ASX Announcement 2 June 2015

M i n i n g t o R e s u m e a t M o u n t We b b e r i n J u l y a n d B G C A g r e e m e n t

Atlas Iron Limited (ASX: AGO) is pleased to announce that production will resume at its Mount Webber mine in the Pilbara in July 2015. The Mt Webber project is expected to produce iron ore at a rate of 6Mtpa for a mine life of more than 8 years.
As part of the Mt Webber re-start, Atlas and BGC Contracting Pty Ltd (BGC) have agreed the following:

 Mt Webber production will ramp up to an annualised rate of 6Mt by the December Quarter, 2015.

 Atlas will pay BGC between A$17.1 million and A$19.6 million in shares and/or cash to cover termination costs associated with the Wodgina mining contract, suspension, remobilisation and other costs for the Mt Webber mine, with discounts applicable for the portions paid in cash. The composition of the payments will be determined by reference to the amount raised in Atlas' proposed capital raising (see ASX release dated 15

May 2015). Further details of the composition of payments are set out in the terms following.

 Under the revised Mt Webber mining agreements, Atlas and BGC targeting mining cost savings of 10-12%.

 As a result Mt Webber's costs will be similar to those at its Wodgina and Abydos mines, meaning the Company will have a break-even price of approximately USD$50/dmt1 (IODEX 62% Fe CFR China basis), based on full cash costs2. At the date of this release the IODEX 62% Fe CFR China is USD$61.50/dmt.

 The agreement with BGC is not based on the contractor collaboration model in place at Wodgina and Abydos.

Under the Mt Webber contract, the rates paid to BGC will not rise in line with the iron ore price and BGC will not share in the net operating cash flow from Mt Webber.

 Atlas has agreed to pay BGC an option fee of A$3.45 million in Atlas shares (or at Atlas' election a cash payment of A$3 million) representing A$3 million credit against the future purchase of the Mt Webber crushing and screening plant.

 The balance of the plant purchase cost can be settled at any time during the term of the contract, according to the depreciated value within the contract schedules at the time of exercise for between A$18 million and A$8 million depending on the time of purchase over the remaining life of the contract (~3.5 years).

 In the option to purchase the plant, Atlas has an opportunity to further reduce operating costs by negating the requirement to pay fixed charges for the crushing plant of approximately A$4 million per annum, in addition to owning the plant outright for the remaining life-of-mine.

Atlas Managing Director Ken Brinsden said the resumption of production at Mount Webber was another key step in the strategy to ensure Atlas has a robust financial future and welcomed the benefit in the long standing relationship with BGC Contracting.
"With Mount Webber operating we will once again have a strong, diversified production base but with markedly
lower costs," Mr Brinsden said.
"We are firmly on track to achieving our key goals of low costs, strong margins and healthy cash flows, backed by a stronger balance sheet that will enable the Company to withstand periods of price volatility."

As set out in more detail below, the Company proposes to use the authorisations to be sought at the general meeting of shareholders to be held at 10.00 am (WST) on Friday, 19 June 2015 (General Meeting) in order to issue shares to BGC as part of the arrangements with BGC described above.

1. IODEX 62%Fe CFR China breakeven defined by adjusted iron units, spot product FOB discount, moisture and full cash costs on the basis of targeted 14-15Mtpa run rate by year end. AUD:USD exchange rate of 0.785.

2. Full cash costs include; C1 production costs, royalties, freight, corporate and administration, expensed exploration and evaluation, interest expense and sustaining capital expenditure.

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

The BGC Agreement and Shares to be issued

At the General Meeting, the Company is seeking approval from shareholders to issue up to a maximum of
3,600,000,000 new fully paid ordinary shares in the Company at an issue price of between A$0.05 and A$0.10 per share pursuant to resolutions 1-4 (inclusive) set out in the Notice of General Meeting (NoM) which convened the General Meeting (the NoM was lodged with ASX on 15 May 2015).
The Company now proposes that the shares to be issued to BGC may be issued under any of Resolution 1 "Approval to issue Contractor Shares and any Contractor Options", Resolution 2 'Approval to Issue Placement Shares and any Placement Options", or under Resolution 4 "Approval to issue any SPO Shortfall Shares and any SPO Shortfall Options", as set out in the NoM, or, under the Atlas Board's power to issue up to 15% of Atlas' capital, or under a combination, in Atlas' sole discretion. Accordingly, shareholders should consider this proposal when determining how to vote on those resolutions. The number of shares to be issued to BGC will depend on the amount raised under Atlas' proposed capital raising, as set out in the table below.

Payments Schedule

Amount raised under capital raising proposal

Atlas obligation

$120 million or more* Pay $17,077,935 in cash

$90-120 million* Pay $8,538,967 in cash and issue $9,819,812 in shares

$60-90 million^ Pay $5,000,000 in cash and issue $13,889,625 in shares

Less than $60 million^ Issue up to $19,639,625 in shares, unless Atlas elects to part pay in cash

* Inclusive of the cost of the capital raising and the subscription price of any Contractor Shares, but excluding the subscription price of any shares issued to BGC which are not "Contractor Shares".

^ Inclusive of the subscription price of any Contractor Shares, but excluding the cost of the capital raising and the subscription price of any shares issued to BGC which are not "Contractor Shares".

The Directors continue to believe that the passing of all of the resolutions proposed in the NoM is in the best interests of the Company and its shareholders, and continue to recommend that shareholders vote in favour of all resolutions at the General Meeting.

Term and Termination

Atlas or BGC may terminate the new arrangements by giving three months written notice. BGC may not provide a termination notice prior to 30 September 2015. The present intention of both parties is to fulfil the remaining unexpired terms of the Mt Webber contracts, being approximately 3.5 years.

Plant Option Fee

In addition to the payments set out in the Agreement, a A$3.45 million non-refundable option fee (Option Fee) is payable for the grant to Atlas of an option to purchase the ore handling plant at Mount Webber at any time during the term of these arrangements, or on termination of the arrangements by BGC with three months' notice, for a pre- determined price.
The Option Fee is to be satisfied by:
(i) the issue to BGC of A$3.45 million of Contractor Shares; or
(ii) at Atlas' discretion, a discounted cash payment of A$3 million.

2

If Atlas exercises the option to purchase, the price payable on completion calculated as above shall be reduced by A$3 million to reflect the payment of the Option Fee, regardless of whether the Option Fee is satisfied by the issue of Contractor Shares or a cash payment.

Investor Enquiries:

Atlas Iron +61 8 6228 8000
Ken Brinsden, Managing Director

Media Enquiries:

Read Corporate +61 8 9388 1474
Paul Armstrong +61 421 619 084

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