial position and the statement of comprehensive income, shown on previous pages, relate tothat segment.

Professional/Project Merger andAmount management acquisitionpayable fees costs Total

35. RELATED PARTY TRANSACTIONS USD’000 USD’000 USD’000 USD’000

(a) Transactions and balances(i) 2010Shareholder:Cost of Air tickets paid for Mr. Boulle (previous shareholder) toattend meetings on behalf of the company – – (55) (55)Director:Enterprise in which Mr. Alex Kamara is also a director –Cemmats Group** (6) (231) – (237)

(ii) 2009Director:Enterprise in which Mr. Len Comerford is a director – PWMIL* (631) – (1,954) (2,585)Enterprise in which Mr. Alex Kamara is also a director –Cemmats Group** (1) (195) – (196)

*In 2006, SRL entered into a material mine development contract with PW Mining International Limited (PWMIL), an enterprise in which Mr Len Comerford is

a director. The contract covers a period of 5 years. On May 1, 2006, Mr Comerford was appointed Chief Executive Officer of SRX and he resigned on February

3, 2009.

**Mr. Alex B. Kamara was appointed as a director of SRX on March 10, 2008. Mr. Kamara is also a non-executive director of Cemmats Group, a Sierra Leoneancompany which has a number of contracts with SRL.


35. RELATED PARTY TRANSACTIONS (CONTINUED)

(b) Out of the 113,660,925 common shares issued, refered to in note 33(i), two substantial shareholders, namely: Pala Investments HoldingsLimited AG and M&G Securities Limited, subscribed for 43,356,991 and 37,900,000 shares, respectively.

(c) SRX has undertaken to provide financial support to SRL and will not request repayment of loans made to SRL until such time that SRL willbe in a position to settle its indebtedness to it.

(d) Amount owed to related parties are unsecured. No provisions have been made for doubtful debts in respect of amounts owed byrelated parties.

35. RELATED PARTY TRANSACTIONS (CONTINUED)

(e) Consultancy agreements with previous DirectorsFollowing his resignation as a non-executive Director, the Company entered into a 12 months consultancy agreement with Mr. Baker forprofessional services. The Company shall pay Mr. Baker GBP 2,500 per month during the duration of the contract. Mr. Malouf resigned as aDirector of the Company on February 21, 2011. The Company then entered into a 6 months consultancy agreement with him against apayment of USD 4,000 per month.

2010 2009(f) Key management personnel compensation USD’000 USD’000

Directors’ fee 987 943Salaries and short-term employee benefits 3,977 2,948Post employment benefits 24 200Termination benefits 140 136

5,128 4,227

36. REPORTING CURRENCY

The financial statements are presented in thousands of United States Dollar (USD).

37. MAJOR SHAREHOLDERS

Substantial individual shareholders and corporate investors own up to 87.71% (2009: 65.04%) of the company’s shares. The remaining12.29% (2009: 34.96%) of the shares is widely held.


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Advisors

CompanyCompany SecretaryJoseph [email protected]

Contact detailsSierra Rutile Limited20 Hill Cot RoadHillstationFreetownSierra Leone

Registered Agents and OfficeSHRM Trustees (BVI) LimitedTrinity ChambersP.O. Box 4301Road TownTortolaBritish Virgin Islands

AdvisersNominated advisers & StockbrokersCollins Stewart Europe88 Wood StreetLondon EC2V 7QR

Joint BrokersMirabaud Securities33 Grosvenor PlaceLondon SW1X 7HY

SolicitorsOlswang Solicitors90 High HolbornLondon WC1V 6XX

AuditorsBDO De Chazal Du Mee10, Frere Felix De Valois StreetPort LouisMauritius

RegistrarsComputershare Investor Services (Channel Islands)LimitedP.O. Box 83Ordnance House31 Pier RoadSt HelierJersey JE4 8PWChannel Islands

Company number629748

Sierra Rutile LimitedSHRM Trustees (BVI) Limited Trinity Chambers P.O. Box 4301 Road Town Tortola British Virgin Islands

Documents

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