ASX Release 2 December 2010 LONRHO MINING LIMITED (ASX: LOM) HIGHLIGHTS Lulo Diamond Concession, Angola (LOM 39%) Impressive results encountered from the first alluvial gravels treated through the Dense Media Separation plant at Lulo, with three gem-quality diamonds weighing 26.45 carats recovered from the first 90 tonnes processed. Diamonds recovered include a 22.25 carat gem, demonstrating the potential of the Lulo Project to host diamonds of significant size and value. All diamonds recovered weigh at least 2 carats. Flowsort x-ray machine purchased and modifications to be made to the DMS plant to speed up processing of alluvial concentrates and improve diamond recoveries, including smaller diamonds which may have been missed in the manual hand-sorting process. Alluvial diamond potential of the 3,000km 2 Lulo Concession enhanced significantly after Lonrho geologists confirm vast areas of shallow-buried Calonda Formation beneath the overlying Kalahari cover. This was missed by the thousands of artisanal alluvial miners who previously targeted the exposed Calonda Formation gravels within the Cacuilo River Valley. A review of old exploration data reinforces Lonrho s view that the Lulo Concession contains more than 200 kimberlites, which are considered the primary source of diamonds. Corporate Lonrho to be debt-free with a strong balance sheet if shareholders approve a proposal for major shareholder Lonrho Plc to convert a $1.62 million debt into equity. In addition, the underwritten conversion of options (which expired on November 18) generates $4 million less costs. LONRHO MINING LIMITED ACN 111 501 663 34 Bagot Road ǀ Subiaco WA 6008 ǀ Tel +61-8 9489 9200 ǀ Fax +61-8 9489 9201 ǀ Email general@lonrho.com.au ǀ www.lonrhomining.com
ACN 111 501 663 Page 2 RECENT OPERATIONS Alluvial Diamond Program The Lulo Project, which covers both an extensive alluvial diamond field and significant kimberlite targets, reached a significant milestone during the quarter when the 15 tonne per hour Dense Media Separation plant was established on site (Figure 4) and re-commissioned to test the diamond content of stockpiled alluvial gravels. While the processing of alluvial gravels through the DMS plant was delayed by several factors, including heavy rains and the manual hand-sorting of concentrates, it met with immediate success. Diamond size 22.25 carats Diamond size 2.2 carats Diamond size 2.0 carats Figure 1 - The First Diamonds Recovered from Lonrho s Alluvial Sampling at Lulo The first diamond recovered from the first bulk sample pit (BLK_2) was an impressive gem-quality diamond weighing 22.25 carats. In all, three diamonds weighing a total of more than 26 carats were recovered from the first 90 tonnes of alluvial gravels treated through the DMS plant from BLK_2 during the quarter (see Figure 1 and Table 1). During the quarter Lonrho purchased a Flowsort x-ray diamond sorting unit to speed up the processing of alluvial gravels through the DMS plant and improve the efficiency of diamond recoveries.
ACN 111 501 663 Page 3 Currently, the gravels from bulk sample pit BLK_2 are producing between 2% and 5% heavy concentrate when processed through the DMS plant. This concentrate has to be visually handsorted to recover diamonds. The hand sorting of concentrates is a slow and inefficient process in which small or dirt-coated diamonds could easily be missed. The Flowsort machine is being sourced from South Africa and is currently at the manufacturers where it is being completely refurbished. It is also being upgraded to treat a larger size fraction material (to 35mm). It is anticipated that the Flowsort machine will be installed and operational at Lulo by February. The Company believes that additional smaller diamonds could be recovered from the reprocessing of the hand-sorted concentrates from BLK_2 once the Flowsort x-ray machine has been fitted to the DMS plant. The manual hand-sorting of concentrates, which is being supervised by representatives from Lonrho, joint venture partner Endiama and Angola s Diamond Security Corps, will continue until the Flowsort x-ray machine arrives on site. Until then, all hand-sorted material will be stockpiled for re-processing at a later date to ensure any smaller diamonds are recovered. In addition, Lonrho is making modifications to the feed section of the DMS plant to further improve efficiencies. Importantly, these modifications will allow the Company to continue processing wet material throughout the Angolan "wet season", which typically extends from November through to late March each year. BLK_2 is the first of three bulk sample sites where alluvial gravel stockpiles have been excavated for processing through the DMS plant at Lulo. The Company has excavated an additional 93 exploration pits to determine future bulk sample sites. The bulk samples sites and exploration pits were selected as part of an initial evaluation program at Lulo which aims to define an economic alluvial diamond resource within the Cacuilo River Valley. The initial phase of this operation is to outline and test the extent of the diamondiferous gravels in a relatively small area around the current field camp (Figures 2 and 3). The bulk sample sites and the exploration pits have targeted the Cretaceous-aged Calonda Formation, which was identified through a comprehensive mapping and exploration program by Lonrho s geologists as the main target for the thousands of artisanal diamond miners who operated in the Cacuilo River Valley within the Lulo Concession. It was reported that more than 10,000 artisinal miners (garimpeiros) worked the area until 2008. The very extensive garimpeiro operations targeted the exposed and easily accessible alluvial basal gravels of the Calonda Formation. While there are no official records of either the grade or the carat value of diamonds recovered from the old alluvial diggings, the presence of several diamond buyers operating from the closest village of Tchamiquilegue suggests significant diamond production must have occurred. Significantly, Lonrho s mapping and exploration pitting programs have revealed vast areas of Calonda Formation within the Cacuilo River Valley which extend beneath the overlying Kalahari cover.
ACN 111 501 663 Page 4 Figure 2 Regional Geology and Location of Alluvial Heavy Mineral Samples
ACN 111 501 663 Page 5 Figure 3 Alluvial Sampling Area Location of Bulk Sample Pits These shallow-buried areas of Calonda Formation were not targeted by the artisanal miners, so their discovery vastly increases the alluvial diamond potential of the 3,000km 2 Lulo Concession.
ACN 111 501 663 Page 6 The Calonda Formation unit accumulated as alluvial fan deposits and braided stream washes that were laid-down not long after the eruption of the kimberlite pipes in the area. The Calonda succession comprises a poorly-sorted basal gravel (0.3-4m in thickness) overlain by gritty sands and silts. Soon after its deposition the Calonda Formation was covered and preserved by windblown aeolian sands of the Kalahari Formation. The BLK_2 bulk sample site targets Calonda Formation gravels that occur beneath 1-2 metres of overburden. The gravels are typically around one metre thick. Figure 5 shows the BLK_2 pit and examples of the contained gravel. The bulk sample pit has approximate surface dimensions of 30mx10m. A total of around 650 tonnes of sample was excavated from the BLK_2 pit and is currently being processed through the DMS plant. Figure 4 DMS Plant Processing Diamondiferous Gravels at Lulo Sample Number Tonnes Sample Excavated Tonnes Sample Treated Table 1 Bulk Sampling Summary Size 2 Distribution + 5ct +1ct - 1ct Number Diamonds Weight Carats Average Stone Size (cts) Largest Diamond (cts) BLK_2 1 650 90 1 2-3 26.45 8.81 22.25 Notes: 1 Sample processing is incomplete 2 The DMS plant treats sample in the +2mm -18mm size range 3 It is expected that additional smaller diamonds could be recovered when the concentrate is re-treated through a Flowsort x-ray recovery machine
ACN 111 501 663 Page 7 Kimberlite Exploration Figure 5 - Photographs from BLK_2 Bulk Sample Pit Lonrho s current focus is on the alluvial sampling and during the quarter most of the Company s resources were utilised in the alluvial bulk sampling program. It was anticipated that once DMS processing commenced, Lonrho s earthmoving equipment could be mobilised to undertake pitting and bulk sampling of the higher-priority kimberlitic targets. At this stage, operational constraints have limited the work on kimberlite targets to surface sampling. The Company continues negotiations to get a drilling rig into the area to test the kimberlitic targets, although no drilling will occur before the end of the wet season. In February 2008 Lonrho completed a low-level MIDAS helicopter survey over 1,000km² of the southern part of the Lulo Concession. Interpretation of the aeromagnetic data resulted in the identification of more than 220 magnetic anomalies. Based on results from adjoining leases, the Company believes that 200 or more kimberlites may occur within the Lulo Concession.
ACN 111 501 663 Page 8 During the quarter Lonrho geologists conducted a review of historical exploration data housed at the Endiama offices in Luanda. Most of this historical work was undertaken by Diamang (Companhia de Diamantes de Angola a predecessor of Endiama) and Condiama (Consórcio Mineiro de Diamantes a consortium of companies managed by DeBeers) between 1971 and 1973. These companies reported the discovery of 27 kimberlites in the north central section of the Lulo Concession. These discoveries were made by following indicator mineral trails from alluvial and loam samples. Most of the kimberlite occurrences can be related to magnetic anomalies identified from Lonrho s 2008 aeromagnetic survey. In several instances two or three kimberlites recognised from the old exploration data form part of a single magnetic anomaly and probably represent parts of a larger kimberlite. Three of the old kimberlites are associated with subtle magnetic features that were not formally recognised as significant anomalies in the original magnetic interpretation. It is likely that the earlier work has identified 17 out of 200+ kimberlites thought to occur within the Concession. Translation and evaluation of the old exploration reports is continuing. During the quarter, the Company commenced a stream sediment sampling program to determine which drainage basins contain significant indicator mineral concentrations. All drainage samples contained kimberlitic indicator minerals (Table 2). Old garimpeiro digging (suggesting the presence of diamonds) were usually restricted to drainage basins containing high concentrations of relatively fresh indicators. Lulo Diamond Concession, Overview The Lulo Diamond Concession covers a total area of about 3,000km 2 and is located in the Cuango River Basin within the Lunda Norte Province of north-eastern Angola. The project area is situated approximately 630km from Angola s capital city of Luanda and can be accessed via sealed road. The project is operated as a Joint Venture with the Government-owned diamond company, Endiama, the exclusive concessionary for Angolan diamond mining rights. Under the joint venture arrangement, Lonrho holds a 39 percent interest in the Concession, with Endiama holding a 51 percent interest and the remaining 10 percent owned by a private Angolan interest. Lonrho is the manager and operator on the Concession and funds all exploration activities. In the event that a mining operation is commenced within the Lulo Concession, Lonrho is entitled to first recover all of its exploration and development costs, after which the proceeds will be shared proportionally between the stakeholders. The project has significant diamond exploration potential, with a major kimberlite field located within the Concession and extensive diamond-bearing alluvials occurring along the Cacuilo and Lulo Rivers. Lonrho has agreements with Endiama covering both the alluvial deposits and kimberlitic diamond deposits within the area.
ACN 111 501 663 Page 9 CORPORATE During the quarter the Company s major shareholder, London-based Lonrho Plc, elected to convert a $1.62 million debt, plus accumulated interest, into additional shares in Lonrho Mining. Lonrho Plc had the option of converting the debt into shares in the Company at an issue price of $0.018 as part of a facility agreement negotiated in May 2010. If Lonrho Mining shareholders approve the allotment of 91,866,500 ordinary shares to Lonrho Plc in full satisfaction of the debt at a meeting on 3 December 2010, it will leave the Company debt free. Lonrho also raised approximately $4 million, less underwriting costs, following the conversion of $0.01 options which expired on 18 November 2010. A total of 401,437,777 options were exercised, leaving a shortfall of just 3,511,611 options (less than 1%) to be taken up by underwriter Indian Ocean Capital Pty Ltd. The conversion of the options has left Lonrho in a sound financial position to continue the Company s alluvial and kimberlite exploration programs at Lulo. Lonrho has formally requested the repayment from the Company s Angolan joint venture partner, Endiama, of the $US1.4 million bond. The bond was lodged with Endiama when the original joint venture agreement was signed and is repayable upon commissioning of the DMS plant at Lulo.
ACN 111 501 663 Page 10 Table 2 Alluvial Sampling Results Sample Number Sample Description Kimberlite_minerals Description of kimberlite minerals Old diggings Hm1 Calonda gravel picroilmenites, pyropes Abundant rounded and Yes angular Hm2 Cacuilo River gravel picroilmenites, pyropes Abundant rounded and Yes angular Hm3 Cacuilo River gravel picroilmenites, pyropes Abundant rounded and Yes angular Hm4 Cacuilo River gravel picroilmenites picroilmenites>1000 grns Yes Hm5 Gravel, laterite (?) picroilmenites, pyropes picroilmenites >1000, Yes pyropes >200 grns, angular shapes Hm6 Gravel Camaiandya River picroilmenites, pyropes picroilmenites >1000, Yes pyropes_>500 grns, round and angular shapes Hm8 Calonda gravel picroilmenites, pyropes Abundant rounded and Yes angular Hm9 Calonda sand, Kalahari gravel picroilmenites picroilmenites >200 Yes Hm10 Cachuma_River gravel picroilmenites >500 grns No Hm11 Sequegi_River gravel picroilmenites, pyropes picroilmenites >>1000, No pyropes 5 Hm12 Cacuilo River gravel picroilmenites, pyropes picroilmenites >>1000, Yes pyropes>10 Hm13 Calonda_Sand picroilmenites picroilmenites >>1000 Yes Hm14 Sequegi_River sand and a small picroilmenites picroilmenites common Yes gravel Hm15 Cacuilo River gravel picroilmenites picroilmenites >>500 Yes Hm16 Luma Direita gravel picroilmenites picroilmenites >>200 Yes Hm17 Stream sand picroilmenites, pyropes, chrome diopside, phlogopite Abundant picroilmenites, pyropes, mica Yes Hm18 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm19 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm20 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm21 Stream coarse-grained sand picroilmenites, pyropes picroilmenites >>500, No pyropes 10+ Hm22 Stream coarse-grained sand picroilmenites, pyropes picroilmenites >>500, Yes pyropes 5 Hm23 Stream coarse-grained sand picroilmenites from kimberlite picroilmenites >100, grain No (?) 2x3 cm angular shape Hm24 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm25 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm26 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm27 Stream coarse-grained sand picroilmenites Picroilmenites rounded No Hm28 Stream coarse-grained sand picroilmenites, pyropes picroilmenites >>1000, Yes pyropes 20+ Hm29 Stream coarse-grained sand picroilmenites, pyropes picroilmenites >>1000, No pyropes 20+ Hm30 Stream sand picroilmenites Picroilmenites rounded No Hm31 Stream sand picroilmenites Picroilmenites rounded No Hm32 Stream sand picroilmenites Picroilmenites rounded No Hm33 Stream gravel picroilmenites Picroilmenites rounded No Hm34 Stream gravel picroilmenites, pyropes, chrome diopside picroilmenites >>1000, pyropes 5+, chrome diopside 2 Hm35 Stream gravel picroilmenites picroilmenites grains No No
ACN 111 501 663 Page 11 For further information, contact: MILES KENNEDY CHIEF EXECUTIVE OFFICER Tel: +61-8 9489 9200 Competent Persons Statement Information in this report that relates to exploration results, mineral resources or ore reserves is based on information compiled by David Jones BSc (Hons) MSc of Ascidian Prospecting Pty Ltd, who is a Corporate Member of the Australasian Institute of Mining and Metallurgy. Mr Jones is a director of Lonrho Mining Limited and has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. Mr Jones consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.