Approval for Nkomati R3.2 billion ($445m) Phase 2 Large Scale Mining Expansion to quadruple annual nickel production to 20,500 tonnes

26 September 2007

Johannesburg, South Africa and Moscow, Russia Federation
26 September 2007
African Rainbow Minerals Limited (ARM) and Norilsk Nickel, 50:50 JV owners of the Nkomati Nickel Mine in the Mpumalanga Province in South Africa, are pleased to announce the approval of a R3.2 billion ($445 million) Phase 2 Large Scale Mining Expansion to increase average annual nickel production to 20,500 tonnes from 5,500 tonnes and extend the life of mine by 18 years to 2027.

Peter Breese, Chief Executive of Norilsk Nickel International commented: “Approval of the Phase 2 Expansion cements Nkomati’s long term future as it unlocks around 1 million tonnes of contained nickel resource and quadruples annual nickel production to 20,500 tonnes. Norilsk Nickel is planning to invest R6 billion (+/-$830 million) in Africa over the next three years to double nickel production and implement the innovative Activox® technology.

The expansion also delivers a powerful boost to the regional Mpumalanga economy through this large direct investment and the creation of new employment opportunities. The recent successful delivery of the Interim Plan on time, within budget and with zero lost time injuries by Nkomati project team bodes well for this project.”

ARM Chief Executive Officer, André Wilkens said: “The Phase 2 Large Scale Mining Expansion takes ARM to the next level of becoming a larger producer of nickel, in line with our 2 x 2010 strategy, and at an operational cost which is globally competitive.”

The Phase 2 Large Scale Mining Expansion
The Phase 2 Large Scale Mining Expansion will exploit two zones of the large layered polymetallic disseminated sulphide resource, which contains 904,335 tonnes of nickel. The first is the Main Mineralised Zone (MMZ) which is currently being mined by the Interim Phase through underground and open pit mining. This is overlayed by the Peridotite Chromititic Mineralised Zone (PCMZ) which will be mined by open pit mining. In addition to nickel, by-products of PGMs, chromite, copper and cobalt will also be recovered.

Mining will continue from the underground mine, at the rate of 47,000 tonnes per month (tpm), and the development of two new open-pits, Pits 2 and 3, which will produce 578,000tpm of ore at a steady state of production. The average mill grade for the total project will be in the order of 0,4% nickel, over the life of mine.

Nkomati expansion phases (all on a 100% basis)
Phase 1 (Interim) Completed Phase 2 (Large Scale) Released for construction Total Nkomati at steady state
Plant capacity (tpm) MMZ: 100,000 MMZ: 375,000 PCMZ: 250,000 Total: 625,000
MMZ underground MMZ underground PCMZ openpit
MMZ openpit MMZ openpit MMZ/PCMZ combined
Nickel production (tpa) c. 5,500 c. 15,000 c. 5,500 c.20,500
The current 100,000tpm concentrator will be upgraded to 250,000tpm to process the PCMZ ore and a new 375,000tpm concentrator for the MMZ will be constructed to give an overall concentrator capacity of 625,000tpm. The mine’s related infrastructurewill also be upgraded, including construction of two new tailing facilities and an upgrade of the power supply to 80MVA.

Construction will commence in early 2008 and is scheduled to take 24 months from announcement date. Production will be sequenced, targeting initial production ramp up from the MMZ concentrator during the third quarter of 2009, with full production by first quarter 2010, and then initial PCMZ production ramp up targeted during the third quarter of 2010, with full production by 2011.

Average annual nickel production in concentrate is forecast to be 20,500 tonnes over the 18 year life of mine. By-product production is expected to be 9,000 tpa copper and 110,000 ounces per annum PGMs, predominantly palladium.

The expansion secures 254 jobs and creates an additional 330 new jobs and during construction will employ some 2 000 contractors.

Project Economics
The project assessment was based on a capital cost of R3.2 billion ($445 million) in May 2007 terms and an average nickel cash cost forecast of $3.57/lb. This will result in an after-tax real IRR greater than 20%. The project will be funded from Nkomati internal cash flows and by both partners when required. The release of the project triggers the $20 million payment by Norilsk Nickel (previously LionOre) to ARM in accordance with the original transaction.

Nkomati has already secured toll smelting and refining capacity for its concentrate. A Bankable Feasibility Study (“BFS”) will be carried out during 2008 to examine the viability of constructing an Activox® refinery for Nkomati.

Nkomati Resource
2007 MINERAL RESOURCES – PHASE 2 EXPANSION PROJECT ONLY (with depletion by production as at 30 June 2007)
Indicated Mineral Resource
Ni% Tonnes Ni% Ni Tonnes Cu% Cu Tonnes Co% 4E g/t Cr2O3%
MMZ (Underground) (Includes Current Mine) 0.30 48,602,000 0.48 233,290 0.21 102,064 0.03 1.03 –
MMZ (Open Pit) Pits 2 & 3 0.24 82,641,000 0.43 355,356 0.19 157,018 0.03 1.08 –
PCMZ (Underground) 0.30 19,946,000 0.38 75,795 0.12 23,935 0.02 0.77 10.93
PCMZ (Open Pit) Pits 2 & 3 0.20 82,998,000 0.26 215,795 0.08 66,398 0.01 0.75 13.24
TOTAL 2007 MINERAL RESOURCE 234,187,000 0.38 880,236 0.15 349,416 0.02 0.93 –

2007 MINERAL RESERVES – PHASE 2 EXPANSION PROJECT ONLY (with depletion by production as at 30 June 2007)
Probable Mineral Reserve
Ni% Tonnes Ni% Ni Tonnes Cu% Cu Tonnes Co% 4E g/t Cr2O3%
MMZ (Open Pit) Pits 2 & 3 0.24 67,900,000 0.42 285,180 0.18 122,220 0.03 1.03 –
PCMZ (Open Pit) Pits 2 & 3 0.16 86,230,000 0.22 189,706 0.06 51,738 0.01 0.62 –
Total 2007 Mineral Reserve 154,130,000 0.31 474,886 0.11 173,958 0.02 0.82 –

Oxidised Massive Chromitite Resource/Reserve (with depletion by production as at June 2007)
Chromitite (at 30% Cr2O3 cut off) Tonnes Cr2O3% SiO2% FeO% CaO% MgO Al2O3%
Total Measured & Indicated Resource 6,233,000 33.47 14.34 18.43 1.37 12.38 12.67
Probable Mineral Reserve 6,560,000 31.10 12.8 17.8 2.1 9.0 11.1

Inferred Resource 2,373,000 32.85 13.23 19.03 0.75 13.50 12.18
14E means platinum+ palladium+ rhodium+ gold
2Due to rounding of figures small discrepancies in may exist.

The above underground mineral resources were estimated during 2006 by Mark Davidson, Manager – Technical Services for Nkomati Mine. All open pit resources have been estimated by Jonathan Woolfe, Geology Leader – ARMplatinum. Messrs Vieler, Davidson and Woolfe have sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which they are undertaking to each qualify as Competent Persons as defined in the 2004 Edition of SAMREC (South African Code for Reporting of Mineral Resources and Mineral Reserves); JORC “Australasian Code for Reporting of Exploration Results, Mineral Resource and Ore Reserves” and as Qualified Persons as defined in the Canadian National Instrument 43-101 (Standards of Disclosure for Mineral Projects).

The Measured and Indicated Mineral Resources are inclusive of those modified to produce the Mineral Reserves.