29 September 2020

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

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 2020 and an update on post reporting period end events to September 2020.

Highlights

·   Zanaga Iron Ore Project (the "Project" or the "Zanaga Project") 30Mtpa staged development project (12Mtpa Stage One ("Stage One"), plus 18Mtpa Stage Two expansion ("Stage Two"))

o  Decision taken by the Board of Jumelles Limited ("Jumelles"), the joint venture company between ZIOC and Glencore, to proceed with an initiative to update the cost estimates associated with the 12Mtpa Stage One Project

o  Floating Offshore Port Study completed in May 2020

§ Concept Study completed on the viability of a Floating Dewatering, Storage, and Offloading port facility ("FDSO" or "Floating Port"), demonstrating the following potential benefits:

‒     $184m reduction to capital costs of the 12Mtpa Stage One development phase of the 30Mtpa Project

‒     Significant NPV and IRR improvement

‒     No increase to operating costs

·   Early Production Project ("EPP Project" or "EPP")

o  1-5 Mtpa production scenarios continue to be under investigation with the focus on processing facilities and suitable logistics solutions through the Republic of Congo ("RoC") and/or Republic of Gabon ("Gabon")

·   Strategic investor discussions

o  Approaches received from a number of strategic investors interested in investing in the Zanaga Project

o  Discussions remain at a very early stage and there is no certainty that these discussions will proceed or a transaction ultimately entered into

·   Other opportunities under investigation

o  Multiple Chinese entities introduced by China Overseas Infrastructure Development and Investment Corporation Limited ("COIDIC") in order to explore opportunities for Chinese involvement in construction of the Project

o  Opportunity being explored for potential development of a steel production facility within COIDIC's Special Economic Zone ("SEZ") at Point-Noire

o  Yantai Port Group introduced by COIDIC to consider logistics synergies

Corporate

·   Equity subscription agreement entered into with Shard Merchant Capital Ltd ("SMC") on 25 June 2020 ("Subscription Agreement")

o  Under the terms of the Subscription Agreement a maximum of 21 million ordinary shares, in tranches of up to 7 million ordinary shares at a time, could be issued to SMC

o  Of the 7 million ordinary shares issued to SMC under the first tranche, SMC have traded approximately 5 million shares with net proceeds of approximately £300,000 received by ZIOC to date

·   Outbreak of COVID-19 has not had a material impact upon the activities of the Group. Further detail regarding the Group's response to the outbreak can be found within the Strategic Report.

·   Cash balance of US$0.4m as at 30 June 2020 has increased to US$0.5m at 28 September 2020 following the receipt of funds from the Subscription Agreement to date.

·   Annual General Meeting to be held on 30 October 2020, and notice to be sent to shareholders shortly

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

"During the first half of 2020 the Zanaga Project Team managed to maintain progress on key initiatives while dealing with significant challenges created by the global impact of coronavirus. The Project Team responded well to the situation and took measures to ensure the safety of all personnel, with no cases reported amongst our employees to date.

The iron ore market has shown robust demand from China and is benefitting from robust iron ore prices. In addition, there is an increasing awareness by the international investor community both in China and in the West of the importance of high quality, large scale, and long life iron ore projects. In view of these positive developments, the Company believes that the Zanaga Project can be regarded as a significant asset in the future supply chain and an important part of future iron ore supply for strategic entities".

Copies of the unaudited interim results for the six months ended 30 June 2020 are available on the Company's website at www.zanagairon.com

The Zanaga Iron Ore Company Limited LEI number is 21380085XNXEX6NL6L23.

For further information, please contact:

Zanaga Iron Ore

Corporate Development and                         Andrew Trahar

Investor Relations Manager                           +44 20 7399 1105

Liberum Capital Limited

Nominated Adviser, Financial                        Scott Mathieson, Edward Thomas

Adviser and Corporate Broker                       +44 20 3100 2000

About us:

Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (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 investment in its associate Jumelles Limited. 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.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Business Review - Operations

Iron Ore Market

The iron ore market has shown robust demand from China and is benefitting from robust iron ore prices. The iron ore market supply deficit has become increasingly problematic, driven by strong continued demand from China and the reduction of significant iron ore supply in Brazil following a combination of mine closures due to tailings dam infrastructure concerns, and the impact of the coronavirus pandemic at a number of mining operations. Iron ore prices have risen significantly over the last two years and are now trading at sustained high levels.

Strategic investor discussions

Jumelles has continued to maintain a dialogue with a number of potential strategic investors, and in recent months approaches have been received from a number of additional strategic investors interested in investing in the Zanaga Project. However, it is emphasized that any such discussions are at a very early stage and there is no certainty that these discussions will proceed or ultimately a transaction entered into. Further updates will only be provided as required by market rules.

Re-costing exercise on the Zanaga 12Mtpa Staged Development Project

Due to the buoyant iron ore market, the Jumelles board have initiated a process to undertake a re-costing exercise to ascertain the potential costs associated with the construction of the Zanaga Project's 12Mtpa Stage One Project in today's contractor pricing market, and external engineering firms have been engaged by Jumelles to complete this evaluation. The results of this exercise are expected to be announced in Q1 2021.

Floating Port Concept Study

Significant opportunities have been identified for potential cooperation between infrastructure companies and EPC contractors to enhance the economics and technical solutions available to the Zanaga Project - particularly the 30Mtpa Staged Development Project.

During H1 2020 a Concept Study was completed to evaluate a Floating Port facility for the Zanaga Project, the results of which were announced on 28 May 2020. The solution involves extending Zanaga's slurry pipeline straight out into the ocean, with significantly reduced land-based facilities. The pipeline would run along the ocean floor to a fixed mooring point where the pipeline would connect to the floating dewatering, storage, and offloading vessel (FDSO). The slurry would be processed onboard by a dewatering plant and the pellet feed concentrate would be stored within the vessel. Offloading facilities would be built into the vessel to allow the FDSO to load cape size vessels directly. By utilising the FDSO Zanaga's materials handling steps would be reduced to only three phases, providing significant efficiencies and a more seamless operation.

The FDSO evaluation process has been led by Paterson & Cooke (P&C), who are leading experts in slurry pipeline design and engineering. P&C have completed a concept level report involving a comparison of the three port solutions available for the Zanaga Project, namely transhipping, deep water port, or the new floating port (FDSO).

The results of the investigation have been very positive from a technical and economic perspective. Potential has been indicated for a $184m reduction to total capital costs of the 12Mtpa Stage One Project, resulting in a reduction of total capital cost from $2,219m to $2,035m. Operating costs are expected to be maintained at approximately $6.5 per tonne due to previously high transhipping costs being substituted by a lease cost to the EPC contractor providing the solution. The net impact on economics shows the potential for the Floating Port to produce a significant NPV and IRR improvement. More detailed information is available in the Company's announcement released on 26 June 2020.

This concept study demonstrated the clear potential of a Floating Port facility to significantly enhance the economics of the Zanaga Project through the reduction of upfront capital costs and increase the Internal Rate of Return. In addition, there is potential to achieve significant ancillary technical benefits such as reduced environmental impact, elimination of dredging, and significant flexibility on coastal route selection. The Project's port solution has been a challenge for the Project since the FS was completed in 2014 and we are pleased with the results of this evaluation exercise.

COIDIC discussions

In December 2019, a Framework Agreement ("FA") was entered into between China Overseas Infrastructure Development And Investment Corporation Limited ("COIDIC") and Jumelles for potential cooperation between them in respect of mining related infrastructure for the Zanaga Iron Ore Project.

The parties' intention is to explore co-operation opportunities for progressing the infrastructure and financing requirements for the Zanaga Project, both in the near term and the longer term, and its potential for synergy with objectives of the Pointe-Noire Special Economic Zone ("SEZ").

COIDIC have been engaging with Chinese government agencies with a view to aligning with strategic objectives to establish a steel mill facility in the SEZ. The Zanaga Project Team have assisted the COIDIC team in this engagement process but have been unable to attend discussions in China due to current travel restrictions resulting from the coronavirus pandemic.

Yantai Port ("Yantai") have been introduced to the Zanaga Project by COIDIC as a Partner in accordance with the Framework Agreement. Yantai is an experienced Chinese operator in Africa. Yantai currently operate mining and logistics operations for more than 40Mtpa of bauxite being exported from Guinea to China. Yantai are also involved in the intended development of the Simandou iron ore mine in Guinea, a significant iron ore mining asset. The potential has been identified to use the Zanaga floating port solution to support COIDIC's aim of developing a bauxite processing hub in the region. This could be achieved by pumping imported bauxite into the SEZ via a return pipeline from the FDSO vessel. This development has been identified as one which, if progressed, could have benefits for COIDIC and the Zanaga Project.

In addition to the above discussions, COIDIC have facilitated discussions with their shareholders, comprising a number of large experienced infrastructure development and design companies, with the capability to deliver all aspects of the Zanaga Project and its related infrastructure.

EPP Project

The Project Team continue to undertake a process to evaluate the potential development of an EPP Project that would be quicker to construct than the larger 30Mtpa staged development project and would utilise existing road, rail and port infrastructure in Republic of Congo and Republic of Gabon. The Project Team continue to advance study work in an effort to improve their understanding of the viability of the EPP Project with an aim to determining capital and operating cost estimates in Q4 2020 in order to allow a view to be taken on the economic viability of this EPP Project. The Project Team continue to evaluate the potential for the EPP Project to operate as a standalone project, or as an initial pathway to production during the construction period of the flagship 30Mtpa Staged Development Project.

Subscription Agreement concluded with Shard Merchant Capital Ltd

The Company entered into a Subscription Agreement with SMC on 25 June 2020. Details of this funding transaction are available in the Company's announcement published on 26 June 2020.

In accordance with the agreement, the first Tranche of 7 million ordinary shares, of a total potential 21 million ordinary shares, has been issued to SMC. To date, approximately 5 million of the shares purchased by SMC have been placed with other investors, with net proceeds of approximately £300,000 being received by ZIOC as at 28 September 2020. ZIOC is pleased to report that SMC has introduced new investors SMC has been actively assessing various areas in which further value can be added and additional investor engagement could be achieved.

Cash Reserves and Project Funding

As already reported in the Company's annual results published on 1 July 2020, Glencore and ZIOC agreed a 2020 Project Work Programme and Budget for the Zanaga Project of US$1.2m plus US$0.1m of discretionary spend, dependent on certain workstreams requiring capital. ZIOC agreed to contribute towards the work programme and budget an amount comprising US$0.6m plus 49.99% of all discretionary items approved jointly with Glencore. Ignoring any entitlement to savings, ZIOC's potential contribution to the Zanaga Project in 2020 is expected to be US$0.7m in total.

We are pleased to report that the Zanaga Project's activities are currently running in line with the 2020 budget forecast.

As at 28 September 2020, ZIOC had cash reserves of US$0.5m and the Board continues to take a very prudent approach to the management of the business and its cash reserves.

Outlook

During 2020 the Project Team have made a number of significant steps in advancing solutions to unlock the key logistical challenges associated with both the 30Mtpa project and the EPP Project.

Due to current high iron ore prices, supply issues in Brazil, and increasing trade tensions between China and some of its trading partners the Company believes that the Zanaga Project has become an even more significant asset in the future iron ore supply chain. As a reminder, the Zanaga Project is economically attractive at much lower iron ore prices than we are experiencing today, making today's iron ore price environment very compelling for the investment case into such a tier one asset. We look forward to updating our shareholders further towards the end of 2020.

Financial review

Results from operations

The financial statements contain the results for ZIOC for the first half of 2020. ZIOC made a loss in the half-year of US$0.8m compared to a loss of US$1.8m in the full year ended December 2019. The loss for the 2020 half-year period comprised:

General expenses of US$0.5m (2019: US$0.3m), consisting of: Directors' fees of US$Nil (2019: US$Nil), professional fees of US$Nil (2019: US$0.2m), LTIP charge of US$0.3m (2019 US$Nil) and US$0.2m (2019: US$0.1m) of other general operating expenses.

The share of loss of associate of US$0.3m (2019: US$0.3m) relates to ZIOC's investment in Jumelles Limited ("Jumelles"), the joint venture company in respect of the Zanaga Project. From May 2014, as a result of the completion of the Feasibility Study and thus consideration to complete the Glencore share option, only 50% (less one share) of the Jumelles results are now included above.

During the half year period, the Company's share of Jumelles' project expenditure was US$0.6m including the effects of currency translation of $0.07m loss. Capitalised exploration assets remain at US$80.0m.

Financial position

ZIOC's net asset value ("NAV") of US$38.2m is comprised of a US$37.4m investment in Jumelles, US$0.4m of cash balances and US$0.4m net current assets.

Cost of investment

The investment in associate relates to the carrying value of the investment in Jumelles, which as at 30 June 2020 owned 50% less one share of the Project. The carrying value of this investment is unchanged in 2020 due to:

·    Company funding per the Funding Agreement of US$0.2m; and

·    The Company's US$0.3m share of the comprehensive loss US$ 0.6m made by Jumelles during the half-year.

As at 30 June 2020, Jumelles had aggregated assets of US$81.2m (June 2019: US$81.2m) and aggregated liabilities of US$0.5m (June 2019: US$0.9m). Non-current assets consisted of US$80.0m (June 2019: US$80.0m) of capitalised exploration assets and US$1.0m (June 2019: US$1.2m) of other fixed assets including property, plant and equipment. Cash balances amounted to US$0.2m (June 2019: US$0.5m) and other current assets were US$Nil (June 2019: US$Nil).

Cash flow

Cash balances have decreased by US$0.4m since 31 December 2019. Additional investment in Jumelles required under the Funding Agreement (details set out in note 1 to the financial statements) utilised US$0.2m, operating activities US$0.2m.