2015

ANNUAL REPORT

ATLAS IRON LIMITED

ABN 63 110 396 168

Atlas Iron Limited (Atlas or Company) is an iron ore company, mining and exporting Direct from its operations in the Northern Pilbara Australia. Since listing on the ASX in late

to become one of Australia's leading mid-tier

Atlas' operations are focused on the Pilbara region A

of Western Australia, where the Company has

grown its Reserve and Resource assets through exploration activities, as well as the acquisition of other mining projects in strategic locations.

Since its establishment, Atlas has commissioned five mines in the Pilbara region, increasing its exports year on year since it started production in 2008.

Atlas is proud of its reputation as an ethical Company with a dynamic, can-do attitude.

In every situation, from large corporate to face-to-face dealings with the local Atlas and its people strive to achieve outcomes for the benefit of all parties.

Through its operations, Atlas is for over 600 jobs, directly and i making a significant contribution and national economy and

ATLAS' VISION

To build a truly company tha place to work, world a better delivers

for shareholders.

our f

CHAIRMAN'S REPORT 03

MANAGING DIRECTOR'S REPORT 04

OUR PEOPLE AND CULTURE 07

HEALTH AND SAFETY 08

REPORT ON OPERATIONS 10

LAND ACCESS, HERITAGE AND ENVIRONMENT 15

EXPLORATION AND RESOURCE DEVELOPMENT 16

ATLAS IN THE COMMUNITY 19

MINERAL RESOURCE AND ORE RESERVE REPORT 21

FINANCIAL REPORT 25

ASX ADDITIONAL INFORMATION 103

CORPORATE INFORMATION 105

ATLAS IRON LIMITED 2015 ANNUAL REPORT 01

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We enter the new financial year with both

an acute awareness of our recent challenges and optimism on the back of our new financial and operational position.

Chairman's Report

Dear Shareholders

I have been in the Chairman's seat at Atlas Iron since June and already I have been asked many times why, given the challenges in the iron ore industry, I took on the job.

The answer is simple: opportunity.

Ironically, much of this opportunity stems from the difficulties Atlas encountered as a direct result of the sharp fall in the iron ore price earlier this year. The challenges this presented for Atlas, including the need to suspend production in April, are not to be understated. But equally, the response from the Company and its key contractors was nothing short of stunning.

The extensive cost cuts which have flowed from the innovative contractor-collaboration agreements, under which our key contractors have reduced their rates and pegged their returns to the iron

ore price and Atlas' cashflow, have opened the door to an opportunity for Atlas shareholders.

Our new lowered cost base is now at the point where Atlas stands to generate returns for shareholders as highlighted by the strong financial performance of Atlas in the months of July and August. Our financial position has also been strengthened by the recently completed A$87 million capital raising. Again, this was undertaken as part of our strategic response

to the iron ore price fall in the first half of 2015 and will help Atlas to capitalise on its opportunities whilst providing some protection from future price volatility.

The end result of this challenging chapter is that Atlas is now stronger and leaner, poised to reap the benefits that can stem from a lower cost base, a more robust balance sheet, incredible support from our shareholders, key contractors and experienced management with a track record of project development and production growth.

Atlas is also grateful for the strong support

it has received from the WA Government and key departments in the form of lower port charges and deferred royalty payments.

I would like to thank my fellow Directors and Atlas management for their incredibly hard work, particularly in recent months. This has involved long days and often long nights and weekends. Their commitment to Atlas' future has been unwavering and the opportunity we now have is also a result of their hard labour.

We enter the new financial year with both

an acute awareness of our recent challenges and optimism on the back of our new financial and operational position.

I thank shareholders for their endurance during these challenges and I look forward

to delivering the benefits of our restructuring.

Hon Cheryl Edwardes

NON-EXECUTIVE CHAIRMAN

ATLAS IRON LIMITED 2015 ANNUAL REPORT 03

We have continued to receive strong interest in and demand for our products, having executed a number of contracts for our standard fines products. Atlas also

continues to receive interest from customers in China, Japan, India and South Korea.

Managing Director's Report

Dear Shareholders

If a week is a long time in politics, there are no words to describe how long it feels in the case of running an iron ore company.

It also remains a primary focus to run our Company safely. The safety of our people is paramount.

To complete a significant mine expansion, suspend operations and then re-mobilise a large mining business without recording a serious injury is a significant achievement. All our

teams are to be congratulated for this effort.

This is a great credit to everyone in the business, particularly our leaders, who have been vigilant in having a safety first culture permeate the Company.

In the space of just one week in early July, the iron ore price see-sawed about US$14 a tonne - just as we were in the throes of completing the share

placement that resulted in Atlas raising A$87 million.

The raising coincided with the end of the most volatile and challenging 12 months in the iron ore sector I have experienced in my career. But it also marked the start of a new beginning for Atlas.

There is no denying that the past financial year has been a difficult time for Atlas and our shareholders.

We had ramped up our production to an annual rate of 14-15 million tonnes in line with the undertaking we had given to the market

over several years. We had also been successful in significantly reducing our costs in response to the falling iron ore price.

But despite these extensive efforts, the iron price fell faster and harder than anyone had predicted and we simply could not reduce our costs by enough to offset the fall. With our costs at the time exceeding the iron ore price, the Company's Board and Management had no realistic choice but to suspend mining in April this year. This was one of the hardest decisions I have ever taken.

However, the old adage that every cloud has a silver lining was quickly illustrated when our key contractors rallied around Atlas and worked with us to implement what we now know as the contractor-collaboration model.

In essence, this involved these contractors agreeing to slash the fees they charge Atlas in return for have a slice of the action as iron

prices rise and our net cashflow grows. They also agreed to inject A$34 million into our Company through the capital raising, meaning they played another key role in our turnaround strategy while securing further exposure to the upside.

This contractor collaboration model is pivotal to Atlas' new, significantly lower cost base. As a result, our full production costs in the month of August were reduced to A$56.52/WMT(includes rate uplift, but

pre contractor collaboration margin share). This meant we were cashflow-positive based on the average realised price on the month of A$61/WMT CFR.

The strength of our new, lower cost base and the confidence in the outlook for Atlas' business was reflected in the demand for the capital raising from both existing shareholders and new investors. As a result, we succeeded in securing sufficient funding to bolster our balance sheet. This have given us a measure of insulation against iron ore price volatility and further enhances our ability to generate returns for shareholders over the medium and long term.

In the face of a difficult 12 months in the iron ore sector, Atlas has achieved a number of important milestones to strengthen its business and position itself for the future, including:

• Implemented ongoing cost reductions, significantly reducing our cost of production;

• Ramped-up production to our targeted rate of 14-15Mtpa four months ahead of schedule;

• Doubled production at Mt Webber from 3 to 6MTPA;

• Commenced shipping a higher-value Atlas lump product for the first time;

• Completed a Contractor Collaboration agreement with Qube, MACA and McAleese at the Wodgina and Abydos mines;

• Entered into an iron ore Royalty Relief agreement with the Western Australian State Government;

• Achieved material savings in Government Port Charges through Port Hedland;

• Completed the capital raising discussed above;

• Reduced our exposure to the volatile iron ore spot price by implementing a number of hedging contracts in respect of our iron ore sales;

• Reduced staff numbers from 290 to 115 during the financial year and the number of Directors from 9 to 5.

While we are seeing the benefits of these initiatives, as demonstrated by our August 2015 production results, the Company remains focused on three key strategic initiatives:

1. Defend and grow net cash flow by further reducing costs and maximising revenues. We are applying our cost-reduction skills to every aspect of the business while looking for opportunities

   to add value to our existing iron ore products.

2. Ensure the business continues to deliver incremental growth by optimising our production schedules. This is aimed at maximising production rates, particularly from 2018 to 2022. We are also studying

   opportunities to complete low cost brownfields expansions which will support higher production rates with a longer mine life.

3. Address issues associated with the Company's debt as a priority. This process has the potential to create value for shareholders.

This three-pronged strategy is aimed at maximising Atlas' cash-generating power and the value of its assets for the benefit of all of our shareholders

and key stakeholders.

We have also continued our exploration activities and we have every reason to be enthusiastic about our results from drilling at Corunna Downs.

The exploration success at Corunna Downs demonstrates the North Pilbara is a favourable location for iron ore exploration, and Atlas' significant land holding in the area is a strategic advantage.

With our existing mines and the potential at our exploration sites, I am very confident about our future.

Of course, in order to maintain our success, it is important we maintain our reputation as a reliable supplier with strong relationships with our customers.

We have continued to receive strong interest in and demand for our products, having executed a

number of contracts for our standard fines products. Atlas also continues to receive interest from customers in China, Japan, India and South Korea.

Despite achieving cost reductions across the business of in the order of A$150 million during the year, the Company still reported an underlying EBITDA loss of A$51.5 million. In addition, largely as a result of downward revisions of future iron ore prices, we were required to take significant impairments totalling of A$1,077.1 million.

This led to a statutory loss of A$1,377.8 million.

It is the strong urbanisation in China which has been driving the demand for iron ore and I remain confident that it will continue for some time.

We continue to see a significant disconnect between the physical demand we are experiencing for our ore and the volatility we see in day-to-day spot iron ore prices. It is increasingly our view that market speculation in relation to various iron ore indices is becoming the dominant influence on the short term price of iron ore. While the opportunity to invest in this paper market is relatively small compared to the flows of capital which are accessing it, we expect to see continued volatility in the iron ore price. We will continue to manage this volatility as best we can by

way of our forward price strategy, which provides Atlas and investors with greater certainty in respect of the prices we will receive for our product and therefore the extent of our margins and cash flows in the near-term.

At a local level, Atlas has continued to be an active contributor to the community. This goes beyond the taxes and royalties we pay and involves us looking for opportunities to improve the communities in which we operate.

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I am proud of the strong relationships we have established with various community organisations through our Community Partnership Program, Helping Hands grants, philanthropic grants and our Community days, in which Atlas' employees down tools and volunteer in the community. Our community involvement helps build a strong and vibrant culture.

As a small company, we have much to be proud of, punching well above our weight. We believe there is every reason to be confident about the future of the Company as we enter our second decade of operations. We have strong relationships with all

of our stakeholders, customers, contractors and we hold attractive assets with competitive advantages in infrastructure.

And while it has been a difficult journey over the past 12 month or so, I believe our new cost base and strengthened balance sheet positions Atlas to both withstand future iron ore price volatility and capitalise on stronger prices and margins.

We have arrived at this point thanks to the immense amount of support and assistance we have received from existing shareholders, new investors, contractors, advisors, staff and our management team. I would

like to thank you all for your commitment, loyalty and belief in Atlas. In return, I promise you that your Directors and Management are totally committed to ensuring a successful future for your company.

David Flanagan

MANAGING DIRECTOR

ATLAS IRON LIMITED 2015 ANNUAL REPORT 05

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Atlas' values are embedded throughout the Company, and are the guiding principles behind how all employees work. They are the critical drivers to developing and nurturing the culture within Atlas, which aligns everyone in the Company to working collectively towards achieving Atlas' vision.

Our People and Culture

Atlas has grown from a one person operation in 2004 to become one of Australia's leading mid-tier iron ore exporters. Achieving this has required a team of exceptional, high performing people, passionate to succeed. These qualities have been important to grow the Company's production and resource base and be a good corporate citizen in the communities in which Atlas is based.

Complemented

Atlas' values are embedded throughout the Company, and are the guiding principles behind how all employees work. They are the critical drivers to developing and nurturing the culture within

Atlas, which aligns everyone in the Company to working collectively towards achieving Atlas' vision.

While the Company has experienced growth, opened new mines and invested in exploration, the market volatility over the past 12 months

has contributed to Atlas repositioning its workforce to around 115 employees (at the date of this report), working in Perth and the Pilbara.

Despite a period in which there has been significant volatility in the iron ore market,

Atlas' employees have remained highly engaged and a strong and positive culture still exists providing the Company with stability and focus.

Atlas is also a proud equal opportunity employer, and has maintained a constant level of female participation of around 27%, including 25% of management roles filled by females. Over the past two years, the 'Women in Atlas Committee' has progressed through its initiatives and has been successful in identifying and recommending

opportunities for women that enable them to help themselves and others to grow personally and professionally through leadership, education,

mentoring and networking support. This achievement was recognised when Atlas won the 'Outstanding Company Initiative Award' at this year's

WA Chamber of Minerals & Energy (CME) Women in Resources Awards.

Atlas' direct workforce is complemented by over 500 contractors (at the date of this report) working across Atlas' various mine sites, haulage and port operations.

Atlas structure has been designed to be flexible and 'fit for purpose', with a lean and capable workforce across all areas of business activities.

Our organisational development strategy ensures our organisational structure is designed to

better enable leadership and to support our people to do the right work at the right level with appropriate accountability and authority.

We are committed to driving a high performance culture where leaders and teams within the business are clearly aligned to the long term strategic objectives of the organisation.

ATLAS IRON LIMITED 2015 ANNUAL REPORT 07

Atlas works closely with its contracting partners to engage them in identifying key health and safety risks on our sites and works collaboratively to manage these risks effectively.

Health and Safety

Atlas' first and overriding value is safety first.

Atlas' strategy for health and safety is built on the four pillars of exceptional leadership, engaged employees, risk management focus and enabling systems.

Atlas works closely with its contracting partners to engage them in identifying key health and safety risks on our sites and works

collaboratively to manage these risks effectively.

Site-specific Safety Management Plans are in place at all Atlas sites and serve as the basis of how we ensure risks are identified, communicated, understood and managed at

the right level across the business. The Safety Management Plans manage safety of all activities on site for both Atlas and our Contractors.

Integral to providing a safe working environment is to ensure the Company is tracking and reporting safety performance and reviewing incidents so as to continuously improve and reduce the risk of injury to our workforce.

As a large portion of the workforce at Atlas' operations are contractors, Atlas works very closely with its contracting partners and their workforce to enshrine a shared culture of working safely. Any incidents involving contractors

are investigated with Atlas involvement and included in all of Atlas' safety reporting.

Lost Time Injury Frequency Rate

Atlas measures its safety performance by reporting on the lost time injury frequency rate (LTIFR).

Pleasingly, Atlas' LTIFR fell for the fifth consecutive year, by over 50% percent, to 0.43 (see below).

Atlas recorded a 10% increase in its total reportable injury frequency rate (TRIFR) during a period which saw a significant reduction in hours worked and major challenges in the operating environment with projects completing, mines suspending and then recommencing production in the final quarter.

Whilst the fall in the LTIFR is a pleasing result, the increase in TRIFR is a result that Atlas will

be working to reverse in 2016. Atlas will continue to focus on safety initiatives to reduce both the LTIFR and TRIFR by continuing its focus on visible safety leadership, an effective safety culture, and compliance to key safety management standards.

Road safety is a major focus for Atlas. With the proximity of its mines to Port Hedland, Atlas transports its product to port on road trains. The Company participates in a variety of road safety programs and is actively involved in

the Pilbara Industry Road Safety Alliance.

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ATLAS IRON LIMITED 2015 ANNUAL REPORT 09

Report on Operations

Atlas' report on operations should be read in conjunction with the Directors' Report and the Financial Statements.

Our strategy

Atlas' purpose is to deliver mineral products that create value for its shareholders, employees, customers and the communities in which the Company operates.

Atlas' strategy is to develop an expanding Pilbara production base, consistent with globally competitive mining operations, and to pursue profitable growth opportunities. Consistent with this philosophy, Atlas seeks to:

1. Defend and grow net cash flow by further reducing costs and maximising revenues. We are applying our cost-reduction skills to every aspect of

   the business while looking for opportunities to add value to our existing iron ore products.

2. Ensure the business continues to deliver incremental growth by optimising our production schedules. This is aimed at maximising production rates, particular from 2018 to 2022. We are also studying

   opportunities to complete low cost brownfields expansions which will support higher production rates with a longer mine life.

3. Address issues associated with the Company's debt as soon as possible. This process has the potential to create value for shareholders.

Our performance

Atlas has had a challenging year as a result of a significant and sustained fall in the iron ore price. The Company completed aggressive cost reduction initiatives; resulting in a significantly reduced cost base. Cost cutting programs focused predominantly on input cost reductions, productivity improvement, and value chain optimisation. Prior to April 2015, Atlas was on track to achieve guidance of 13.7 - 14.1M WMT (wet metric tonnes) shipped. In April 2015, with the iron ore price continuing to fall to a level below Atlas' breakeven price, Atlas was forced to suspend its operations at Abydos, Wodgina and Mt Webber whilst the Company completed a detailed review and revised operating plan. Subsequently the

Company entered into new commercial arrangements with key contractors, culminating in a significantly reduced production cost base. Atlas' is now targeting a Break Even Price 62% Fe Index of US$50/DMT CFR.*

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