September 2013 ly Report 17 October 2013 Bumper for Atlas as Production Hits 10Mtpa Existing mine performance and investment at Abydos drives record production, while healthy prices and cost control drives strong cash flow. HIGHLIGHTS Record 2.4Mt (WMT) shipped during the Sep13 Qtr (June13 Qtr: 2.22Mt) Average headline price of ~US$117/t CFR (DMT) received for Standard Fines product and ~US$98/t CFR (DMT) received for Value Fines EBITDA (unaudited) of ~$91 million during the Sep13 Qtr $378M gross cash on hand at 30 September 2013 Production ramp-up progressing well at the recently commissioned Abydos mine Commissioning nearing completion at the Utah Yard 2 port facility, with full operational capability Mt Webber mine development progressing well; mining due to commence in the Dec13 Qtr and haulage/shipping in the Jun14 Qtr Strong customer demand for 2014 contracts, with reduced discounts expected 3 cent dividend for FY2013 paid in September 2013 Sept Qtr cash operating costs (FOB, excluding royalties) consistent with FY14 guidance of $49 - $53/t On track for FY14 guidance of 9.8 10.3Mt shipped Following significant new mine and port developments during FY13 and excellent existing mine performance, Atlas has delivered record quarterly production across mining, processing, haulage and shipping. Consistent with Atlas guidance, exports are now at the 10Mtpa run rate. Atlas Managing Director, Ken Brinsden said, The continued strong iron ore price coupled with a focus on cost control and expanded production, has enabled Atlas to maintain cash on hand at $378 million at 30 September 2013, while investing $90 million in mine and infrastructure growth projects, returning shareholders $22 million in dividend payments and building significant inventory. Strong production from existing operations, combined with the commencement of mining and haulage from Atlas fourth mine, Abydos, has resulted in another quarter of record shipping. We now have a production rate of 10Mtpa, targeting shipments for the year of 9.8 to 10.3Mt. With another quarter of strong operating cash flow and our current strong balance sheet position we are fully funded to achieve our 12Mtpa targeted export rate, with attractive growth options beyond 12Mtpa, he added. 1
OPERATIONS MINE PRODUCTION AND SHIPPING Table 1: Production September 2013 Ore Tonnes Mined 1 2,885,689 2,424,824 460,865 19% Ore Tonnes Processed 2,728,200 2,186,361 541,839 25% Haulage to Port 2,562,483 2,093,021 469,462 22% Note 1: Ore Tonnes Mined represents ore tonnes delivered to Run-of-Mine (ROM) stockpiles at the processing plant Note 2: Please see Appendix 1 for further details of production outputs by mine Table 2: Inventory and Shipping September 2013 Inventory (see Appendix 1 for detail) Final Product Stocks - Port 200,373 41,524 158,849 383% Shipping Ore Tonnes Shipped (Wet) 2,403,634 2,221,776 181,858 8% Ore Tonnes Shipped (Dry) 2,225,567 2,061,796 163,771 8% Strong production from Atlas existing operations, together with the commissioning and ramp-up of the Abydos mine resulted in another quarter of record production and shipments. Atlas shipped 2.40Mt (WMT) for the Sep13 Qtr including 366Kt of Atlas Value Fines. This represents an 8% increase on the Jun13 Qtr and a 50% increase on the Sep12 Qtr. The strong production performance has driven a material increase in inventory levels from pit to port, providing a solid basis for production and export in the current quarter. Customer demand and additional production capacity (particularly at Wodgina) has been used to deliver above plan Value Fines product from the mines (approximately an additional 1.5 cargos). Atlas will continue to take advantage of Values Fines production while there is sufficient flexibility in production capacity and the market demands the product. Standard Fines production for the quarter was consistent with Atlas underlying forecast assumptions. Atlas confirms its FY14 shipping guidance of 9.0 9.3Mt of Standard Fines and 0.8 1.0Mt of Value Fines together with cash operating cost guidance (FOB, and excluding royalties) of $49-53/t. 2
Abydos Mine The Abydos mine is now a key contributor to Atlas product mix, following the commencement of haulage on 23 August 2013. Atlas is targeting production of Direct Shipping Ore (DSO) from Abydos at a rate of 2-3Mtpa. With further exploration and conversion of existing Resource to Reserve, Atlas is targeting a mine life of 7 to 10 years for Abydos. The ramp-up of mine production and processing at Abydos is progressing as expected. Outstanding construction activities are primarily related to the establishment of the final runof-mine and final product stockpiles, camp and mine office facilities. The mine was declared open by WA Minister of Mines and Petroleum, Hon. Bill Marmion and David Flanagan, Atlas Iron s Chairman, at a ceremony on site on 9 October 2013. Utah Point Yard 2 Figure 1: Ribbon Cutting Ceremony at Abydos Atlas has largely completed commissioning of the Utah Point Yard 2 port facility, ensuring that the Company has sufficient port capacity to meet production from existing mines, the recently commissioned Abydos mine and the soon to be developed Mt Webber mine (scheduled for first haulage and shipping in the June Qtr of FY14). MARKETING Iron ore sales for September 2013 Qtr were 2.40Mt (WMT) including shipments of 366Kt (WMT) of Value Fines. Iron ore prices performed strongly in the September 2013 Qtr, with seasonal price weakness previously experienced at this time of the year not seen during the quarter. Chinese Steel 3
production levels remain high and iron ore inventories moderate, which are typically indicators of ongoing iron ore price strength. Atlas average headline sale price for the September 2013 Qtr was USD$117/DMT for Standard Fines (June Qtr USD$107 increase of 9%) and USD$98/DMT for Value Fines (June Qtr USD$94 increase of 4%). The ultimate AUD sale prices achieved were increased significantly by reductions in the value of the Australian dollar, which was on average some 10% lower against the USD compared with the previous financial year. The average grade of Standard Fines shipped for the September Qtr was 57.2% Fe, which was in line with the targeted specification. Phosphorous levels for the quarter averaged 0.06, well down from the 0.1% average for the previous quarter, as the higher phosphorus product from Pardoo is progressively replaced by better quality material from Abydos. This serves to increase the attractiveness of Atlas product to customers as Phosphorus is one of the key impurities to control for blast furnace feed. The average grade for Value Fines for the quarter was 53.4% Fe. Atlas has commenced negotiations with those customers whose contracts expire at the end of 2013 and all have indicated a desire to continue to buy from Atlas. The majority of customers are looking for increased tonnage and have indicated pricing with lower discounts to those on the expiring contracts. This is an encouraging trend and further reinforces Atlas confidence that strong demand will continue to exist for its product in the coming period. SEPTEMBER QUARTER PRICING OUTCOMES Standard Fines* Value Fines* Headline CFR Sale Price USD / DMT (62%Fe) 133 - Atlas Realised CFR Sale Price USD / DMT 117 98 Atlas Realised CFR Sale Price AUD / DMT 127 107 Average Product Moisture 7% 7% Atlas Realised CFR Sale Price AUD / WMT 118 100 Average Freight + Penalties AUD / WMT 13 12 Sale Price / AUD FOB 105 88 *Some cargoes are provisionally priced based on 1 October forward curve with the final price to be settled in coming months. 4
PROJECTS HORIZON I Mt Webber Following approval of early works in, the Mt Webber project received Board approval in July 2013 for the initial 3Mtpa stage. Major contracts have been awarded, with construction well underway and good progress achieved on site. Mining operations are scheduled to start late in the December 2013 Qtr, with first haulage planned for the June 2014 Qtr. A ceremonial ground breaking in the Ibanez pit was carried out by WA Minister of Mines and Petroleum, Hon. Bill Marmion and Atlas Iron Chairman, David Flanagan, on 9 October 2013. Following the detailed and competitive tenders completed for the construction, mining and processing contracts for the Stage 1 project (3Mtpa), significant opportunities have been realised for the proposed Stage 2 project expansion (6Mtpa) that will optimise the cost and time for development of the expanded Mt Webber mine. Feasibility works for Stage 2 are in progress and due for completion during the December Qtr. PROJECTS HORIZON II McPhee Creek The McPhee Creek pre-feasibility studies continued during the period, with studies for rail spurs underway as an input into the progressive feasibility evaluations. The McPhee Creek pre-feasibility is targeted for completion early in the March 2014 Qtr, with detailed study works to commence thereafter. SE Pilbara Atlas continues to progress minor feasibility studies for its environmentally approved SE Pilbara projects, with development scenarios subject to the applicable infrastructure solution. Rail The studies for rail spurs to Atlas McPhee Creek project outlined above are underway. Discussions continued with potential 3 rd party rail haulage providers during the period. Atlas is satisfied with progress to date, however sufficient detail has to be explored to deal with the long term requirements of rail haulage and port relationships consistent with long standing mine and port asset development. Combined with the geographic spread of Atlas orebodies this adds another layer of complexity to the process. Furthermore, Atlas objective is to capture its entire Pilbara footprint (and in particular its Horizon II projects) within the required infrastructure solutions, to ensure maximum shareholder value is delivered. Atlas remains confident that a logical and commercial solution will be forthcoming in the near term. Atlas is strongly positioned to participate in infrastructure solutions to support the longterm growth of the business and unlock the broader potential of Atlas substantial Pilbara resource base. 5
Port - North West Infrastructure Atlas holds a 63% interest in North West Infrastructure (NWI) which has rights to 50Mtpa of export capacity at Port Hedland and is progressing plans to develop a stockyard facility in Boodarie and berths in South West Creek at Port Hedland. NWI continues to work with the Port Hedland Port Authority to finalise a port development agreement and associated lease. EXPLORATION AND RESOURCE GEOLOGY During the September Qtr Atlas completed 288 RC drill holes for a total of 22,509m and 2 diamond drill holes for 431.7m at the Mt Webber, McPhee Creek and Corunna Downs projects, with the main focus being Corunna Downs where two RC rigs and one diamond rig have been engaged. Atlas incurred $6.3 million on exploration during the quarter (of which $1.5 million is capitalised). During the December Qtr, RC and diamond drilling is planned for Corunna Downs and RC drilling at Miralga Creek and Abydos. Corunna Downs Atlas declared an initial Inferred Resource of 25Mt at 56.5%Fe (50% Fe cut-off) at the Split Rock Prospect on 24 July 2013 (refer ASX announcement Maiden Resource at Corunna Downs of 24 July 2013). During the quarter, work at Corunna Downs focused on infill drilling at Split Rock to increase ore body knowledge, with additional exploration work being carried out on a number of the other nearby prospects late in the period. Assays for the program testing the new targets are expected over the coming weeks. In the December 2013 Qtr, the focus will be testing of the several remaining targets in order to further scope the substantial exploration potential of the project area. See Figure 2 below. 6
Figure 2 Corunna Downs Split Rock Resource location and mapped surface enrichment within the prospective BIF horizon with rock chip results displaying Fe%. Note: Rock chip sample results are only indicative of near surface Fe enrichment and are not used for estimation purposes. (Refer ASX announcement - Maiden Resources at Corunna Downs of 24 July, 2013). 7
RESERVES AND RESOURCES During the September Qtr Atlas announced an increase in its total Pilbara Ore Reserves to 507Mt, further strengthening the Company s existing operations, near term development projects and its longer-term growth strategy. A maiden Inferred Resource was also declared at Corunna Downs as mentioned above. (Refer ASX announcements - Reserve and Resource Update and Maiden Resource at Corunna Downs of 24 July 2013). CORPORATE Cash movements for the Cash as at 30 September 2013 was $378M. Atlas Term Loan B Debt facility of USD$273M is fully drawn, with other finance facilities of AUD$92M available to the Company (undrawn). Centaurus Metals Limited Atlas holds a 19.85% strategic interest in Centaurus Metals Limited, an emerging Brazilian iron ore explorer and developer (see Centaurus website: www.centaurus.com.au for further details). Shaw River Manganese Limited Atlas holds a 53.4% strategic interest in Shaw River, a manganese exploration and development company (see Shaw River s website: www.shawriver.com.au for further details). Dividend & Dividend Reinvestment Plan On 22 August 2013, Atlas declared an unfranked dividend of 3 cents per share for the 2013 financial year. Shareholders who elected to participate in the Dividend Reinvestment Plan received Atlas shares at an issue price of $0.8511 per share, a 2.5% discount to the daily VWAP (volume weighted average price) for the trading days from 9 to 13 September 2013. A total of 5,777,749 shares were placed pursuant to the Atlas Dividend Reinvestment Plan and $22M was paid in cash dividend. 8
CORPORATE PROFILE Directors David Flanagan, Non-Executive Chairman Ken Brinsden, Managing Director Mark Hancock, Executive Director, Commercial David Hannon, Non-Executive Director Dave Smith, Non-Executive Director Tai Sook Yee, Non-Executive Director Jeff Dowling, Non-Executive Director Kerry Sanderson AO, Non-Executive Director Geoff Simpson, Non-Executive Director Company Secretary Mark Hancock Executive Management Jeremy Sinclair, Chief Operating Officer Rob Wilson, Chief Development Officer Registered Office and Head Office Level 18, 300 Murray Street, Perth WA 6000 Website: atlasiron.com.au Share Details as at 30 September 2013 915,496,158 ordinary shares Unlisted Options as at 30 September 2013 13,155,000 Unlisted Options Substantial Shareholders as at 30 September 2013 IMC Group 85.81M shares Reporting Calendar Results of the Annual General Meeting: 30 October 2013 December 2013 ly Report: 29 January 2014 9
Appendix 1 Mine Production by Location and Inventory Table A: Mine Production Pardoo Sept 2013 Ore Tonnes Mined 1 369,802 286,975 82,827 29% Ore Tonnes Processed 333,842 284,406 49,436 17% Haulage to Port 214,271 278,531 35,740 13% Table B: Mine Production Wodgina Sept 2013 Ore Tonnes Mined 1 1,485,663 1,253,085 232,578 19% Ore Tonnes Processed 1,473,182 1,272,190 200,992 16% Haulage to Port 1,438,643 1,186,806 251,837 21% Table C: Mine Production Mt Dove Sept 2013 Ore Tonnes Mined 1 657,868 884,764 (226,896) (26%) Ore Tonnes Processed 616,974 629,765 (12,791) (2%) Haulage to Port 601,078 627,684 (26,606) (4%) Note 1: Ore Tonnes Mined represents ore tonnes delivered to Run-of-Mine (ROM) stockpiles at the processing plant. Table C: Mine Production Abydos Sept 2013 Ore Tonnes Mined 1 372,356-372,356 - Ore Tonnes Processed 304,202-304,202 - Haulage to Port 208,491-208,491 - Note 1: Ore Tonnes Mined represents ore tonnes delivered to Run-of-Mine (ROM) stockpiles at the processing plant. Table D: Inventory Sept 2013 Inventory Run-of-Mine Ore at site 1,018,762 876,871 141,891 16% Final Product Stock at site 392,533 193,720 198,813 103% Final Product Stocks - Port 200,373 41,524 158,849 383% 10