ASX Announcement 2 July 2015
Please find attached a copy of a letter to shareholders from Atlas Iron's Managing Director David Flanagan that is
being mailed to Atlas shareholders.
Also attached is a copy of a sample investor communication that will be distributed in substantially the same form as the attached, in print and digital media over the coming days.
Investor Enquiries:
Atlas Iron +61 8 6228 8000
David Flanagan, Managing Director
Media Enquiries:
Read Corporate +61 8 9388 1474
Paul Armstrong +61 421 619 084
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
Capital raising to acquire Atlas shares at 5c, with a free attaching option
"I am delighted that as part of our capital raising, we have been able to offer shareholders an opportunity to acquire new shares in Atlas at an attractive price, with a free attaching option. Atlas is a stronger company than that of a few months ago, with a lower cost base and a more sustainable iron ore business." - Atlas Managing Director David Flanagan.
Dear Fellow Atlas Shareholder
It has been almost one month since I have been back as the Managing Director of Atlas and while it has been non-stop, I am thoroughly enjoying the challenge.
At the general meeting on 25 June, our shareholders demonstrated their overwhelming support for the capital raising we are undertaking and the feedback I have had from shareholders and potential new investors to date has been very pleasing.
Our proposed capital raising, which gives existing Atlas shareholders priority participation, is aimed at bolstering the financial strength of our company, ensuring we are better positioned to operate profitably and sustainably in challenging market conditions.
Atlas has as its foundation three iron ore mines in Western Australia's prolific Pilbara region, targeting a production rate of 14-15 million tonnes per annum by the end of this year.
The cash flow that is expected to be extracted from these mines is now underpinned by a significantly lower cost base than the one which existed before we suspended our operations in April this year.
By taking disciplined action to reduce our overheads and working in collaboration with our key contractors, Atlas' break-even cost has been reduced to approximately US$50 a tonne1, which is significantly lower than that achieved in Atlas' historical operations.
As a result of the innovative agreements we have struck with our contractors, and with the support of the West Australian State Government, Atlas' break-even cost will be lower than many hundreds of millions of tonnes of current iron ore production in the market.
If the capital raising is successful, Atlas will have a stronger balance sheet than was the case before production was suspended. Again, this stronger balance sheet is expected to provide a measure of insulation in times of iron ore price volatility.
The capital raising has been priced at 5 cents per share. To provide investors with additional upside potential, you will receive one free attaching option, which can be exercised for 7.5 cents, for every share you apply for.
All investors are invited to participate in the capital raising and the offers of securities are made in the prospectus dated 11 June 2015. Anyone who wishes to subscribe for securities under the capital raising will need to complete the application form/s that is in or accompanies the prospectus.
1
The prospectus describes the investment proposition in full, but importantly also describes in detail the risks and uncertainty related to an investment in Atlas and so should be considered carefully before any investment decision is made. The prospectus is available from our website at www.atlasiron.com.au.
Please keep in mind that the shareholder participation offer closes at 5.00pm Perth time on Monday the 13th July 2015. Please also remember that shareholders will be allocated stock on a first-come, first-served basis. Shareholders who wish to participate are therefore encouraged to submit their applications as soon as possible.
The quickest way to apply is to make a BPAY payment using your personalised BPAY reference number on your Green Personalised Acceptance Form. Otherwise, you can send in your Green Personalised Acceptance Form with a cheque to the share registry.
If you have any questions about the capital raising or anything else to do with Atlas, please don't
hesitate to contact our shareholder hotline on 1300 723 432 (from within Australia) or +61 3 9946
4434 (from outside Australia) at any time between 9:00am and 5:00pm (Sydney time) on Monday to
Friday during the period in which any of the offers under the prospectus remain open. I thank you for your ongoing support of Atlas.
Yours faithfully
David Flanagan
Managing Director
1] IODEX 62%Fe CFR. China breakeven price defined by adjusted iron units, spot product FOB discount, moisture, Full Cash Costs on the basis of targeted 14-15Mtpa run rate by year end and any applicable Contractor Collaboration Margin. AUD:USD exchange rate of 0.785. Full Cash Costs include: C1 Cash Costs, royalties, freight, corporate and administration, expensed exploration and evaluation, interest expense and sustaining capital expenditure. C1 Cash Costs are inclusive of contractors and Atlas' costs including Contractor Rate Uplift. For the avoidance of doubt Full Cash Costs excludes depreciation and amortisation, one-off restructuring costs and other non-cash
expenses. Refer to the Prospectus dated 11 June 2015 for further information.
2
A message from Atlas Iron Managing Director David Flanagan
Atlas Iron Capital Raising
"As you may be aware, after making the difficult decision to stop mining due to the sharp fall in the iron ore price earlier this year, Atlas Iron Limited (ACN 110 396 168) has taken decisive action to significantly reduce costs and has resumed production at its three iron ore mines in WA's Pilbara, targeting a production rate of 14-15 million tonnes per annum by the end of this year.
"The cash flow that is expected to be extracted from these mines is now underpinned by a significantly lower cost base than the one which existed before we suspended our operations in April this year.
"By taking disciplined action to reduce our overheads and working in collaboration with our key contractors, Atlas' break-even cost has been reduced to approximately US$50 a tonne1, which is significantly lower than that achieved in Atlas' historical operations.
"As a result of the innovative agreements we have struck with our contractors, and with the support of the West Australian State Government, Atlas' break-even cost will be lower than many hundreds of millions of tonnes of current iron ore production in the market.
"This major change in Atlas' business means we can maximise the profits and cash flow we generate from our mines, while helping to provide a measure of insulation for the company against a volatile iron ore price.
"Now Atlas is implementing the next stage of its recovery strategy. This involves a capital raising to further strengthen our financial position. Detailed information about the capital raising and all of the above can be found in Atlas' prospectus dated 11 June 2015, and I encourage you to read that in full.
"The capital raising has been priced at 5 cents per share, which represents a significant discount of 58% to the last traded price of Atlas and is significantly lower than Atlas shares have ever traded.
"To provide investors with additional upside potential, you will receive one free attaching option, which can be exercised for 7.5 cents, for every share acquired in the capital raising.
"The raising was overwhelmingly endorsed by our shareholders at last week's general meeting, and the feedback I have had from them and potential new investors to date has been very pleasing.
"All eligible Atlas shareholders are invited to participate in the capital raising, and have a priority to do so. Other investors are also welcome to apply. The offers of securities under the capital raising are made in the prospectus dated 11 June 2015. Investors can go to www.atlasiron.com.au to download the prospectus and the application form/s.
"The prospectus describes the investment proposition in full, but importantly also describes in detail the risks and uncertainty related to an investment in Atlas and so should be considered carefully before any investment decision is made. Anyone who wishes to subscribe for securities under the capital raising will need to complete the application form/s that is in or accompanies the prospectus.
"Please also keep in mind that the offers to most eligible shareholders and the general public close at 5.00pm Perth time on Monday the 13th July 2015."
Yours faithfully
David Flanagan Managing Director Atlas Iron
If you have any questions about the capital raising, please contact the Atlas shareholder hotline on 1300 723 432 (from within Australia) or +61 3 9946 4434 (from outside Australia) at any time between 9:00am and 5:00pm (Sydney time) on Monday to Friday during the period in which any of the offers under the prospectus remain open.
1] IODEX 62%Fe CFR. China breakeven price defined by adjusted iron units, spot product FOB discount, moisture, Full Cash Costs on the basis of targeted 14-15Mtpa run rate by year end and any applicable Contractor Collaboration Margin. AUD:USD exchange rate of 0.785. Full Cash Costs include: C1 Cash Costs, royalties, freight, corporate and administration, expensed exploration and evaluation, interest expense and sustaining capital expenditure. C1 Cash Costs are inclusive of contractors and Atlas' costs including Contractor Rate Uplift. For the avoidance of doubt Full Cash Costs excludes depreciation and amortisation, one-off restructuring costs and other non-cash
expenses. Refer to the Prospectus dated 11 June 2015 for further information.