Afferro divests interest in the Putu Iron Ore Project for minimum US$115 million cash

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Afferro Mining Inc. ("Afferro" or the "Company"), a TSX-V / AIM listed exploration and development company is pleased to announce that Afferro and its wholly owned subsidiary, Mano River Iron Ore Holdings Limited ("Mano"), have entered into a legally binding heads of terms agreement (the "Heads of Terms") with Lybica Holdings B.V. ("Lybica"), an affiliate of ZAO "Severstal Resources" ("Severstal"), for the sale of its 38.5% interest in the Putu iron ore project in Liberia ("Putu"). Lybica currently holds the remaining 61.5% interest in Putu.

Transaction Highlights:

    Afferro to receive a cash payment of US$65 million on completion;
    Afferro's right to request a deferred payment of US$50 million cash;
    Additional consideration should Putu be sold to a third party;
    Afferro released from any further capital contribution to fund Putu from 1 January 2012;
    Transaction subject to shareholder and regulatory approvals;
    Funds will be used to accelerate the Company's development strategy for its 100% owned Nkout iron ore project in Cameroon; and
    Proceeds will enhance Afferro's negotiating position in attracting a strategic partner for Nkout.

Luis da Silva, Chief Executive Officer, commented:

"This transaction demonstrates Afferro's ability to successfully generate significant returns for our shareholders. Divesting the minority stake in Putu to generate total cash proceeds of at least US$115 million allows the Company to focus on its 100% owned flagship Nkout project and minimises shareholder dilution. With the focus and cash, Afferro will be extremely well placed to enter a new and exciting phase of growth. We would like to thank Severstal for the successful partnership between our companies during the last three years."

A conference call for analysts and investors will take place at 11.00 GMT on Monday 12th December 2011 on the following numbers:

UK dial in:              +44 20 8515 2302
Toll Free UK:         0800 358 5271
Toll Free Canada: 1 866 228 9189

A replay of the conference call will be available on the Company's website: www.afferro-mining.com

Strategy:
Taking into consideration the potential upside from its other core projects and the increasing capital commitments for Putu the Board of Directors of Afferro believes this is an appropriate time to divest the Company's remaining non-controlling interest in the project. The Nkout project, like Putu, has the potential to continue to create significant value for Afferro. The Company has made exceptional progress in expanding Nkout's mineral resource in 2011, with an estimated 944Mt at 32.7% Fe in the indicated category and 1.05Bt at 31.6% Fe in the inferred category. The mineral resource at Nkout has been delivered in only 18 months and under budget, reflecting the Company's cost effective approach to exploration.

The proceeds from divesting Putu ensure that the Company will be able to accelerate its development strategy in Cameroon, including completion of a preliminary economic assessment ("PEA") and a prefeasibility study at Nkout. Work on the PEA which commenced last month with a site visit by the project team and a delegation of government ministers from Cameroon together with ambassadors from Canada and the UK. The delegation was impressed with the progress Afferro and its local wholly-owned subsidiary Caminex SARL have made. At a recent meeting in Cameroon the Minister of Industry, Mines and Technological Development invited representatives of the Company to a meeting along with other mining companies to establish a consultative framework for the development of the mining industry in Cameroon.

The Company is continuing to have discussions with potential strategic partners who would be prepared to fund Nkout's infrastructure requirements. Although these discussions are at an early stage, it is expected that the preferred partner will also provide a long term off take agreement. The cash resources from the sale of Putu make Afferro a stronger party in any negotiations.

Consideration Terms:
Under the Heads of Terms, an initial cash payment of US$65 million will be payable on completion of a definitive sale and purchase agreement (the "SPA") by no later than 28 February 2012. The Company may be able to benefit from the future sale of a material stake in Putu to a third party or other realisation of commercial value without having to contribute further to its development post 2011. A deferred cash payment will be made in an amount to be determined in accordance with the following provisions:
(a)      At any time after the earlier of (i) June 30, 2013 and (ii) two months after the delivery of a definitive feasibility study (a "DFS") relating to Putu, Mano may require Lybica to pay a cash payment of US$50 million.  Such right shall terminate on the second anniversary of such right first arising.
(b)      Provided Mano has not exercised its rights under the above clause (a), in the event of the agreement by Lybica or Severstal on or prior to the date which is the earlier of (i) 12 months after the delivery of a DFS and (ii) 31 March 2015 to directly or indirectly sell all or a material part, being not less than 10%, of Putu or otherwise realize commercial value for it (e.g. by the introduction of another investor acquiring a material interest in the project or offering of shares to the public in an entity holding Putu), Lybica shall make a cash payment to Mano equal to the greater of (i) US$70 million and (ii) a sum equal to 38.5% of the total consideration in respect of the sale or realization event less 38.5% of any further development costs, less the initial cash payment of US$65 million, such sum to be multiplied by 50%.
(c)       At any time after 30 June 2014, Lybica may at its sole discretion make a cash payment of US$70 million to Mano being a Deferred Payment. Upon receipt of such payment any rights of Mano under clauses (a) and (b) above shall terminate.
       

Use of Proceeds:
The Company intends to use the proceeds to develop its Cameroon iron ore assets with special emphasis on Nkout. Specifically the sale proceeds are intended to fund:

    The delivery of a PEA on Nkout which the Company aims to complete by the end of Q1 2012; and
    A prefeasibility study on Nkout, which is estimated to take 12 months to complete, post the delivery of the PEA.

The Company anticipates that work on the DFS for Nkout will commence in the second half of 2013 and will take approximately 12 months to complete.

The potential for Direct Shipping Ore ("DSO") at Nkout is currently under evaluation. To date, the Company has identified 18.5 million tonnes inferred DSO resource grading 60.3% Fe. The current drilling programme is focused on Nkout Centre but the Company intends to expand this to the west and east. Infill drilling is expected to take place in 2012 to upgrade the DSO to indicated resource status and potentially outline a DSO starter project at Nkout to provide early cash flows.

Alongside the development of Nkout, the Company's exploration team plans to increase exploration activities at Afferro's other projects, and in particular the Ntem and Ngoa projects in Cameroon. The Company believes the cost effective and timely delivery of the above milestones will maximise the potential value of Nkout and the other assets.

Exclusivity and Break Fee:
In consideration of Lybica agreeing to proceed with negotiating the definitive transaction documents, Mano and Afferro have granted a period of exclusivity to Lybica until midnight on 23 December 2011.

In addition each party to the transaction undertakes, that it shall pay to the other party the sum of US$3 million in the event that: (a) the proposed transaction does not complete prior to 28 February 2012, as a result of that party's failure to use its reasonable endeavours to satisfy the conditions precedent to completion; (b) upon satisfaction or waiver of all the conditions precedent,  they fail to fulfil their obligations with respect to the completion of the transaction; and (c) in the case of Mano and Afferro, either of them breach their obligations under the exclusivity agreement.

Timing and next steps:
Subject to the terms and conditions set out under the Heads of Terms, the parties plan to enter into the SPA by 23 December 2011.  Approval from shareholders, TSX-V and AIM will be required in order to complete the sale transaction. An information circular setting out the details of the transaction and the notice of the special meeting of shareholders will be sent to the Company's shareholders in due course.

About Afferro Mining Inc.
Afferro is an established exploration and development company listed on the TSX-V (AFF) and AIM (AFF). Afferro's portfolio includes the 100% owned Nkout iron ore project and surrounding iron ore targets in Cameroon. At Nkout, Afferro has an NI 43-101 compliant indicated mineral resource estimate of 944Mt at 32.7% Fe and an inferred mineral resource estimate of 1.05Bt at 31.6% Fe. Afferro currently has a 38.5% interest in the Putu iron ore project in Liberia, which it is currently intending to sell to Severstal, the Company's joint venture partner, under the binding heads of terms agreed between the Company and Severstal.

Qualified Person
Howard Baker has some ten years' experience in the exploration, definition and mining of iron ore Mineral Resources. Howard Baker is a full-time employee of SRK Consulting (UK) Ltd, an independent Consultancy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the type of activity which he is undertaking to qualify as a Qualified Person in accordance with NI 43-101 and a Competent Person as defined in the June 2009 Edition of the AIM Note for Mining and Oil & Gas Companies. Howard Baker consents to the inclusion in the announcement of the matters based on their information in the form and context in which it appears and confirms that this information is accurate and not false or misleading.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts

For further information please see the Company's web site at www.afferro-mining.com or contact one of the following:
Afferro Mining Inc.
Luis da Silva / Bevan Metcalf /Jeremy Cave
Tel: +44 (0) 20 7257 2930
Evolution Securities Limited
Nominated Adviser: Neil Elliot / Adam James
Corporate Broker: Chris Sim / Jonathan Wynn
Tel: +44 (0) 20 7071 4300
RBC Capital Markets
Joint Broker: Martin Eales / Richard Hughes
Tel: +44 (0) 20 7653 4000
Pelham Bell Pottinger
Charles Vivian / James MacFarlane
Tel: +44 (0) 20 7861 3232