Recommended proposal for the £215 million acquisition of Sierra Rutile Limited by Iluka Resources"

Part I

Not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from the United States or from any other jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

This announcement contains inside information in relation to Sierra Rutile Limited.

FOR IMMEDIATE RELEASE 1 August 2016

Recommended proposal for the £215 million acquisition

of Sierra Rutile Limited by Iluka Resources Limited to be implemented by statutory merger under the BVI Companies Act

of

Sierra Rutile Limited with

Iluka Investments (BVI) Limited

Summary

• The Boards of Sierra Rutile Limited ("SRL") and Iluka Resources Limited ("Iluka") are pleased to announce that they have reached agreement on the terms of a recommended Acquisition of all of the issued and to be issued shares of SRL by Iluka. The Acquisition will be implemented by merging SRL with Iluka Investments (BVI) Limited ("Iluka Newco"), a wholly-owned BVI incorporated subsidiary of Iluka International (West Africa) Pty Ltd., which is an entity within the Iluka Group.

• Under the terms of the Acquisition, SRL Shareholders will receive 36 pence in cash for each SRL Share. The Acquisition represents:

  • a premium of 32.3 per cent. to 27.2 pence, being the 1 month volume-weighted average price of SRL Shares to 29 July 2016 being the Business Day immediately prior to the date of this announcement;

  • a premium of 34.7 per cent. to 26.7 pence, being the 3 month volume-weighted average price of SRL Shares to 29 July 2016;

  • a premium of 43.9 per cent. to 25.0 pence, being the 6 month volume-weighted average price of SRL Shares to 29 July 2016;

  • a premium of 80.0 per cent. to 20 pence, being the price at which SRL undertook a share placement on 14 April 2016;

  • a discount of 4.0 per cent. to the closing middle market price of 37.5 pence per SRL Share on 28 July 2016, being the Business Day immediately prior to the date on which SRL announced a possible offer from Iluka; and

  • a discount of 1.4 per cent. to the closing middle market price of 36.5 pence per SRL Share on 29 July 2016, being the Business Day immediately prior to the date of this announcement.

• Assuming the exercise of all outstanding options under the SRL Share Plan which have an exercise price of less than 36 pence in cash, the Acquisition values all of the issued and to be issued shares of SRL at approximately £215 million.

• It is intended that the Acquisition will be implemented by means of a statutory merger between SRL and Iluka Newco under section 170 of the BVI Companies Act.

• Pala has irrevocably undertaken to vote in favour of the resolutions to approve the Acquisition, the Merger and all ancillary matters relating to the implementation of the Merger as may be proposed at the Shareholder Meeting in respect of 318,065,731 SRL Shares, representing approximately 53.39 per cent. of the existing issued shares of SRL.

• Neon has irrevocably undertaken to vote in favour of the resolutions to approve the Acquisition, the Merger and all ancillary matters relating to the implementation of the Merger as may be proposed at the Shareholder Meeting in respect of 34,517,400 SRL Shares, representing approximately 5.79 per cent. of the existing issued shares of SRL.

• In aggregate, therefore, and including the irrevocable undertakings given by the SRL Directors, Iluka and Iluka Newco have received irrevocable undertakings to vote in favour of the resolutions to approve the Acquisition, the Merger and all ancillary matters relating to the implementation of the Merger as may be proposed at the Shareholder Meeting in respect 60.15 per cent. of the of the SRL Shares in issue on 29 July 2016.

• The Iluka Board believes that the Acquisition provides SRL Shareholders with certain value at a time of heightened market volatility and uncertainty, while at the same time meeting Iluka's strategic rationale and financial merit criteria.

• The SRL Board, which has been so advised by Investec, considers the terms of the Acquisition to be fair and reasonable. In providing its advice to the SRL Board, Investec has taken into account the commercial assessments of the SRL Board.

• The SRL Board intends unanimously to recommend that SRL Shareholders vote in favour of the resolutions to be proposed at the Shareholder Meeting which is to be convened to approve the Acquisition, and has irrevocably undertaken to vote in favour of the resolutions to approve the Acquisition, the Merger and all ancillary matters relating to the implementation of the Merger as may be proposed at the Shareholder Meeting in respect of their own beneficial shareholdings representing 5,772,463 SRL Shares and approximately 0.97 per cent. of the existing issued shares of SRL.

• The SRL Board believes that the Acquisition provides attractive certainty and liquidity for SRL and its shareholders as a whole. There is a concentration of shareholdings amongst a small number of SRL Shareholders and a relative lack of liquidity in SRL Shares. The SRL Board believes that the Acquisition presents an opportunity for all SRL Shareholders to crystallise value for their shareholdings which may not be achieved in the near term if SRL were to remain independent and quoted on AIM.

• The Acquisition is conditional on approval of the Merger by a simple majority (i.e. more than 50 per cent.) of SRL Shareholders being obtained at a duly convened meeting.

• It is expected that the Merger Circular will be published in August 2016 and that, subject to the satisfaction of all relevant Conditions, the Merger will become Effective in September or on or before 30 November 2016 (or such other date as agreed between Iluka, Iluka Newco and SRL).

Commenting on the Acquisition, Robert Edwards, Chairman of SRL said:

"The SRL Board has reached agreement on the terms of a recommended Acquisition of SRL by Iluka. The Acquisition enables all SRL Shareholders to realise value today in cash for their shares at an acceptable level after the management of SRL has achieved all of its immediate goals with respect to optimising the asset base. Iluka has an established track record in the mineral sands sector and will be able to support SRL's longer term growth and optimisation ambitions. We believe

that the Acquisition provides attractive certainty and liquidity for SRL and its shareholders as a whole."

Commenting on the Acquisition, John Sisay, Chief Executive of SRL said:

"I believe the Acquisition of SRL by Iluka will ensure the operations in Sierra Leone will be realised to their fullest potential. I am proud of the important milestones which have been achieved by management and employees in recent years, in particular, record rutile production in 2015 and H1 2016 and the successful commissioning of the Gangama Dry Mine in May 2016. Iluka is a financially strong and established owner with a successful track record in the mineral sands sector who will continue the development of SRL's long life assets. Management and employees will benefit from Iluka's future investment in SRL and wider career development opportunities across Iluka's global asset base. This Acquisition demonstrates that Sierra Leone is open for business and able to attract investment from high profile multinational companies such as Iluka that are keen to participate in the development and growth of the country."

Commenting on the Acquisition, Greg Martin, Chairman of Iluka said:

"The transaction is consistent with Iluka's approach to act in a counter-cyclical manner where appropriate, including via transactions where strategic rationale and financial merit can be demonstrated. It is a logical combination of complementary businesses at this point in the mineral sands cycle.

The offer is cash based and entails Iluka absorbing SRL's modest debt of ~ US$60 million which would represent a pro-forma post-acquisition gearing for Iluka (net debt / net debt + equity) of ~ 25 per cent. The Acquisition of SRL, along with, current Iluka project progress, provides the potential for enhanced portfolio flexibility which will in turn determine the level and phasing of Iluka's future capital expenditure. Iluka will continue to prioritise the maintenance of a strong balance sheet after an expected peak debt in 2018 as internal projects are also funded within that period.

Iluka believes that a disciplined approach to both capital expenditure and cash distribution strongly influences shareholder value creation and delivery in a cyclical industry. Iluka's approach in both respects remains unchanged."

Commenting on the Acquisition, David Robb, Managing Director of Iluka said:

"SRL is a long life operation, with an established position in high grade chloride feedstock markets. Iluka is confident the application of its industry-specific technical expertise, together with its market access and reach, will enhance the SRL business.

The Acquisition provides Iluka with additional, long life (20 years plus) resources of proven quality, with further potential through resource additions, reserve optimisation and exploration. The combination enhances Iluka's rutile portfolio position. This enhancement sits alongside Iluka's existing position as the largest global zircon producer.

Due diligence has been conducted on SRL's operations and Iluka believes the offer represents an attractive risk / return profile for shareholders across a range of scenarios. The transaction is expected to be EPS accretive in the first full year (2017)."

This summary should be read in conjunction with the full text of the following announcement including the Appendices. The Conditions and certain further terms of the Acquisition are set out in Appendix I to this announcement. Appendix II sets out the bases of calculation and sources used in this announcement. Appendix III contains details of the irrevocable undertakings given to Iluka. Appendix IV contains the definitions of certain terms used in this announcement.

Enquiries:

Person making this notification: SRL Limited

John Nagulendran

Company Secretary +44 (0)20 7074 1800 RBC Capital Markets Financial Adviser and Joint Corporate Broker Richard Horrocks-Taylor +44 (0)20 7653 4000 Jonathan Hardy

Paul Betts

Investec Bank plc Nominated Adviser and Joint Corporate Broker Chris Sim +44 (0)20 7597 4000

Jeremy Ellis George Price Jonathan Wynn

Numis Securities Limited Joint Corporate Broker

John Prior +44 (0)20 7260 1000

Iluka Resources Limited

Dr Robert Porter

General Manager, Investor Relations and Corporate Affairs +61 (0)3 9255 5008

Goldman Sachs Financial Adviser to Iluka

Richard Phillips +61 (0)3 9679 1111

Peter Watson +61 (0)8 9218 1000

RBC Capital Markets is Financial Adviser to SRL. Numis Securities Limited is Joint Corporate Broker for SRL.

Herbert Smith Freehills is retained as legal advisers to SRL. Ogier is retained as BVI legal advisers to SRL.

Ashurst is retained as legal advisers to Iluka.

Conyers Dill & Pearman is retained as BVI legal advisers to Iluka.

Further information

This announcement is not intended to and does not constitute, or form part of, any offer to sell or subscribe for or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise, nor shall there be any sale, issuance or transfer of securities of SRL in any jurisdiction in contravention of applicable law.

Any vote in respect of the Acquisition should only be made on the basis of the information contained in the Merger Circular, which will contain the full terms and conditions of the Acquisition (including details of how to vote). SRL Shareholders are advised to read the formal documentation in relation to the Acquisition carefully once it has been dispatched.

Please be aware that addresses, electronic addresses and certain other information provided by SRL Shareholders, persons with information rights and other relevant persons in connection with the receipt of communications from SRL may be provided to Iluka during the offer period.