ASX Announcement 13 August 2015

2015 Annual Results

Cost reduction initiatives lower operating costs. Further step down in costs expected from contractor collaboration model in FY2016

Highlights

 Company responded to a deteriorating iron ore market through a new contracting relationship which on completion of ramp up will deliver a breakeven price of US$50DMT CFR* China; recent falls in AUD:USD further improves this position

 July 2015 capital raising of A$87M (gross, including A$53M of new cash) significantly strengthens balance sheet and improves working capital position

 Operations were suspended and then resumed at all three Nth Pilbara mines. On track to achieve targeted production of 14-15Mtpa by December 2015

Annual Results

 Record exports of 12.2Mt (10.9Mt FY14)

 Revenue down by 35% to A$718.5M, following significant fall in the USD iron ore price over the period

 Average FY15 realised price per tonne received of A$59.96/ WMT CFR (A$100.51/ WMT CFR FY14)

 Underlying* EBITDA loss of A$51.5M

 All-in cash costs* down to A$64.23/WMT (A$76.80/WMT FY14) generating a A$150M of annualised cost reductions

 Previously advised non-cash asset impairment and write downs of A$1,077.1M together with restructure and suspension costs of A$52.8M contribute to statutory loss of A$1,377.8M

 Cash on hand of A$73M (pre capital raising), after investing A$81M predominately on completing the

Mt Webber stage 2 project in the December half

 Capital investment to support production of 14-15Mtpa now complete

Investors can listen to the analysts‟ briefing call, which starts at 10.30 AM (AEDT) (8.30 WST) today. Click on the link http://www.brrmedia.com/event/140075

Atlas Iron Limited (ASX: AGO or the Company) has today released it‟s FY15 annual results. The results reflect the impact of a significant and sustained fall in the iron ore price which delivered a reduction in revenue of 35% to A$718.5M.
Whilst the Company was able to achieve a significant cost reduction of A$150 million during the year, the savings generated could not match the rate of decline experienced in the iron ore price. The FY15 all-in cash cost* per tonne was reduced by 16% to A$64.23/WMT (FY14: A$76.80/WMT).

After allowing for non-cash asset impairments, inventory write-downs, de-recognition of deferred tax assets (A$1,077.1M) and restructuring and suspension costs (A$52.8M), the Company recorded a statutory loss of A$1,377.8M.

* Please refer to Glossary for definitions

Atlas Iron Limited

ABN 63 110 396 168

Raine Square, Level 18

300 Murray Street Perth WA 6000

PO Box 7071

Cloisters Square Perth WA 6850

P: +61 8 6228 8000

F: +61 8 6228 8999

E: [email protected]
W: www.atlasiron.com.au

Cash on hand at 30 June 2015 was A$73.3M (pre capital raising) after investing A$81M (predominately at Mt Webber), payment of dividends in August 2014 (A$16.2M), repayment of debt facilities (A$17.7M) and payment of interest (A$30.6M). The capital raising of A$87M (gross, including A$53M of new cash) completed in July 2015 has strengthened the Company‟s balance sheet and improved its working capital position.
During a year when the iron ore price experienced a significant and sustained fall, the Company responded by implementing initiatives to significantly reduce its cost base, but was ultimately forced to suspend mining operations in April 2015 and conduct a whole of business review. Atlas then implemented an operating strategy based around a contractor collaboration model (refer ASX announcement 15 May 2015).
As part of this strategy, Atlas entered into new commercial relationships with key contractors and, with the support of the Western Australian Government, resolved to target a substantially lower cost base (in lower iron ore price environments) and thereby contribute to a more sustainable business. Atlas now aims to be break even at a benchmark 62%Fe price of US$50/DMT CFR* (based on the assumptions set out in the Glossary below, which include an AUD:USD exchange rate of 0.7850).
In addition, as part of the contractor collaboration model Atlas moved to reduce exposure to volatility in iron ore pricing by utilising hedging products, fixed price sales contracts and shorter dated pricing periods on a three month look forward basis. This will reduce Atlas‟ exposure to iron ore price risk.
The Company has since re-deployed all mining fleet, recommissioned all fixed plant and resumed shipping of ore from all three of its mine sites.
On the back of the revised operating strategy the Company launched a capital raising which culminated in A$87M
being raised in July 2015.
Atlas Managing Director, David Flanagan said the organisation has demonstrated its strong capability to be resilient and innovative in extremely challenging market conditions.
"Yes, the changing iron ore market has meant we have had to take large asset write downs and that hurts. While Atlas can‟t influence the iron ore price we have moved the needle on our cost base and are now seeing the results of the contractor collaboration model. The combined efforts of our people, contractors, WA Government and of course with the support of our shareholders means we are not just stronger than we were, we are much stronger than many of our competitors and we plan to keep it that way."
Further details regarding Atlas‟ annual results can be found in the accounts and presentation lodged with ASX
today.

Media Enquiries:

Read Corporate +61 8 9388 1474

Paul Armstrong +61 421 619 084

* Please refer to Glossary for definitions

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Glossary

Break Even Price: The key assumptions underlying the estimated Break Even Prices above, are summarised below:

 AUD/USD $0.7850.

 "Break Even Price Estimate" based on nominal production run-rate and Full Cash Costs at 15Mtpa (i.e.

320kt/mth, 480kt/mth and 450kt/mth from Abydos, Wodgina and Mt Webber respectively)

 Sea freight of US$6.25/WMT.

 No Contractor Collaboration Deed cost assumed for Mt Webber, however estimated 10-12% mining cost savings (via the BGC Agreement).

 Private and State Royalties of 10.5% at Wodgina and 8.0% at Mt Webber and Abydos.

 Interest of 8.75% p.a. applied to secured debt of US$269M (i.e. A$343M at AUD/USD $0.785).

 Payment of margin to collaborating contractors (see ASX Announcement dated 15 May 2015) included for Wodgina and Abydos (Contractor Collaboration Margin).

 Moisture of 5.7%, 3.8% and 4.5% at Wodgina, Abydos and Mt Webber respectively (i.e. average

expected moisture over next 24 months).

 Average assumed lump premium of A$10/DMT with Lump contributing 66% and 50% of Abydos and Mt

Webber product respectively. No Lump product assumed to be produced at Wodgina.

 Initial Lump production at Mt Webber from November 2015, growing during December 2015 to stated

50% of product tonnes.

 Average "Other‟ contractual penalties of US$0.50/DMT assumed to provide for impurities not specified in contracts.

 Quality / Value in Use discount of 12.5%, relating to discounts for ore impurities.

 Average assumed grade of Atlas ore of 57.0% Fe, compared with benchmark grade of 62.0% Fe.

 WA State Government Royalty Relief not included in Break Even Price analysis.

The underlying basis is a non-IFRS measure that in the opinion of Atlas‟ directors provides useful information to
assess the underlying financial performance of the Company. These are non-IFRS measures and are unaudited.

All-in cash costs' includes C1 Cash Costs, royalties, freight, corporate and administration, expensed exploration and evaluation but excludes interest expense, capital expenditure, one-off restructuring costs, suspension and ramp up costs of operating mine sites, Contractor Collaboration Margin and other non-cash expenses. C1 Cash Costs are inclusive of contractors and Atlas‟ costs including any uplift in rates paid to collaborating contractors (see ASX Announcement dated 15 May 2015). All-in cash costs are derived from unaudited management accounts. This non-IFRS measure is unaudited.

Full cash costs includes All-in cash costs‟, capitalised exploration and evaluation, interest expense and sustaining capital expenditure, but excludes depreciation and amortisation, one-off restructuring costs, suspension and ramp up costs of operating mine sites, Contractor Collaboration Margin and other non-cash expenses. Full cash costs are derived from unaudited management accounts. This non-IFRS measure is unaudited.

WMT: Wet Metric Tonnes

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