June 2016 Quarterly Report 27 July 2016

Highlights

• A$30M generated from operations after interest and contractor profit share

• 3.7M WMT shipped (March 2016 Quarter 3.9M WMT)

• Average realised price of A$57/WMT CFR (March 2016 Quarter A$53/WMT CFR)

• Full cash costs* of A$49/WMT CFR (March 2016 Quarter: A$49/WMT CFR)

• Net Debt reduced to A$109M at 30 June 16 (A$257M at 31 March 16) following successful debt restructure

• Utah Port Charges reduction extended to 30 June 2017

• Identified lithium prospects on Atlas tenements

• Cash on hand at 30 June 2016 A$81M (31 March 2016: A$88M)

Atlas Iron Limited (ASX: AGO) is pleased to report on the June 2016 Quarter.

Atlas Managing Director David Flanagan said: "The June Quarter's excellent performance and completion of the debt restructure puts Atlas on a sound footing for the future.

"The business has achieved significant cost and debt reductions over a number of months and this is now leading to strong operating margins. We generated A$30M from our operations over the Quarter after interest payments and our contractor profit sharing obligations. It's now about consolidating that improved performance and delivering value for shareholders."

Quarterly - Key Metrics

* Please refer to Glossary in this announcement

Note: All costs in this table are unaudited and are quoted in Australian dollars unless otherwise stated.

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

FY 2016 Performance - Key Metrics

* Please refer to Glossary in this announcement (includes contractor margin share)

** Variance calculated from lower end of FY2016 Guidance

Note: All costs in this table are unaudited and are quoted in Australian dollars unless otherwise stated.

Debt Restructure

On 6 May 2016, Atlas completed the debt restructuring announced in December 2015 (see ASX release dated 6 May 2016 for further details). This debt restructure has resulted in the following:

• Atlas has reduced its term loan debt from US$267M to US$135M and extended the maturity date from December 2017 to ~April 2021;

• Atlas has reduced its annual cash interest expense by ~65% as a result of the lower debt balance and reduced cash interest rate;

• Atlas has issued 6.22 billion fully paid ordinary shares and 4.51 billion options to acquire fully paid ordinary shares in Atlas to the Term Loan Lenders (Lenders) such that the Lenders held 70% of all Atlas shares and options on issue at 6 May 2016; and

• The Lenders and Atlas have entered into an amended Term Loan Agreement where the six monthly Asset Coverage Ratio covenant has been replaced with a minimum cash balance covenant requiring Atlas to have a minimum of A$35 million at the end of each month.

• Mr Eugene I Davis, Mr Alan J Carr and Mr Daniel Harris (the New Directors) have been appointed as Directors of the Company and Mr Ken Brinsden and Mr Jeff Dowling resigned as Directors.

Operations

*- Includes intra-mine tonnes

Note 1: Please see Appendix 1 for further details of production outputs by mine and inventory.

Atlas shipped 3.7M WMT for the June 2016 Quarter; 2.3M WMT of Standard Fines, 0.3M WMT of Value Fines and 1.1M WMT of Atlas Lump.

Shipped tonnes were slightly lower than the prior Quarter due to an unplanned six day port outload shut in June 2016 when the Utah Point ship loader was damaged while loading another proponent's vessel. This resulted in higher levels of finished product inventory at Quarter end and delayed receipt of some sale proceeds to July 2016 due to a greater number of ships loading later in June 2016 than originally scheduled.

Marketing

The benchmark Platts 62% Fe IODEX averaged US$56/DMT in the June 2016 Quarter compared with US$48/DMT in the March 2016 Quarter. Atlas achieved an average price of US$45/DMT, which was inclusive of three cargos of lower grade Value Fines product and increased discounts for products of Atlas' grade over the June 2016 Quarter.

The average AUD:USD exchange rate strengthened over the Quarter (June 2016: 0.7455, March 2016: 0.7215) which negatively impacted on the received AUD sale prices in the June 2016 Quarter.

At the date of this report, Atlas had approximately 3.4M WMT of December 2016 Half sales subject to some form of forward price fixing via the use of forward sales, swaps, collars. This includes some 1.1M WMT of fixed price sales or swaps at an approximate average 62% Fe DMT equivalent price of US$52/t and collars comprising 2.3MT of puts with an average 62% Fe DMT equivalent of US$47/t and 1.9Mt of calls with an average 62% Fe DMT equivalent price of US$55/t. Approximately one third of puts have price protection limited to approximately US$40/t levels at 62% Fe DMT equivalent levels.

Financial Position Summary

Cash as at 30 June 2016 was A$81M (31 March 2016: A$88M) with the reduction driven by payment of one off restructuring costs, debt and royalty assistance repayments and other working capital movements offsetting cash generated from operations.

Working Capital as at 30 June 2016 was A$70M, an increase of A$17M from the prior Quarter end (A$53M at 31 March 2016) reflecting the improved operating performance during the June 2016 Quarter. The majority of key contractors and service providers continue to be paid in month of service.

Corporate

On 28 June 2016, the Company advised the market that David Flanagan had resigned as Managing Director. David Flanagan will finish as Managing Director of the Company on 5 August 2016.

Atlas Non-Executive Director, Mr Daniel C Harris, has been appointed as interim Managing Director (MD) and Chief Executive Officer (CEO) and will continue in this role until a permanent replacement MD and CEO is appointed and commences employment with the Company. Thereafter, Mr Harris will revert to being a Non-Executive Director of the Company. Information about Mr Harris and the material terms of his employment while acting as interim MD and CEO are set out in Appendix 2 to this announcement