Atlantic Limited : Standard and Poor's Rating Review

11 February 2014

Atlantic Ltd (ASX: ATI) (Atlantic or the Company) advises that the attached rating review was announced by Standard and Poor's Ratings Services earlier today for Atlantic's wholly-owned subsidiary Midwest Vanadium Pty Ltd (MVPL).

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Ph: + 61 8 6141 7100 Ph: +61 8 6141 7120

Atlantic is committed to building a diversified portfolio of world class resources assets that will provide superior returns to shareholders.

Atlantic subsidiary Midwest Vanadium Pty Ltd owns 100% of the Windimurra vanadium and iron ore operation, located approximately 600 kilometres north of Perth in Western Australia. Windimurra hosts one of the largest proven vanadium reserves in the world.

Additional information on Atlantic can be found at www.atlanticltd.com.au.

MELBOURNE (Standard & Poor's) Feb. 11, 2014-Standard & Poor's Ratings Services said today that it had lowered its corporate credit rating and senior secured issue ratings on Australian mining company Midwest Vanadium Pty Ltd. (MVPL) to 'CCC-' from 'CCC', and placed the ratings on CreditWatch with negative implications. The recovery rating remains unchanged at '4'.

"The downgrade and CreditWatch negative placement reflect our view of MVPL's continued "weak" liquidity and lower-than-expected cash flows," Standard & Poor's credit analyst May Zhong said. "In addition, we believe the company will face difficulty to meet its interest obligations due on Feb. 15, 2014, if it fails to raise additional external funds."

On Jan. 31, 2014, the company's parent, Atlantic Ltd., announced that MVPL has technically breached a covenant covering its US$335 million senior secured notes. This breach follows MVPL's failure to replenish its interest reserve account by US$5 million by Feb. 3, 2014. MVPL has 10 business days to rectify the technical breach. In addition, the company has to pay an interest amount of about US$19 million on the senior secured notes due on Feb. 15, 2014. The notes have a grace period of 30 days.

MVPL previously encountered a technical breach in February 2013. In this situation, the breach was remedied when MVPL obtained consent from senior secured notes holders to waive the minimum holding requirement in the interest reserve account. At the same time, it secured additional funding from its parent Atlantic Ltd.'s largest shareholder Droxford International Ltd. At the time, these initiatives alleviated its liquidity pressure, enabling the company further ramp up production at its Windimurra project.

Nevertheless, the production ramp-up has been slow and faced a string of operating issues, since MVPL's initial production of ferrovanadium in early 2012. The modification works to rectify the operating issues have yet to generate a track record that shows the plant will perform as MVPL expected. In addition, recent incidents have disrupted production, including a fire event in early February 2014 and a major rain event

in late January 2014.

The delay in ramping up to full capacity has slowed cash flow generation to much later than we expected, resulting in MVPL's "weak" liquidity. As a result, we believe that the company will require further external funding to meet its interest obligations in February 2014 and to complete the Windimurra project. In our view, the most likely external funding source will be from Atlantic's largest shareholder Droxford, which has provided more than A$200 million in the past two years.

Ms. Zhong added: "We expect to resolve the CreditWatch placement by the end of March at the latest. To resolve the CreditWatch, we will focus on the willingness of Atlantic's shareholders to continue to support this project and the timeliness of such shareholder support. The senior secured issue rating may be lowered, depending on our assessment of the Windimurra project's recovery prospects in a default scenario."

RELATED CRITERIA AND RESEARCH

 Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Jan. 2, 2014

 Key Credit Factors For The Metals And Mining Upstream Industry, Dec. 20, 2013

 Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013

 General: Corporate Methodology, Nov. 19, 2013

 Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012

 Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012

 2008 Corporate Criteria: Rating Each Issue, April 15, 2008

Richard Noonan, Melbourne (61) 3-9631-2152, richard.noonan@standardandpoors.com

May Zhong, Melbourne, may.zhong@standardandpoors.com

Thomas Jacquot, Melbourne, thomas.jacquot@standardandpoors.com

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