ASX Announcement 8 July 2015

U p d a t e o n F o r w a r d P r i c e S t r a t e g i e s

Forward sales arrangements are providing Atlas with a measure of near-term protection against iron ore price falls while retaining some exposure to price upside

As advised in its ASX announcement of 15 May 2015 regarding the Contractor Collaboration arrangements, Atlas Iron Limited (ASX:AGO) has sought to establish strategies that mitigate its exposure to iron ore price volatility in the near-term. The Company is pleased to provide the following update in delivery of its forward pricing strategy.
These strategies are aimed at providing Atlas with some insulation against falls in the US dollar iron ore price while maintaining some exposure to pricing upside. As Atlas' forward sales relate to the US dollar iron ore price, Atlas retains the benefit of the positive impact that a weakening Australian dollar has on the revenue from its US dollar denominated iron ore sales.
Based on the transactions entered into by Atlas to date, approximately 2.06 million wet metric tonnes (wmt) of production for the September quarter and 0.4 million wmt of production for the December quarter are currently subject to some form of price insulation. This equates to roughly 70% of September quarter's targeted production (being approximately 3 million tonnes) and some 10% of December quarter's targeted production.
Atlas Managing Director David Flanagan said the pricing strategies sought to reduce Atlas' exposure to iron ore
price volatility while the Company completed its capital raising and production ramp-up.
"This approach provides Atlas and investors with greater certainty in respect of the prices we will receive and
therefore the extent of our margins and cash flows in the near-term.
"At the same time, we have retained some exposure to iron ore price upside."
Further detail in relation to the strategies Atlas has in place as at the date of this announcement follow:
1) Iron ore put options - Atlas has purchased iron ore put options. These provide a floor price while allowing Atlas to retain full exposure to any price rise via a floating-priced physical sales contract. This means that for the tonnes covered by the puts, the price received by Atlas cannot be less than that of the put price, even if the index price falls below the put level.
Atlas has 400,000 dmt of 62% Fe puts in place (equivalent to approximately 460,000 wmt of Atlas 57% Fe product). These options, if exercised, will see Atlas realise prices of between US$53 to US$54/dmt (IODEX
62%Fe CFR China basis) for 300,000 tonnes in July, even if the price falls below these levels. Atlas also stands to realise US$54/dmt (IODEX 62%Fe CFR China basis) for a further 100,000 tonnes in August, again if prices fall below these levels. In circumstances where the market price is above these put option price levels, Atlas will receive this higher price.
2) Fixed-price sales contracts - Atlas has approximately 900,000wmt of forward sales in place at a fixed price*. These forward sales comprise approximately 300,000wmt of lump and 600,000wmt of fines to be filled between July and October. Applying equivalent revenue assumptions to those underlying the "Break Even Price" estimation in Atlas' prospectus dated 11 June 2015+ (as supplemented by the supplementary prospectus dated 6 July 2015), this fixed price corresponds to a benchmark 62% Fe price of approximately US$59/dmt (IODEX 62%Fe CFR China basis). Positive AUD:USD exchange rate movements since the date of the Prospectus (in which the Company applied an exchange rate assumption of AUD:USD 0.785 in
determining its estimated "Break Even Price") would provide further potential benefit to Atlas' expected AUD
revenue outcomes.

3) Zero cost cap / collar transactions - Under this arrangement, a floor and ceiling price is set at a 62% Fe equivalent level. This means Atlas is assured of realising no less than the floor price and no more than the

Atlas Iron Limited

ABN 63 110 396 168

*Fixed price sales contracts based on an average sale price net to Atlas after adjusting for grade, discounts and lump premium of approximately US$49/dmt (CFR China) for combined lump and fines product.

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

ceiling in respect to the tonnes covered by the transactions. If the actual price is within this range at the time of settlement, the actual price is applied.
Atlas has approximately 1.1 million wmt worth of sales covered by this pricing methodology with physical delivery to occur from July to December. The floor prices on these transactions range from US$50-52/dmt (IODEX 62%Fe CFR China basis) and the ceiling prices from US$55-60/dmt (IODEX 62%Fe CFR China basis), with the usual net-back factors (as set out in Section 8.5 of Atlas' recent Prospectus) to be applied to calculate the Atlas net-received price.

Important Note: While Atlas' sales strategies provide greater certainty of price over the current quarter (and some sales in the December quarter), pricing outcomes beyond this period cannot be guaranteed and are uncertain. Atlas' ability to continue to extend the current forward sales and pricing strategy will be dependent on iron ore physicals and derivatives market conditions; accordingly, no representation is made as to the Company's ability to do so.

Having secured the overwhelming approval of shareholders at Atlas' recent General Meeting, the Company is currently completing a capital raising that has already received significant support from Atlas' contractors . Shareholders have a priority right to subscribe for new shares (through the Shareholder Participation Offer, 'SPO') at 5 cents, with 1 free attached option at 7.5 cents.
All investors are invited to participate in the capital raising. The offers of securities under the capital raising are made in the prospectus dated 11 June 2015, as supplemented by the supplementary prospectus dated 6 July
2015. The prospectus as supplemented by the supplementary 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.
Go to www.atlasiron.com.au to download the prospectus dated 11 June 2015, the supplementary prospectus dated
6 July 2015 and the application forms.
Please remember that the offers to most eligible shareholders and the general public close at 5pm Perth time on
Monday the 13th July 2015.
If you have any questions about the capital raising, including how to participate, 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.

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

+Prospectus Break Even Price revenue assumptions follow:

 Average assumed lump premium of A$10/dmt.

 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.

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