Atlas Iron : FY2016 Results and Audited Annual Accounts

30 August 2016‌

FY2016 Annual Results and FY2017 Guidance

• Underlying EBITDA of A$74M (FY2015: loss of A$51), of which A$54M was earned in a strong H2 FY2016

• Record exports of 14.5Mt in FY2016 (FY2015: 12.2Mt), of which 7.6Mt was exported in the second half of FY2016 (H2 FY2016)

• Revenue up by 9% to A$786M (FY2015: A$718M) of which $413M was earned in H2 FY2016

• Average FY2016 realised price of A$55.47/ WMT CFR (FY2015: A$59.96/ WMT CFR)

• Full cash costs down by 24% to A$52.59/WMT (FY2015: A$68.95/WMT)

   C1 costs down by 25% to A$34.39/WMT (FY2015: A$45.74/WMT)

• Cash flow from operations for year of A$31M (FY2015: cash outflow of A$67M)

• Non-cash asset impairment & write downs of A$101M (FY2015: A$1,077M) have contributed to a statutory loss of A$159M (FY2015: A$1,378M)

Atlas Iron Limited (ASX: AGO or Atlas) has today released its FY2016 annual results. These results reflect the impact of lower iron ore prices which, with 19% higher tonnes, delivered an increase in revenue of 9% to A$786M. The increase in revenue also reflects the additional lump tonnes sold in FY2016 which attract a premium price.

Atlas was able to achieve significant cost reductions during FY2016 where the savings generated were able to match or better the rate of decline experienced in the iron ore price. The FY2016 full cash cost per tonne was reduced by 24% to A$52.59/WMT (FY2015: A$68.95/WMT), with the average realised price per tonne received in FY2016 of A$55.47/ WMT CFR (FY2015: A$59.96/ WMT CFR). The average 62% Fe price was US$51.37/ DMT CFR in FY2016 (FY2015: US$71.39/ DMT CFR) and the average USD/AUD exchange rate changed from 0.8382 in FY2015 to 0.7283 in FY2016.

After allowing for non-cash asset impairments and inventory write-downs of A$101M (FY2015: A$1,077.1M) and a depreciation and amortisation expense of A$85M (FY2015: A$117.8M), Atlas recorded a statutory loss of A$159M (FY2015: A$1,378M).

Cash on hand at 30 June 2016 was A$80.9M after investing A$14.5M (including the lump circuit at Mt Webber), repayment of debt facilities (A$16.9M) and payment of interest (A$29.5M). The net proceeds of the July 2015 capital raising of A$46.6M strengthened Atlas' balance sheet and improved its working capital position.

As advised last year, Atlas entered into new commercial relationships with key contractors and, with the support of the Western Australian Government, targeted a substantially lower cost base in a lower iron ore price environment to ensure a more sustainable business. In addition, as part of the contractor collaboration model, Atlas moved to reduce exposure to volatility in iron ore pricing by utilising hedging products, fixed price sales contracts and shorter dated pricing periods. This has reduced Atlas' exposure to iron ore price risk.

Borrowings have decreased by A$150M primarily as a result of a debt restructure completed in May 2016. The key terms of the restructure were as follows:

• Term loan debt reduced from US$267M to US$135M and extended maturity date to April 2021;

• Annual cash interest expense reduced by ~65% due to the lower debt balance and reduced cash interest rate;

• Atlas issued 6,229,503,087 fully paid ordinary shares and 4,513,986,260 7.5 cent 31 July 2017 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 on issue at 6 May 2016.

Borrowings have been negatively impacted by the change in the AU$:US$ foreign exchange rate from 0.7680 at 30 June 2015 to 0.7426 at 30 June 2016.

Pursuant to the debt restructure completed in May 2016, the Lenders and Atlas have entered into an amended Term Loan Agreement where the six monthly Asset Coverage Ratio 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. A 100% cash sweep pay down has also been introduced for any cash in excess of A$80 million at the end of each quarter to be paid to the lenders in the following month.

Atlas wishes to advise that its FY2017 Guidance is as follows:

Note: The FY2017 Guidance range takes into account the higher haulage costs that result from Mt Webber's full year run rate of 6Mtpa during FY2017.

Note: The ultimate breakdown of the 14Mt to 15Mt of product mix during the year is subject to change and will depend on demand and product availability

Atlas' Horizon 1 mining properties relate to the assets and liabilities contained within its current operating mines and the Corunna Downs development project. During the year ended 30 June 2016, Atlas recognised an impairment loss for its Horizon 1 mining properties of A$13,273,000 (property, plant and equipment of A$4,170,000 (2015: A$7,003,000) and mine and reserve development assets of A$9,103,000 (2015: A$169,948,000)) all of which was highlighted in our H1 FY2016 half year report in February 2016.

Atlas' Horizon 2 projects relate predominantly to the McPhee Creek and South East Pilbara projects. During the year ended 30 June 2016, Atlas recognised an impairment loss for its Horizon 2 projects of A$79,400,000 (mining tenements capitalised of A$78,700,000 (2015: A$574,286,000) and reserve development assets of A$700,000 (2015: A$32,285,000)) due primarily to changes in the forecasted iron ore price (provided by independent iron ore forecasters).

Atlas is currently completing a review of its Ore Reserves as at 30 June 2016. In its 2015 Annual Report, Atlas reported Ore Reserves for its Horizon 2 projects at McPhee Creek and South East Pilbara (Davidson Creek Hub). Based on current assessments of the ability to fund rail and port infrastructure for these iron ore projects, Atlas advises that it is unlikely to report Ore Reserves at 30 June 2016 for its Horizon 2 projects at McPhee Creek and South East Pilbara (Davidson Creek Hub) but expects to continue to report Mineral Resources for the two projects. Atlas expects to release its Mineral Resource and Ore Reserves as at 30 June 2016 in its Annual Report expected to be released October 2016.

Atlas is continuing to investigate a trucking based infrastructure solution for its McPhee Creek project. Should such a trucking based infrastructure solution for its McPhee Creek project be feasible, Atlas may again be able to report Ore Reserves for its McPhee Creek project.

Further details regarding Atlas' FY2016 annual results can be found in the accounts lodged with ASX today.

The underlying basis is a non-IFRS measure that in the opinion of Atlas' directors provides useful information to assess the underlying financial performance of the Company. These are non-IFRS measures and are unaudited.

Full cash costs includes All-in cash costs, contractor collaboration margin, capitalised exploration and evaluation, interest expense and sustaining capital expenditure, but excludes depreciation and amortisation, one-off restructuring and suspension costs of operating mine sites and other non-cash expenses. Full cash costs are unaudited, Full cash costs are derived from unaudited management accounts. This is a non-IFRS measure.

WMT: Wet Metric Tonnes

A$: All currency amounts are in Australian dollars (A$) unless otherwise noted

This Preliminary Final Report for Atlas Iron Limited and its subsidiaries ("Atlas Iron") (ASX Code: AGO) is provided to ASX under ASX Listing Rule 4.3A

Results for announcement to the market

The preliminary Financial Report (Appendix 4E) and audited financial statements for the year ended 30 June 2016 are attached.

The Annual General Meeting will be held on 21 November 2016.