Atlas Iron : Updated FY15 Cost and Production Guidance

ASX Announcement 23 October 2014

U p d a t e d F Y 1 5 C o s t a n d P r o d u c t i o n G u i d a n c e

Cost-improvement program delivers significant opex savings per tonne & FY15 capex reduced by $31m

 Sept Qtr all-in cash costs+ reduced to A$68.90/wmt CFR, down from A$75/wmt in June Qtr FY15

 FY15 all-in cash cost guidance reduced to A$65-$70/wmt CFR (previously A$68-$73/wmt CFR)

 Sept Qtr C1 cash costs reduced to A$48.10/wmt FOB, down from A$51/wmt in the June Qtr

 FY15 C1 cash cost guidance reduced to A$46-$49/wmt FOB (previously A$47-$50/wmt FOB)

 Further cost-improvement initiatives identified, lifting target for annualised savings to A$65-$90M (previously A$50M-$80M) by June 2015

 FY15 cap-ex reduced to A$94M (previously A$125M)

 Updated production guidance targeting 12.4M - 13M wmt shipped for FY15, comprising 12.3M -

12.8M wmt Standard Fines and 0.1M - 0.2M wmt Value Fines (previously 12.2M - 12.8M wmt in total)

Atlas Iron Limited (ASX:AGO) is pleased to advise that its cost-improvement program continues to generate significant results, with costs falling in the September Quarter and further savings in both operating and capital expenditure targeted over the remainder of this financial year.
All-in cash costs in the September Quarter were A$68.90/wmt CFR China. This compares with A$75/wmt CFR in the June Quarter and with Atlas' most recent guidance of A$68-$73/wmt CFR China for the current financial year. In light of this accelerated success in reducing costs, Atlas has now substantially reduced its all-in cash cost guidance for FY15, targeting A$65-70/wmt CFR China.
Atlas' C1 cash costs in the September Quarter 2014 were A$48.10/wmt FOB. This compares with A$51/wmt in the
June Quarter 2014. FY15 C1 cash cost guidance has also been reduced to A$46-49/wmt from A$47-$50/wmt.
As a result of the cost improvement program, Atlas now expects to save a total of A$65M-A$90M per year, from A$50M-A$80M previously announced. In addition to ongoing operational savings, Atlas has reduced its forecast capital expenditure for 2015 by $31M, reducing it to $94M.
"The same expertise that has delivered new mines and production growth in previous years is now intensely focused on removing costs from the business, as these significant savings demonstrate" Atlas Managing Director Ken Brinsden said.
"This lower cost base presents a strong platform for our existing Pilbara production in testing markets, and will deliver increased margins when iron ore markets improve."
Production guidance has been revised to 12.4M-13.0M wmt for FY15, including an increase in the higher grade standard fines contribution to 12.3M-12.8M wmt of overall production. In the event market conditions improve for the value fines product, there may be a potential opportunity to further increase production.

Note: Actual cost outcomes for the September Quarter are derived from unaudited management accounts and exclude one-off restructuring costs of approximately

$1.7M.

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

E: atlas@atlasiron.com.au
W: www.atlasiron.com.au

+ 'all-in cash costs' includes C1 production costs, royalties, freight, corporate and administration, expensed exploration and evaluation but excludes interest expense and capital expenditure.

During FY14, Atlas commenced a program aimed at identifying sustainable annualised cost savings of A$50M-
$80M by 30 June 2015. This target equated to a reduction in all-in cash costs of ore delivered to China of A$4-
$7/wmt, when compared to FY14 results.
The program has so far realised material savings ahead of time, resulting in an improvement to Atlas' FY15 all-in cash cost guidance to A$65-$70/wmt CFR (a minimum of approximately 10% improvement on the equivalent actual cost for FY14). Similarly the C1 cash cost guidance for FY15 has been revised downwards to A$46-
$49/wmt FOB, a significant improvement on the A$51/wmt achieved for FY14.
On the basis of the savings already achieved, combined with additional initiatives identified, Atlas has increased its annualised savings target to A$65M-$90M by 30 June 2015.

Atlas continues to focus on a series of savings and productivity initiatives to reduce the cost of iron ore delivered to market. These initiatives have targeted the entire cost base, including operational, corporate, mine capital, project development and exploration spending. The cost savings are expected to be won primarily over the course of FY15 and to a lesser extent, in FY16.
Savings and efficiency initiatives have been defined across four categories:

 Integrated Planning - network optimisation targeting improved inventory management, resource optimisation, tighter value chain management, improved compliance to Atlas Management Operating System, cut-off grade optimisation etc;

 Streamlined Structure - redefined operating model to remove silos, achieve economies of scale, efficiencies in process, sharing of resources and infrastructure with key contractors;

 Operational Improvement - productivity improvement initiatives across all mine sites, haulage and port operations; and

 External Spend Reduction - input cost reduction through sourcing initiatives that target reduced volume and pricing.

* C1 cash cost includes the cost to purchase Altura Mining Limited's (Altura) share of Mt Webber JV ore tonnes. Altura has agreed to sell its share of ore mined to Atlas, with the point of sale being the run-of-mine (ROM) stockpile. The purchase price of Altura's tonnes is based on a FOB price at Port Hedland reduced by the costs of processing, transport, stockpiling and loading the ore post the ROM pad. As such, the cost attributable to each Altura tonne will fluctuate with the actual FOB price used to determine the price paid to Altura.

Atlas has reduced its expected FY15 investment in capitalised mine, project and exploration to A$94M (previously
$125M). Following a review of the various budgeted projects a number have been reduced, deferred or eliminated.

^ Includes Corunna Downs Exploration and Evaluation Expenditure

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

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

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