30 September 2015

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2015

Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM: ZIOC) is pleased to announce its unaudited interim results for the six months ended 30 June 2015.

Highlights

·   Zanaga Project work programme and budget agreed to December 2015

o  Designed to progress the Zanaga Project towards development and financing at minimum cost

o  Power, Port and Permitting workstreams underway as priority items

·   Cost reductions implemented at the Zanaga Project (the "Project"), as well as across ZIOC's corporate costs, to align the cost base with current market conditions

·   Cash balance of US$9.7m as at 30 June 2015

Clifford Elphick, Non-Executive Chairman of ZIOC, commented:

"During the first half of 2015 iron ore markets were subjected to significant volatility. The Zanaga Project team responded rapidly by reducing the cost base of the project and placing the Project into a position whereby it is progressing along a positive path, but without the burden of substantial costs.

The substantial fall in iron ore prices has been driven by general market apprehension, resulting from the slowdown in the Chinese economy, and concurrent large scale supply expansions from the major iron ore producers. This has been partially offset by the closure of numerous high cost iron ore mining operations globally.

At the same time, a number of positive developments have provided relief to many miners. Reductions in operating costs have been achieved through lower freight rates and oil prices, while weaker domestic operating currencies have reduced overall input costs in US dollar terms. In addition, high quality iron ore products have been the beneficiaries of increased price premiums. The net result is that the competitive landscape for iron ore has shifted, with higher quality iron ore producers being positioned more favourably versus lower quality producers, resulting in major changes to cash margins across the peer group.

Importantly, the Project continues to remain well-positioned in the iron ore industry as a project capable of delivering a high quality, premium-priced, iron ore product that has commanded pricing levels significantly higher than Platts 62% sinter, at very low operating cost. This critical combination provides the ability of the Project, even in a low iron ore price environment, to compete with the major iron ore producers on the basis of 'cash margin per tonne', and is key to the Project's investment case. As a result, we are increasingly confident that the Zanaga Project is aligned with the industry's trends on product type, quality and pricing.

While financing remains difficult today we believe that Zanaga will be at the forefront of development opportunities when markets stabilise."

Copies of the unaudited interim results for the six months ended 30 June 2015 are available on the Company's website at www.zanagairon.com.

For further information please contact:

About us:

Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is the owner of 50% less one share in the Zanaga Iron Ore Project based in the Republic of Congo (Congo Brazzaville) through its joint venture partnership with Glencore. The Zanaga Iron Ore Project is one of the largest iron ore deposits in Africa and has the potential to become a world-class iron ore producer.

Business Review - Operations

Cost Reduction Programme, Cash Reserves and Project Funding

In recognition of the current iron ore price environment, a cost reduction process took place at the Zanaga Project to allow the Project to progress with a lower cost base. These cost reduction processes have been implemented and we are pleased that the project team is confident of its ability to progress the Project through the next phase of development.

Glencore and ZIOC agreed a work programme and budget for the Project of US$8.8m for 2015. ZIOC agreed to contribute towards funding the work programme consisting of a fixed sum of US$ 2.5m plus an amount equal to 50% of the Management Team costs (total Management Team costs are estimated to be $0.9m of the US$8.8m budget). In addition, where there are overall savings to the budgeted figure beyond US$0.5m, ZIOC is entitled to share 50/50 in any such savings. Ignoring any entitlement to savings, ZIOC's potential contribution to the Project in 2015 is expected to be US$2.95m in total.

Separately, ZIOC has taken steps to reduce corporate overheads. A number of areas were identified where savings could be achieved and a cost reduction plan has been completed, with the Company now better positioned to weather the current cycle. As part of this overall process, we have also undertaken a streamlining of the ZIOC board with Dave Elzas, Colin Harris and Alistair Franklin retiring at the AGM on 22 July 2015. The Company will continue to review its board composition and will seek to enlarge the board once the level of operational activity justifies the additional cost.

Following the reduction of the cost base at the Zanaga Project, as well as the costs associated with the management of ZIOC, we are now well positioned to support our operations going forward. As at 30 June 2015, we had cash reserves of US$9.7m and continue to be prudent with our cash.

Mining Convention for the Zanaga Project

In August 2014, the Mining Licence was issued and the Mining Convention was signed by the Republic of Congo. These were significant milestones for the Zanaga Project and are demonstrative of the Government of the Republic of Congo's firm commitment to developing the country's mining sector and testament to the Project's strong stakeholder relations.

The Mining Convention covers the proposed staged development of the Zanaga Project and sets out the fiscal and legal terms with respect to the construction and operation of the Zanaga Project pursuant to its Mining Licence.

Following signature of the Mining Convention, formal ratification is required by the Parliament of the Republic of Congo (the "RoC"). The Zanaga Project team has been actively engaging with the relevant departments of the Government of the RoC to ensure this process progresses accordingly, and we are monitoring the stages through which the Mining Convention moves towards formal ratification.

The Project team is confident that the ratification of the Mining Convention will be forthcoming in the near future and shareholders will be kept updated on the progress of this necessary step.

Environmental Permit

The Social and Environmental Impact Assessment for the exploitation phase of the Zanaga project was transmitted to the RoC in April 2014, and a number of subsequent discussions have taken place between the Project Team and the Ministry of Environment in order to validate this Assessment. The Project team is confident that the validation of the SEIA will be forthcoming in the near future and shareholders will be kept updated on the progress of this necessary step.

Power solution programme

ZIOC and Glencore commenced a process to ensure that the Project has a fit for purpose power solution in place in order to support the Project's initial 100MW Stage One power requirement (Note: Power requirements for Stage Two have been nominally designed to align with development of the RoC's power expansion plans, of which numerous attractive projects appear to be advancing towards development). For Stage One, a process has been commenced whereby a number of Power developers, with both transmission and generation capabilities, have been approached to assess options to work alongside the Zanaga Project team in securing the correct power transmission and access solution for the initial development phase of the Project. We look forward to updating shareholders on the progress of this work programme in H1 2016.

Iron Ore Market

The iron ore market continues to be subject to sustained price weakness, with benchmark iron ore prices currently trading around U$50-55/t. As a result, ZIOC expects the iron ore industry's marginal producers to continue to experience substantial pressure, which has the potential to be exacerbated by further supply expansions entering the system in the remainder of the year, further reducing short-term iron ore prices. This new supply is the result of a number of large scale projects completing their construction phases - projects which were approved for development during periods of higher prices. This expansion of supply has to some extent been offset by some producers reducing output or suspending production altogether. The impact of lower freight rates, lower oil prices and weaker foreign exchange rates (lowering operating costs in US dollar terms) has provided some relief to a number of producers as they attempt to ride out current weak iron ore pricing conditions.

Regarding the demand for iron ore, China continues to produce high levels of steel and consume record levels of iron ore. However the slowing rate of economic growth, and impact of tighter pollution controls on steel mills, is slowing the pace of demand from the world's largest consumer, while simultaneously reshaping the product demand spectrum towards higher quality lump and pellet feed iron ore. In addition, the reduction in the Renmimbi/US Dollar exchange rate is expected to lead to further exports of Chinese steel, thereby supporting China's record levels of steel production.

As a result of these movements in supply and demand, the level at which price equilibrium is reached is difficult to predict. Too much of the industry is operating either at a loss or at unsatisfactory financial margins to sustain production at today's low prices, and the expectation is that there will be an increasing rate of mine closures which will serve to some degree to offset supply expansions. At the same time, there is emerging a clear focus on identifying and accessing higher grade lump or pellet feed iron ore product which have, and continue to command, prices 25% above Platts 62% sinter. Once industry adjustments are complete, we expect that iron ore prices will settle at a sustainable equilibrium, although the timing of this is difficult to forecast.

Importantly, the combination of Zanaga's competitive operating costs and high quality pellet feed  iron ore product, which is expected to attract a premium price, should allow the Project to remain attractive in this evolving iron ore market. This critical attribute is expected to make the Project an attractive development opportunity once a new sustainable iron ore price equilibrium is established.

The Zanaga Project's forecast competitive operating costs and premium quality product are expected to deliver high profit margins even in a low iron ore price environment. This differentiates the Project as an attractive investment opportunity even at today's iron ore prices. The Zanaga Project is expected to be able to compete, on a benchmark 62% iron ore price equivalent basis, with some of the lowest cost mining operations in Australia and Brazil, making it attractive when compared to competitor projects globally.

Outlook

During the current period of price weakness and price volatility in the iron ore market, ZIOC and Glencore have chosen to continue to progress a number of key preliminary value-adding activities on the Project. These are important preparatory steps that will place the Project in a position to seek financing once market conditions stabilise and become more favourable.

The value adding activities which are being progressed include the establishment of port and power agreements, issue of the environmental permit, and ratification of the signed Zanaga Mining Convention by the parliament of the RoC. The Company and Glencore continue to work closely with the RoC's government on the conclusion of these workstreams and are pleased to say that the Project continues to enjoy strong support.

The Project is now underpinned by a large, well-defined, resource and a Feasibility Study that demonstrates robust economics. The Project has also been substantially derisked through the receipt of a Mining Licence, and in addition the signature of the Project's Mining Convention.

However, as mentioned above, developments in the global iron ore market have affected and continue to affect the raising of finance for the development of the Project. Once market conditions stabilise and become more favourable, it is our belief that the Zanaga Project is likely to be in a good position to compete for attracting the finance which is needed to enable the Project to be developed.