ATLAS IRON LIMITED TARGET S STATEMENT

Transcription

1 ATLAS IRON LIMITED TARGET S STATEMENT in relation to the offer by Hancock Prospecting Pty Ltd ACN through its wholly-owned subsidiary Redstone Corporation Pty Ltd ACN to purchase all of your fully paid ordinary shares in Atlas Iron Limited for $0.042 cash per share Your Directors unanimously recommend that you ACCEPT the Hancock Offer, in the absence of a superior proposal This is an important document and requires your immediate attention. If you are in any doubt as to how to deal with this document, you should consult your financial, legal or other professional adviser immediately. Legal Adviser to Atlas Financial Adviser to Atlas

2 Contents LETTER FROM THE CHAIRMAN OF ATLAS DIRECTORS RECOMMENDATION REASONS TO ACCEPT OR REJECT THE HANCOCK OFFER FREQUENTLY ASKED QUESTIONS YOUR CHOICES AS AN ATLAS SHAREHOLDER RISKS OF NOT ACCEPTING THE HANCOCK OFFER INFORMATION ABOUT ATLAS INFORMATION ABOUT REDSTONE AND HANCOCK RISK FACTORS AUSTRALIAN TAXATION CONSIDERATIONS KEY FEATURES OF THE HANCOCK OFFER ADDITIONAL INFORMATION AUTHORISATION GLOSSARY ANNEXURE 1 INDEPENDENT EXPERT'S REPORT

3 LETTER FROM THE CHAIRMAN OF ATLAS Dear Atlas Shareholder On 18 June 2018, Hancock Prospecting Pty Ltd, through its wholly-owned subsidiary Redstone Corporation Pty Ltd, announced the offer to acquire Atlas for cash consideration of $0.042 per Atlas Share, to be effected by way of an off-market takeover bid (Hancock Offer). You will have now received the Bidder s Statement setting out the terms and conditions of the Hancock Offer. DIRECTORS RECOMMENDATION As announced on 21 June 2018, the Atlas Board determined that the Hancock Offer was superior to the MinRes Proposal, which is no longer proceeding. The Atlas Board unanimously recommends that Atlas Shareholders accept the Hancock Offer, in the absence of a superior proposal. Your Directors believe that the Hancock Offer is an excellent opportunity for Atlas Shareholders to realise the value of their investment in Atlas. In addition, the Independent Expert has concluded that the Hancock Offer is fair and reasonable to Atlas Shareholders. As such, the Directors unanimously recommend that Atlas Shareholders ACCEPT the Hancock Offer in the absence of a superior proposal. Subject to that same qualification, each Director intends to accept the Hancock Offer in respect of any Atlas Shares held or controlled by them. As the Chairman of your company, I would like to take this opportunity to highlight the key reasons why the Directors believe that the Hancock Offer is compelling and why we recommend that you ACCEPT the Hancock Offer in the absence of a superior proposal: The Offer Price represents a compelling premium to Atlas historical trading values and the implied value of the MinRes Proposal, including a: 121% premium to Atlas closing price of 1.90 cents per share on 4 April 2018, being the last day of trading in Atlas Shares prior to the announcement of the MinRes Proposal; 78% premium to Atlas 30-day VWAP of 2.36 cents per share up to and including 4 April 2018; 50% premium to Atlas' closing price of 2.80 cents per share on 7 June 2018, being the last day of trading in Atlas Shares prior to the announcement of MinRes' consent to waive certain clauses of the MinRes proposal to allow Atlas to explore discussions with other parties; and 45% premium to the implied value of the MinRes Proposal of 2.90 cents per share, based on MinRes closing price of $16.57 on 20 June 2018, being the last day of trading in MinRes Shares prior to the announcement of the termination of the MinRes Proposal. The Hancock Offer is an all-cash offer and provides certainty of value The all-cash Offer Price of $0.042 per Atlas Share provides Atlas Shareholders with the opportunity to realise certain value for their entire Atlas shareholdings. If you accept the Hancock Offer, you will cease to be exposed to the risks associated with an investment in Atlas. The Independent Expert has concluded that the Hancock Offer is fair and reasonable to Atlas Shareholders 1 In deciding whether to accept the Hancock Offer, you should consider that the Hancock Offer is subject to the no prescribed occurrences condition, which is summarised in Section 10.3 and set out in section 8.10 of the Bidder s Statement. The Hancock Offer is not subject to any regulatory approvals, financing, due diligence or minimum acceptance conditions. Over the past eighteen months, the Atlas leadership team has worked diligently to improve the Atlas business. The fruits of this work have been seen in the improvements we have made to our iron ore business, including the achievement of a better quality product, as well as in our early-stage diversification initiatives in lithium and manganese. However, the widening discounts being applied to lower-grade iron ore has largely offset these improvements to our underlying business, resulting in our operations running at a loss as outlined in our March and June 2018 Quarterly Activities Reports. 1 Please refer to Annexure 1, which contains the Independent Expert's Report.

4 Atlas has also conducted a detailed strategic review with the assistance of independent advisors. The strategic review examined a number of alternative strategic options including debt refinancing, equity raising and asset sales to create value for Atlas Shareholders. Following that review and given ongoing difficult market conditions for low grade iron ore, we believe that the Hancock Offer is in the best interests of Atlas Shareholders in the absence of a superior proposal. The Hancock Offer is scheduled to close at 5.00pm (Perth time) on 3 August 2018, unless withdrawn or extended. To ACCEPT the Hancock Offer, please refer to the acceptance instructions set out in section 8.3 of the Bidder s Statement and in the acceptance form that accompanies the Bidder s Statement. Further information in relation to the Hancock Offer is contained in this Target s Statement, including the reasons for your Directors recommendation to ACCEPT the Hancock Offer and a summary of the findings of the Independent Expert. This Target s Statement also includes disadvantages and risks associated with the Hancock Offer and a continued investment in Atlas which are set out in Sections 2.2 and 8. I urge you to read this Target s Statement (including the Independent Expert s Report) and the Bidder s Statement carefully in full, and if required, to seek your own legal, financial, taxation or other professional advice. I encourage you to closely consider the merits of the Hancock Offer as described in this Target s Statement. Redstone has opened an information line to assist Atlas Shareholders with queries about the Bidder's Statement or how to accept the Hancock Offer which can be contacted on for Australian callers or for international callers. Eugene I. Davis Non-Executive Chairman

5 IMPORTANT NOTICES Nature of this document This Target s Statement is dated 16 July 2018 and is given under section 635 of the Corporations Act by Atlas Iron Limited ACN in response to the Replacement Bidder s Statement lodged by Redstone Corporation Pty Ltd ACN , a wholly-owned subsidiary of Hancock Prospecting Pty Ltd ACN , with ASIC and served on Atlas on 29 June Defined terms and interpretation Capitalised terms used in this Target s Statement (other than the Independent Expert's Report (including the Independent Technical Specialist's Report) contained in Annexure 1) are either defined in brackets when first used or are defined in the Glossary in Section 13. The Glossary also sets out some rules of interpretation which apply to this Target s Statement. The Independent Expert's Report and the Independent Technical Specialist's Report contain their own defined terms which are sometimes different from those set out in the Glossary in Section 13. References to Target s Statement, Sections and Annexures References to Sections and Annexures are to the named Sections and Annexures in this Target s Statement. ASIC and ASX disclaimer A copy of this Target s Statement has been lodged with ASIC and ASX. Neither ASIC, ASX nor any of their respective officers take responsibility for the content of this Target s Statement. No account of personal circumstances This Target s Statement does not constitute financial product advice and has been prepared without reference to individual investment objectives, financial situation, taxation position or particular needs of any Atlas Shareholder or any other person. It is important that you read this Target s Statement before making any decision, including a decision on whether or not to accept the Hancock Offer. If you are in doubt as to what you should do, you should consult your legal, investment, taxation or other professional adviser. Atlas Shareholders should consult their taxation adviser as to the applicable tax consequences of the Hancock Offer. A summary of the Australian taxation considerations is detailed in Section 9 and section 6 of the Bidder s Statement. Forward looking statements Certain statements in this Target s Statement relate to the future, including forward looking statements and information ("forward looking statements"). The forward looking statements in this Target s Statement, are not based on historical facts, but rather reflect the current views and expectations of Atlas concerning future events and circumstances. These statements may generally be identified by the use of forward looking verbs such as "aim", "anticipate", "believe", "estimate", "expect", "foresee", "intend" or "plan", qualifiers such as "may", "should", "likely" or "potential", or similar words. Similarly, statements that describe the expectations, goals, objectives, plans, targets, estimates of Ore Reserves and Mineral Resources and future costs of Atlas are, or may be, forward looking statements. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results, performances or achievements of Atlas, to be materially different from future results, performances or achievements expressed or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which Atlas will operate in the future, including the price of commodities, anticipated costs and ability to achieve goals. Certain important factors that could cause actual results, performances or achievements to differ materially from those in the forward looking statements include, among others, port access, customer risks, commodity price volatility, discrepancies between actual and estimated costs or production, Ore Reserves and Mineral Resources being inaccurate or changing over time, mining operational and development risk, litigation risks, regulatory restrictions (including environmental regulatory restrictions and liability), activities by governmental authorities (including changes in taxation), currency fluctuations, the speculative nature of mining services, mineral exploration and production, the global economic climate, dilution, share price volatility, competition, loss of key directors and employees, additional funding requirements and defective title to mineral claims or property. See Section 8.1 for a (non-exhaustive) discussion of potential risk factors underlying, and other information relevant to, the forward looking statements and information. Forward looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on them. All forward looking statements should be read in light of such risks and uncertainties. You should note that the historical performance of Atlas is no assurance of its future financial performance. The forward looking statements in this Target s Statement reflect views and expectations held only at the date of this Target s Statement. Atlas believes that all forward looking statements included in this Target s Statement have been made on a reasonable basis. However, none of Atlas, its directors nor any other person gives any representation, assurance or guarantee that any outcome, performance or results expressed or implied by any forward looking statements in this Target s Statement will actually occur. Atlas Shareholders should therefore treat all forward looking statements with caution and not place undue reliance on them. Subject to any continuing obligations under law or the Listing Rules, Atlas and its directors disclaim any obligation to revise or update, after the date of this Target s Statement, any forward looking statements to reflect any change in views, expectations or assumptions on which those statements are based. Diagrams, charts, maps, graphs and tables Any diagrams, charts, maps, graphs and tables appearing in this Target s Statement are illustrative only and may not be drawn to scale. Effect of rounding A number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in this Target s Statement are subject to the effect of rounding (unless otherwise stated). Accordingly, the actual calculation of these figures may differ from the figures set out in this Target s Statement, and any discrepancies in any table between totals and sums of amounts listed in that table or to previously published figures are due to rounding. Currency All references in this Target s Statement to: $, AUD, Australian dollars are to Australian currency; and US$, USD and US dollars are to United States currency. Notice to foreign Atlas Shareholders The distribution of this Target's Statement may, in some countries, be restricted by law or regulation. Persons who come into possession of this Target's Statement should inform themselves of and observe those restrictions. Privacy and personal information Atlas has collected your information from the Atlas Register for the purpose of providing you with this Target s Statement. Such information may include the name, contact details and shareholdings of Atlas Shareholders and the names of persons appointed to act as proxy, attorney or corporate representative of Atlas Shareholders. Without this information, Atlas would be hindered in its ability to issue this Target s Statement. The Corporations Act requires the name and address of Shareholders to be held in a public register. Personal information of the type described above may be disclosed to Atlas, Redstone and their registries, print and mail and other service providers, authorised securities brokers, related bodies corporate of Atlas and Redstone, and may be required to be disclosed to regulators, such as ASIC. Atlas Shareholders have certain rights to access personal information that has been collected. Atlas Shareholders should contact the Share Registry in the first instance, if they wish to access their personal information. Atlas Shareholders who appoint a named person to act as their proxy, attorney or corporate representative should ensure that they inform that person of these matters. Atlas Iron Limited TARGET S STATEMENT Page 4

6 1 DIRECTORS RECOMMENDATION 1.1 Summary of the Hancock Offer Hancock Prospecting Pty Ltd, through its wholly-owned subsidiary Redstone Corporation Pty Ltd, is offering to acquire all of your Atlas Shares for $0.042 cash per Atlas Share you own. The Hancock Offer is subject only to the no prescribed occurrences condition, which is summarised in Section 10.3 and set out in full in section 8.10 of the Bidder s Statement. Refer to the Bidder s Statement for full particulars of the Hancock Offer. 1.2 Recommendation of the Directors This Target s Statement sets out the formal response of the Directors to the Hancock Offer, including the reasons why the Directors unanimously recommend that you ACCEPT the Hancock Offer in the absence of a superior proposal. The key reasons for the Directors unanimous recommendation are set out in Section Intentions of the Directors Each of the Directors intends to accept the Hancock Offer in respect of any Atlas Shares that they own or control (in the absence of a superior proposal). Details of the relevant interests of each Director in Atlas Shares are set out in Section Independent Expert Atlas has commissioned BDO as the Independent Expert to prepare a report to ascertain whether the Hancock Offer is fair and reasonable to Atlas Shareholders. As part of the preparation of the Independent Expert s Report, the Independent Expert has engaged CSA Global as the Independent Technical Specialist to prepare the Technical Specialist s Report for inclusion in the Independent Expert s Report. The Independent Expert has concluded that the Hancock Offer is fair and reasonable to Atlas Shareholders on the basis that: (a) (b) (c) (d) the Offer Price represents a greater price than the fair value of an Atlas Share, inclusive of a premium for control, as assessed by the Independent Expert; the Hancock Offer provides Atlas Shareholders with an opportunity to realise their investment with certainty; the Offer Price is at a premium to Atlas's last traded price prior to both the announcement of the MinRes Proposal and the Hancock Offer; and the Hancock Offer is not subject to a minimum acceptance condition. The Independent Expert's Report is included in Annexure What to do next To ACCEPT the Hancock Offer, you must follow the instructions provided in section 8.3 of the Bidder s Statement. To validly accept the Hancock Offer, your acceptance must be received before 5.00pm (Perth time) on 3 August 2018, unless the Offer Period is extended. To reject the Hancock Offer, you do not need to take any action. Atlas Iron Limited TARGET S STATEMENT Page 5

7 2 REASONS TO ACCEPT OR REJECT THE HANCOCK OFFER Set out below are some of the reasons why the Atlas Board considers that you should accept the Hancock Offer. Also set out below is a summary of some of the reasons why you may decide to reject the Hancock Offer. You should read the entire Bidder s Statement, this Target s Statement and the Independent Expert s Report before deciding whether or not to accept the Hancock Offer. You should particularly consider the risk factors in Section 8, which apply to the information in this Section 2. While your Directors acknowledge that there are reasons to reject the Hancock Offer, they believe the advantages of the Hancock Offer significantly outweigh the disadvantages. 2.1 Reasons to ACCEPT the Hancock Offer Your Directors recommend the Hancock Offer in the absence of a superior proposal The Independent Expert, BDO, has concluded that the Hancock Offer is fair and reasonable to Atlas Shareholders Hancock s Offer Price represents a compelling premium to Atlas historical trading values and the implied value of the MinRes Proposal The Hancock Offer is an all-cash offer and provides certainty of value Your Directors unanimously recommend that you ACCEPT the Hancock Offer, in the absence of a superior proposal. Each of your Directors (who holds a Relevant Interest in Atlas Shares) intend to accept the Hancock Offer with respect to any Atlas Shares controlled or held by, or on behalf of, such Director in the absence of a superior proposal. The Independent Expert, BDO, has concluded that the Hancock Offer is fair and reasonable to Atlas Shareholders. The Independent Expert's Report is set out in Annexure 1. Hancock s Offer Price of $0.042 per Atlas Share represents a compelling premium to the historical trading values of Atlas Shares and the implied value of the MinRes Proposal. Hancock s Offer Price represents a premium of: 121% premium to Atlas closing price of 1.90 cents per share on 4 April 2018, being the last day of trading in Atlas Shares prior to the announcement of the MinRes Proposal; 78% premium to Atlas 30-day VWAP of 2.36 cents per share up to and including 4 April 2018; 50% premium to Atlas closing price of 2.80 cents per share on 7 June 2018, being the last day of trading in Atlas Shares prior to the announcement of MinRes consent to waive certain clauses of the MinRes Proposal to allow Atlas to explore discussions with other parties; and 45% premium to the implied value of the MinRes Proposal of 2.90 cents per share, based on MinRes closing price of $16.57 on 20 June 2018, being the last day of trading in MinRes Shares prior to the announcement of the termination of the MinRes Proposal. The all-cash Offer Price of $0.042 per Atlas Share provides you with the opportunity to realise certain value for your entire Atlas shareholding. If you accept the Hancock Offer, you will cease to be exposed to the risks associated with an investment in Atlas (refer to Section 8). If you retain your Atlas Shares, the price which you will be able to realise is uncertain and you will continue to be exposed to the risks associated with being an Atlas Shareholder. These risk factors for remaining an Atlas Shareholder are discussed in Section 8. The Hancock Offer removes these risks and uncertainties for Atlas Shareholders, and allows Atlas Shareholders to exit their investment in Atlas at a price that the Directors consider compelling. The Hancock Offer is subject only to the condition that no prescribed occurrences (being the occurrences listed in section 652C of the Corporations Act) occur in relation Atlas Iron Limited TARGET S STATEMENT Page 6

8 to Atlas or its subsidiaries prior to the end of the Offer period. The Atlas Board is comfortable that the condition to the Hancock Offer is capable of satisfaction during the Offer Period. The Hancock Offer is not conditional on due diligence, financing, regulatory approval or further internal approvals. Once the Hancock Offer becomes unconditional, Hancock has committed to paying you within seven days of receipt of an effective acceptance. Further, by accepting the Hancock Offer, you will not incur brokerage fees, which may otherwise be incurred if you were to sell you Atlas Shares on market. The latest financial and operational results show Atlas is currently operating at a loss, raising concerns about the future profitability of Atlas as a stand-alone entity Atlas latest consolidated financial results for the six months ending 31 December 2017 disclose a statutory loss of approximately $21 million. As reported in Atlas Quarterly Activities Reports for March and June 2018: Full Cash Costs were $62/wmt CFR; and the average realised price was $59/wmt CFR, implying an operating loss of $3/wmt across the total approximate 4.1 million wmt of iron ore shipped in the six months ending 30 June 2018 (results include the impact of financial instruments). If these conditions persist, Atlas will continue to generate losses. The graph below highlights the impact of the discounts applied to Atlas lower-grade iron ore, which have kept Atlas realised price low. USD/DMT Monthly Average Benchmark Iron Ore Price vs. Atlas Realised Price $65.3 Implied Discount $18.8 $46.6 Platts spot 62% Fe (Rolling Monthly Average) USD/DMT Atlas Realised CFR Price USD/DMT This is further highlighted by the graph below which shows how the discounts to the 62% Fe index implied by the price realised for Atlas lower-grade iron ore have significantly increased in the last two years. USD/DMT 35.0 Atlas' Implied Discount to the Benchmark Iron Ore Price % Discount 40% % 30% 15.0 $ % % Implied Discount USD/DMT Implied Discount (as % of Platts spot 62% Fe) Over a longer time period, the changes in macroeconomic conditions which Atlas has faced have been significant. For example, Atlas average realised price per wet metric tonne on a CFR basis has decreased from an average of US$125 wmt in FY11, to a FY17 average of US$46 wmt. Atlas Iron Limited TARGET S STATEMENT Page 7

9 Several factors have contributed to the decline in received iron ore prices, including: increases in the global supply of iron ore by lower cost producers has led to persistent lower benchmark 62% Fe content iron ore prices; and China s growing preference for high-grade iron ore has seen lower-grade iron ore receive wider than normal discounts relative to the benchmark 62% Fe content iron ore prices. As a result, the average benchmark discounts applied to Atlas lowergrade iron ore on a FOB basis has expanded from sub 5% in FY11, to the current level of 36-37% for fines product. Atlas has also been impacted by increasing costs on a per tonne basis, as can be seen in the graph below. The increase in costs has been driven by a number of factors which will continue to impact Atlas in the future, such as declining production volumes (therefore increasing corporate overhead costs and financing costs on a per tonne basis) and increased road haulage distance from the remaining Mt Webber operations relative to recently wound up operations such as Abydos and Wodgina. In addition, shipping costs from Port Hedland to China have increased, which could potentially persist in the future. AUD/WMT 70.0 Full Cash Cost (CFR) 60.0 $ Mt Webber is currently Atlas only operating asset, following the closure of Wodgina and Abydos mines in May 2017 and October 2017 respectively. Operations at Mt Webber are currently forecast to end in Atlas is currently not in a position to fund the development of assets such as Corunna Downs and McPhee Creek. Without sourcing additional capital, selling assets or entering into a transaction such as the one proposed by the Hancock Offer, Atlas will have no significant operating assets generating revenue when operations cease at Mt Webber. Atlas long-term allocation of port capacity at Utah Point has been provided on the basis that it maintains substantial export volumes. If Atlas ceases exporting, the Port Authority has rights to reallocate port capacity to other producers. Under the terms of its Term Loan B Facility, Atlas is required to maintain a minimum cash balance of $15 million at the end of each month. Amongst its other covenants is a requirement to not suspend all, or substantially all, of the Atlas Group's mining operations for a period longer than 30 consecutive days (although Atlas can and does adjust its operations from time to time, based on market conditions). If Atlas cannot operate profitably and is unable to cease operations to preserve cash without it constituting a breach of covenants, there is a risk that Atlas' cash balance will diminish to the point where the covenant is breached and lenders under the Term Loan B Facility will have the option to accelerate repayment of the debt. If the lenders choose to accelerate repayment of the debt, the debt will immediately become due and payable. In the event that Atlas is unable to immediately repay the Term Loan B Facility, Atlas may become insolvent and an administrator may be appointed. If this occurs while the Hancock Offer remains open for acceptance, this may also cause the non-satisfaction of one or more of the Offer Conditions which would allow Redstone to not proceed with the Hancock Offer. If the Hancock Offer lapses, all acceptances of the Hancock Offer will be void and of no effect. Atlas Iron Limited TARGET S STATEMENT Page 8

10 Atlas currently does not have the capital to fully develop its existing assets Atlas currently does not have the capital to fully develop its existing assets. In the absence of a significant operating cash flow, Atlas would require additional financial resources to support current operations as well as fund the development of existing exploration assets. There can be no guarantee that Atlas will be able to complete fundraising, or as to the terms of such fundraising. The widening discount being applied to lower-grade iron ore has largely offset improvements to Atlas underlying business, resulting in operations running at a loss, as outlined in our March and June 2018 Quarterly Activities Reports. No superior proposal has emerged There is the potential for a proposal that is superior to the Hancock Offer to emerge. However, as at the date of this Target s Statement no superior proposal has emerged. If a competing proposal is received prior to the end of the Offer Period, this will be announced to ASX and the Atlas Board will carefully consider the proposal and advise Atlas Shareholders of their recommendation. There are risks to not accepting the Hancock Offer The Atlas Board considers if the Hancock Offer does not become or is not declared unconditional, and no alternative proposal emerges, the Atlas Share price may fall given the Offer Price is significantly above the closing prices of Atlas Shares prior to the announcements of both the MinRes Proposal on 9 April 2018 and MinRes' consent to waive certain clauses of the MinRes Proposal to allow Atlas to explore discussions with other parties on 8 June This is highlighted by the fact that the Offer Price represents a 121% premium to Atlas closing price of 1.90 cents per share on 4 April 2018, being the last day of trading in Atlas Shares prior to the announcement of the MinRes Proposal. The Offer Price also represents a 50% premium to Atlas' closing price of 2.80 cents per share on 7 June 2018, being the last day of trading in Atlas Shares prior to the announcement of MinRes' consent to waive certain clauses of the MinRes Proposal to allow Atlas to explore discussions with other parties. The Atlas Board notes that given the prices at which Atlas Shares have been trading on ASX since the Hancock Offer was announced, there may be opportunity for some Atlas Shareholders to sell their Atlas Shares on ASX at prices above the Offer Price. If the Hancock Offer becomes or is declared unconditional and you have not accepted the Hancock Offer or sold your Atlas Shares on market by the end of the Offer Period, you may become a minority shareholder in a company which has a large shareholder able to exert significant influence. This position may create a number of risks, including: Atlas share price may fall immediately following the end of the Offer Period The Offer Price is significantly above the closing prices of Atlas Shares prior to the announcements of both the MinRes Proposal on 9 April 2018 and MinRes' consent to waive certain clauses of the MinRes Proposal to allow Atlas to explore discussions with other parties on 8 June The Atlas Share price may fall immediately following the end of the Offer Period and the liquidity of Atlas Shares may be lower than it is presently. Potential changes to the Atlas Board Redstone intends to (subject to the formal requirements of the Corporations Act and Atlas constitution) seek representation on the Atlas Board so that the proportion of Redstone nominees is broadly in line with its voting power in Atlas. Atlas may be removed from the official list of ASX If Redstone is entitled to do so, it intends to procure that Atlas is removed from the official list of ASX. If Atlas is removed from the official list of ASX it may adversely impact your ability to sell your Atlas Shares, the price at which you can sell your Atlas Shares, and the level of relevant Atlas information you are able to access. For Redstone s entitlement to achieve the above intention, refer to the details Atlas Iron Limited TARGET S STATEMENT Page 9

11 regarding minority shareholder protections in Section 5.7. Potential consequences of more than one Atlas Shareholder each controlling more than 10% of all Atlas Shares At the date of this Target s Statement, there is one other Atlas Shareholder in addition to Redstone who controls more than 10% of all Atlas Shares (Competing Minority Shareholder). In the event that Redstone acquires a Relevant Interest in less than 50% of all Atlas Shares and that Redstone and the Competing Minority Shareholder each being a minority shareholder controlling more than 10% of all Atlas Shares, it may be detrimental to Atlas business operations and strategic direction to the extent that Redstone and the Competing Minority Shareholder have competing objectives. Potential reliance on one or a small number of Atlas Shareholder(s) to support Atlas potential equity raising in the future There is a possibility that substantial equity raising would be required for Atlas to fund its daily operations, reduce its debt level, and/or provide funding to develop its existing assets. In the situation where Redstone acquires a Relevant Interest in less than 100% of all Atlas Shares and Atlas undertakes an equity capital raising by way of a pro rata offer of Atlas Shares to Atlas Shareholders to raise additional funds, if the pro rata equity raising is supported only by Redstone, or Redstone and a small number of other Atlas Shareholders, the pro rata equity raising will be dilutive to Atlas Shareholders who do not participate in the offer. Redstone may increase its Relevant Interest in Atlas Shares without Atlas Shareholder approval or making a takeover bid, as a result of taking up its full entitlement (assuming any available shortfall is not fully allocated) or any agreed underwriting arrangements to which it is a party. Redstone may be able to determine the outcome of ordinary resolutions If Redstone acquires a Relevant Interest in 50% or more of all Atlas Shares, it will be able to determine alone the outcome of an ordinary resolution (in respect of which it is entitled to vote), and will be in a position to control the composition of the Atlas Board. For Redstone s entitlement to achieve the above intention, refer to the details regarding minority shareholder protections in Section 5.7. Change of control consequences If Redstone acquires a Relevant Interest in 50% or more of all Atlas Shares, Atlas will be controlled by Redstone. A change of control in Atlas may trigger an acceleration in Atlas repayment obligation under the Term Loan B Facility. The Term Loan B Facility becomes immediately due and payable Following a change in control of Atlas, the lenders under the Term Loan B Facility have the option to accelerate repayment of the debt. If the lenders choose to accelerate repayment of the debt, the debt will immediately become due and payable. Redstone has confirmed in its Bidder's Statement it will offer to make available to Atlas (by way of a loan facility) such amount as may be necessary to enable Atlas to meet its repayment obligation in relation to the Term Loan B Facility, or will offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders under the Term Loan B Facility). However, Atlas and Redstone have not agreed to the terms for the provision of such funding to Atlas and there is a risk such agreement may not eventuate. In the event lenders under the Term Loan B Facility demand repayment and funding is not available sufficiently promptly (either from Redstone or otherwise) and Atlas is unable to immediately repay the Term Loan B Facility, Atlas may become insolvent. Redstone may be able to determine the outcome of special resolutions If Redstone acquires a Relevant Interest in 75% or more of all Atlas Shares, it will be able to determine alone the outcome of a special resolution (in respect of Atlas Iron Limited TARGET S STATEMENT Page 10

12 which it is entitled to vote). This would enable it to pass resolutions, for example, to amend Atlas constitution. For Redstone s entitlement to achieve the above intention, refer to the details regarding minority shareholder protections in Section 5.7. Compulsory acquisition If Redstone acquires a Relevant Interest in 90% or more of all Atlas Shares and the compulsory acquisition provisions of the Corporations Act are satisfied, Redstone intends to compulsorily acquire the Atlas Shares that it does not already own. If you choose not to accept the Hancock Offer and Redstone subsequently exercises compulsory acquisition rights, you are likely to be paid later than other Atlas Shareholders who accept the Hancock Offer. Potential changes to Atlas strategic direction If Redstone acquires a Relevant Interest in less than 50% of all Atlas Shares, it intends to remain actively involved as an Atlas Shareholder, including by way of influencing the strategic direction of the business of Atlas, to the greatest extent that is permitted by law. Should Redstone acquire control of Atlas, it intends to undertake a strategic review of the Atlas assets and operations. The conclusions and outcomes reached in the strategic review will inform its preferred approach to developing, operating and retaining or divesting the assets within the Atlas portfolio. Changes to the business which are implemented by Redstone may mean that you may subsequently choose to dispose of your Atlas Shares at a time when market conditions are less favourable than those prevailing at the date of this Target s Statement. Reduced Liquidity of Atlas Shares As Redstone increases its shareholding in Atlas, it will reduce the number of Atlas Shares that can be expected to be available for trading on the ASX. This is likely to reduce the liquidity of Atlas Shares, and may adversely affect the price at which they might otherwise be expected to trade. Refer to Section 5 for details regarding specific risks of not accepting the Hancock Offer depending on the outcome of the Hancock Offer, and protections for minority shareholders. 2.2 Reasons to REJECT the Hancock Offer You may disagree with your Directors unanimous recommendation or the Independent Expert's conclusion In the Directors recommending the Hancock Offer (in the absence of a superior proposal) and in the Independent Expert concluding that the Hancock Offer is fair and reasonable to Atlas Shareholders, the Directors and Independent Expert are making judgements based on future events which are not predictable with certainty and which may prove to be incorrect (either positively or negatively). Atlas Shareholders may not agree with the Directors' unanimous recommendation or the Independent Expert's conclusion and are not obliged to follow the recommendation. Atlas Iron Limited TARGET S STATEMENT Page 11

13 You may believe there is an opportunity for increased value from Atlas remaining as a standalone entity You may believe that Atlas Shareholders will have the opportunity for greater returns over the long term by continued investment in Atlas as a stand-alone entity. Reasons you may be of this view include but are not limited to: a belief that Atlas realised iron ore price is likely to increase materially from levels experienced recently, enabling Atlas to trade profitably to a level that could fund the development of existing opportunities; a belief that a way exists to substantially reduce Atlas existing cost base; a belief that Atlas current diversification initiatives will continue beyond their current contractual period; a belief that future diversification opportunities such as exploration and potential royalty streams are sufficiently prospective to constitute a step change in Atlas value; a willingness to invest and an ability to secure substantial capital to allow Atlas to develop its growth projects; and a desire to maximise the exposure of your investment to iron ore price movements. In assessing and recommending the Hancock Offer, your Directors have evaluated the risks and benefits of continuing as a stand-alone company against the Offer Price. In deciding that they should recommend the Hancock Offer, your Directors determined that, on balance, the value and other benefits provided by the Hancock Offer are more certain, lower risk and offer the prospect of a faster return to Atlas Shareholders than may be achievable if Atlas remains as a stand-alone entity (although no guarantee is given of those matters). A superior proposal for Atlas, if it were to continue as a stand-alone entity, may materialise in the future At the date of this Target s Statement, no superior proposal for Atlas has emerged. It is possible that, if Atlas were to continue as a stand-alone entity, a superior proposal for Atlas which is more attractive for Atlas Shareholders may materialise in the future. There is nothing preventing other parties from making unsolicited competing proposals for Atlas during the Offer Period. If a competing proposal is received prior to the end of the Offer Period, this will be announced to ASX and the Atlas Board will carefully consider the proposal and advise Atlas Shareholders of their recommendation. The potential tax consequences of the Hancock Offer may not suit your current financial position or tax circumstances Acceptance of the Hancock Offer may have potential tax consequences for Atlas Shareholders. A general outline of the tax implications of accepting the Hancock Offer is set out Section 9 of the Target's Statement. As this outline is a general outline only, Atlas Shareholders are encouraged to seek their own specific advice as to the taxation implications applicable to their circumstances. Atlas Iron Limited TARGET S STATEMENT Page 12

14 3 FREQUENTLY ASKED QUESTIONS The following table provides brief answers to questions you may have in relation to the Hancock Offer, but must be read in conjunction with the more detailed information included in this Target s Statement and the Bidder s Statement. You are urged to read the Bidder s Statement, the Independent Expert's Report and this Target s Statement in its entirety. Question Who is the bidder? What is the Hancock Offer for my Atlas Shares? What is the Bidder's Statement? What is the Target's Statement? What is the Independent Expert's Report? What choices do I have as an Atlas Shareholder? What are the Directors recommending? What do the Directors intend to do with their Atlas Shares? How do I accept the Hancock Offer? How long will the Hancock Offer be open for acceptance? Answer Redstone Corporation Pty Ltd, a wholly-owned subsidiary of Hancock Prospecting Pty Ltd. Refer to section 1 of the Bidder's Statement and Section 7 for information on Redstone and Hancock. Hancock, via Redstone, has made an off-market cash offer of $0.042 for each of your Atlas Shares. The Bidder's Statement is the document prepared by Redstone which sets out the terms of the Hancock Offer. Redstone lodged its Bidder's Statement with ASIC on 29 June The Bidder's Statement was sent to each Atlas Shareholder registered as such at 5.00pm (Perth time) on 22 June This Target's Statement is the Atlas Board's formal response to the Hancock Offer, as required by the Corporations Act. Accordingly, this document has been prepared by Atlas and contains important information to help you decide whether to accept the Hancock Offer. Atlas has commissioned BDO as the Independent Expert to prepare a report to ascertain whether the Hancock Offer is fair and reasonable to Atlas Shareholders. As part of the preparation of the Independent Expert's Report, the Independent Expert has engaged CSA Global as the Independent Technical Specialist to prepare the Technical Specialist's Report for inclusion in the Independent Expert's Report. The Independent Expert's Report is included in Annexure 1. As an Atlas Shareholder you can: ACCEPT the Hancock Offer. The Directors recommend that you accept the Hancock Offer in the absence of a superior proposal; or reject the Hancock Offer by doing nothing. Your Directors unanimously recommend that you ACCEPT the Hancock Offer in the absence of a superior proposal. The reasons for the Directors' recommendation are set out in Section 2.1. The Directors collectively hold approximately 0.098% of all Atlas Shares on an undiluted basis and approximately 1.22% of all Atlas Shares on a fully diluted basis. Each of your Directors (who hold a Relevant Interest in Atlas Shares) intend to accept the Hancock Offer with respect to any Atlas Shares controlled or held by, or on behalf of, such Director in the absence of a superior proposal. The Directors reserve the right to change their intention should new circumstances arise. To accept the Hancock Offer, you should carefully follow the instructions in section 8.3 of the Bidder's Statement. The Hancock Offer is scheduled to close at 5.00pm (Perth time) on 3 August 2018 as specified in the Bidder s Statement, unless it is extended or withdrawn in accordance with the Corporations Act. Atlas Iron Limited TARGET S STATEMENT Page 13

15 Question Answer Can the Hancock Offer be varied? What happens if a superior proposal is made by a third party? Is the Hancock Offer conditional? What are the consequences of accepting the Hancock Offer now, while it remains conditional? If I accept the Hancock Offer now, can I withdraw my acceptance? When will I receive the Offer Price if I accept the Hancock Offer? What are the consequences of the Hancock Offer becoming unconditional? What happens if I do nothing? Redstone may vary the Hancock Offer in any of the ways permitted by the Corporations Act, including by extending the Offer Period or by increasing the Offer Price, provided the varied terms and conditions are not less favourable to Atlas Shareholders than the Hancock Offer. If Redstone varies the Hancock Offer in any of those ways, it must give written notice to ASIC and Atlas and send you a copy of that notice (provided, however, that Redstone will not be required to send you a copy of the notice if, at the time of the variation, you have already accepted the Hancock Offer, the Hancock Offer is unconditional and the variation merely extends the Offer Period). If a superior proposal is made by a third party, Atlas Shareholders who have already accepted the Hancock Offer at such time will not receive the benefit of the superior proposal made by the third party. As at the date of this Target s Statement, the Directors have not received a superior proposal. The Hancock Offer is subject only to there being no prescribed occurrences. Refer to section 8.10 of the Bidder s Statement and Section 10.3 for further details of this condition. If you accept the Hancock Offer now, unless withdrawal rights are available (see below), you will give up your right to sell your Atlas Shares or otherwise deal with your Atlas Shares while the Hancock Offer remains open. If Atlas Shares trade above the Offer Price you will have lost your ability to sell your Atlas Shares on ASX at that higher price. You cannot withdraw or revoke your acceptance unless a withdrawal right arises under the Corporations Act. A withdrawal right will arise if, after you have accepted the Hancock Offer, Redstone varies the Hancock Offer in a way that postpones for more than one month the time that Redstone has to meet its obligations under the Hancock Offer. In summary, if you accept the Hancock Offer: before the Unconditional Date, Redstone will pay you the Offer Price within seven days after the Unconditional Date; and after the Unconditional Date, Redstone will pay you the Offer Price within seven days after you accept the Hancock Offer. If you accept the Hancock Offer and the Hancock Offer becomes unconditional, you will be entitled to receive the Offer Price in respect of your Atlas Shares. You will remain an Atlas Shareholder. If Redstone acquires 90% or more of Atlas Shares and the Hancock Offer becomes unconditional, Redstone intends to compulsorily acquire the remaining Atlas Shares. If Redstone acquires between 50% and 90% of Atlas Shares and the Hancock Offer becomes unconditional, you will remain a minority shareholder and Atlas will then be controlled by Redstone. In this circumstance, the lenders under the Term Loan B Facility will have the option to accelerate repayment of the debt. Redstone has stated in its Bidder's Statement that should its voting power in Atlas exceed 50%, if Atlas requires funding support to repay the Term Loan B Facility, Redstone will offer to make available to Atlas (by way of a loan facility) such amount as may be necessary to enable Atlas to meet its repayment obligation in relation to the Term Loan B Facility, or will offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders under the Term Loan B Facility). However, Atlas and Redstone have not agreed the terms for the provision of such funding to Atlas and there is a risk such agreement may not eventuate. If Redstone provides an unsecured loan facility to Atlas, funding may be made available promptly for the required immediate repayment of the Term Loan B Facility. However, if Redstone requires the loan facility to be secured over Atlas' assets, it may require Atlas Shareholder approval and the funding may not be able to be made available sufficiently quickly for the required immediate repayment of the Term Loan B Facility. Accordingly, Atlas Iron Limited TARGET S STATEMENT Page 14

16 Question Answer there is no guarantee that Atlas could repay the lenders in this scenario. Refer to sections 4 and 5 of the Bidder's Statement for details in relation to Redstone s intentions in relation to Atlas. What if I want to sell my Atlas Shares onmarket? Can I be forced to sell my Atlas Shares? During the Offer Period, you may sell some or all of your Atlas Shares on-market for cash provided you have not accepted the Hancock Offer for those Atlas Shares. Before doing so, you should consider the implications of this course of action, including that you would not receive the benefit of any increase in the Offer price. You will also forfeit the ability to accept any superior proposal that may emerge. If you sell your Atlas Shares on-market, you may incur a brokerage charge. You cannot be forced to sell your Atlas Shares unless Redstone acquires a Relevant Interest in at least 90% of all the Atlas Shares by the end of the Offer Period, and proceeds to compulsory acquisition of your Atlas Shares. If that happens, you will be provided the last Offer Price offered by Redstone for the Atlas Shares before the end of the Offer Period. At the date of this Target s Statement, there is one other Atlas Shareholder in addition to Redstone who controls more than 10% of the Atlas Shares. That Atlas Shareholder is therefore capable of blocking compulsory acquisition if it chooses not to accept the Hancock Offer and does not otherwise dispose of its Atlas Shares. When will the Hancock Offer close? What happens if the Offer Conditions are not satisfied or waived? What are the tax implications of accepting the Hancock Offer? Is there a number I can call if I have further queries in relation to the Hancock Offer? The Hancock Offer is presently scheduled to close at 5.00pm (Perth time) on 3 August 2018, but the Offer Period can be extended in certain circumstances in accordance with the Corporations Act. Refer to Section 10.2 for details on extending the Offer Period. If the Offer Conditions are not satisfied or waived by the end of the Offer Period, the Hancock Offer will lapse. You will then be free to deal with your Atlas Shares even if you had accepted the Hancock Offer. A general outline of the tax implications for certain Australian resident and Australian non-resident Atlas Shareholders of accepting the Hancock Offer is set out in Section 9 of the Target's Statement. You should not rely on that outline as advice on your own affairs. It does not deal with the position of particular Atlas Shareholders. You should seek your own personal, independent financial and taxation advice before making a decision as to whether to accept or reject the Hancock Offer. Redstone has opened an information line to assist Atlas Shareholders with queries about the Bidder's Statement or how to accept the Hancock Offer which can be contacted on for Australian callers or for international callers. Atlas Iron Limited TARGET S STATEMENT Page 15

17 4 YOUR CHOICES AS AN ATLAS SHAREHOLDER The Directors unanimously recommend that Atlas Shareholders ACCEPT the Hancock Offer in the absence of a superior proposal. However, as an Atlas Shareholder you have the following choices available to you: 4.1 Accept the Hancock Offer To accept the Hancock Offer, follow the instructions set out in section 8.3 of the Bidder s Statement. Details of the payment you will receive are set out in Section 10.1 and in the Bidder s Statement. You will only receive that payment if the Offer Conditions are either satisfied or waived. The Hancock Offer is subject only to the no prescribed occurrences condition. Refer to section 8.10 of the Bidder s Statement for full details of the conditions of the Hancock Offer. The consequences of accepting the Hancock Offer are discussed in Section If you accept the Hancock Offer, you will not be able to sell your Atlas Shares on market unless you have the right to withdraw your acceptance and you have exercised that right. The circumstances in which acceptances of the Hancock Offer may be withdrawn are detailed in section 8.6 of the Bidder s Statement. If you accept the Hancock Offer, you may be liable for capital gains tax or income taxes as a result of your acceptance. An overview of the taxation consequences for Atlas Shareholders of accepting the Hancock Offer is provided in section 6 of the Bidder s Statement and Section 9. Atlas encourages you to consider your personal risk profile, investment strategy, tax position and financial circumstances before making any decision in relation to your Atlas Shares. 4.2 Sell some or all of your Atlas Shares on-market During the Offer Period, if you have not accepted the Hancock Offer, you can sell some or all of your Atlas Shares on ASX. If you choose to sell, settlement will occur on a normal T+2 basis and the purchaser of those Atlas Shares may accept the Hancock Offer in respect of those Atlas Shares. There is no guarantee of the price at which the Atlas Shares will trade from time to time, whether before or after the end of the Offer Period. The latest price for the Atlas Shares may be obtained from the ASX website (ASX: AGO). If you sell your Atlas Shares you: (a) (b) will lose the ability to accept the Hancock Offer in relation to those Atlas Shares (or any other offer for Atlas Shares which may eventuate); and may incur a brokerage charge. Atlas Shareholders who wish to sell their Atlas Shares on market should contact their broker for information on how to effect the sale. You should seek your own personal advice regarding the taxation consequences for you of selling the Shares on ASX. 4.3 Do nothing and retain all your Atlas Shares You can reject the Hancock Offer by simply doing nothing. If you reject the Hancock Offer, you will retain all of your Atlas Shares. You should note that if you choose to reject the Hancock Offer by simply doing nothing, and retain all of your Atlas Shares, you may be exposed to a number of risks which have been outlined in Section 5. Atlas Iron Limited TARGET S STATEMENT Page 16

18 5 RISKS OF NOT ACCEPTING THE HANCOCK OFFER The Atlas Board considers if the Hancock Offer does not become or is not declared unconditional, and no alternative proposal emerges, the Atlas Share price may fall given the Offer Price is significantly above the closing price of Atlas Shares prior to the announcements of both the MinRes Proposal on 9 April 2018 and MinRes' consent to waive certain clauses of the MinRes Proposal to allow Atlas to explore discussions with other parties on 8 June This is highlighted by the fact that the Offer Price represents a 121% premium to Atlas closing price of 1.90 cents per share on 4 April 2018, being the last day of trading in Atlas Shares prior to the announcement of the MinRes Proposal. The Offer Price also represents a 50% premium to Atlas closing price of 2.80 cents per share on 7 June 2018, being the last day of trading in Atlas Shares prior to the announcement of MinRes consent to waive certain clauses of the MinRes Proposal to allow Atlas to explore discussions with other parties. Redstone s intentions for Atlas are described in sections 4 and 5 of the Bidder s Statement, but those intentions may change, particularly as a result of the strategic review which Redstone states that it will undertake. Changes to the business which are implemented or failed to be implemented by Redstone may mean that you may subsequently choose to dispose of your Atlas Shares at a time when market conditions are less favourable than those prevailing at the date of this Target s Statement. If you do not accept the Hancock Offer, maintaining your investment in Atlas may mean that you are exposed to the risks outlined below, depending on the outcome of the Hancock Offer. The risks presented in this Section are not designed to be an exhaustive list, but to highlight some of the key potential risks of not accepting the Hancock Offer. 5.1 Risks if Redstone acquires a Relevant Interest in less than 50% of all Atlas Shares (a) Potential changes to the Atlas Board In sections 5.11, 5.15 and 5.21 of the Bidder s Statement, Redstone has stated that it intends to (subject to the formal requirements of the Corporations Act and Atlas constitution) seek representation on the Atlas Board so that the proportion of Redstone nominees is broadly in line with its voting power in Atlas. (b) Potential changes to Atlas strategic direction In section 5.22 of the Bidder s Statement, Redstone has stated that it intends to remain actively involved as an Atlas shareholder, including by way of influencing the strategic direction of the business of Atlas, to the greatest extent that is permitted by law. (c) Potential consequences of more than one Atlas Shareholder each controlling more than 10% of all Atlas Shares At the date of this Target s Statement, there is one other Atlas Shareholder in addition to Redstone who controls more than 10% of all Atlas Shares (Competing Minority Shareholder). In the event that the Competing Minority Shareholder accepts the Hancock Offer or sells all the Atlas Shares it holds, the Competing Minority Shareholder will cease to control more than 10% of all Atlas Shares. If Redstone becomes the only minority Atlas Shareholder who controls more than 10% of all Atlas Shares, Redstone may be able to achieve the above potential changes to Atlas. In the event that the Competing Minority Shareholder does not accept the Hancock Offer or sell all the Atlas Shares it holds, the Competing Minority Shareholder will continue to control more than 10% of all Atlas Shares, along with Redstone. In this circumstance, Redstone and the Competing Minority Shareholder will each control more than 10% of all Atlas Shares. If Redstone and the Competing Minority Shareholder have competing objectives with respect to Atlas business operations and strategic direction, Redstone s ability to achieve its intentions, including making potential changes to the Atlas Board and Atlas strategic direction, might not be able to be realised. If the two shareholders have competing objectives to the extent that they are able to block each other s proposed intentions with respect to the Atlas business operations and strategic direction, Atlas may fail to implement any strategy to improve the business. If Atlas cannot operate profitably and is unable to cease operations to preserve cash without it constituting a breach of covenants, there is a risk that Atlas cash Atlas Iron Limited TARGET S STATEMENT Page 17

19 balance will diminish to a point where a covenant is breached providing the lenders under the Term Loan B Facility the option to accelerate repayment of the debt. Refer to Section 6.8(a) for details of the Term Loan B Facility. (d) Potential reliance on one or a small number of Atlas Shareholder(s) to support Atlas potential equity raising in the future There is a possibility that an equity raising would be required for Atlas to fund its daily operations, reduce its debt level, and/or provide funding to develop its existing assets. In the situation where Redstone acquires a Relevant Interest in less than 100% of all Atlas Shares and Atlas undertakes an equity capital raising by way of a pro rata offer of Atlas Shares to Atlas Shareholders to raise additional funds, if the pro rata equity raising is supported only by Redstone, or Redstone and a small number of other Atlas Shareholders, the pro rata equity raising will be dilutive to Atlas Shareholders who do not participate in the offer. Redstone may increase its Relevant Interest in Atlas Shares without Atlas Shareholder approval or making a takeover bid, as a result of taking up its full entitlement (assuming any available shortfall is not fully allocated) or any agreed underwriting arrangements to which it is a party. 5.2 Risks if Redstone acquires a Relevant Interest in 50% or more of all Atlas Shares (a) Atlas may be removed from the official list of ASX In section 5.14 of the Bidder s Statement, Redstone has stated that it intends to procure that Atlas is removed from the official list of ASX (if it becomes entitled to do so). If Atlas is removed from the official list of ASX it may adversely impact your ability to sell your Atlas Shares, the price at which you can sell your Atlas Shares, and the level of relevant Atlas information you are able to access. ASX guidance indicates that ASX would not usually require Redstone to obtain Atlas Shareholder approval for Atlas' removal from the official list of ASX in the context of a successful takeover where the usual conditions are satisfied, which include that (among other things): (i) (ii) Redstone and its related bodies corporate own or control at least 75% of Atlas Shares; and there are fewer than 150 holders of Atlas Shares having holdings with a value of at least $500, excluding Redstone and its related bodies corporate. In the event the above conditions are not met, Redstone has stated that it may still request ASX remove Atlas from the official list of ASX. ASX's guidance indicates that ASX's decision to act on Redstone's request may be subject to the satisfaction of certain conditions (including the approval of Atlas Shareholders to the removal by way of an ordinary resolution) directed to ensuring that the interests of remaining Atlas Shareholders are not unduly prejudiced by the removal and that trading in Atlas Shares takes place in an orderly manner up to the date of its removal. For Redstone s entitlement to achieve the above intention, refer to the details regarding minority shareholder protections in Section 5.7. (b) Redstone will be able to determine the outcome of ordinary resolutions Redstone will be in a position to cast the votes required to determine alone the outcome of an ordinary resolution (in respect of which it is entitled to vote), and will be in a position to control the composition of the Atlas Board. For Redstone s entitlement to achieve the above intention, refer to the details regarding minority shareholder protections in Section 5.7. (c) Term Loan B Facility Atlas Term Loan B Facility contains a number of events of default, including change of control as defined in the Term Loan B Facility (which includes any person or group becoming the beneficial owner, directly or indirectly, in the aggregate of more than 50% of the total voting power of Atlas Shares). The occurrence of such events of default permits the lenders to accelerate repayment of the loans and enforce the security. Refer to Section 6.8(a) for details of the Term Loan B Facility. Atlas Iron Limited TARGET S STATEMENT Page 18

20 If Redstone acquires a Relevant Interest in 50% or more of all Atlas Shares and the Hancock Offer becomes or is declared unconditional, the lenders under the Term Loan B Facility will have the option to accelerate repayment of the debt. If the lenders choose to accelerate repayment of the debt, the debt will immediately become due and payable. Set out below is a non-exhaustive list of funding options for the repayment of the Term Loan B Facility and their potential implications for Atlas minority shareholders in this scenario: (i) Loan Facility from Redstone: In section 4.1 of the Bidder s Statement, Redstone has stated that should Redstone s voting power in Atlas exceed 50%, if Atlas requires funding support to repay the Term Loan B Facility, Redstone will offer to make available to Atlas (by way of a loan facility) such amount as may be necessary to enable Atlas to meet its repayment obligation in relation to the Term Loan B Facility, or will offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders under the Term Loan B Facility). Redstone has stated that any such offer of funding required by Atlas from Redstone will be on terms similar to those of the Term Loan B Facility. Refer to section 2 of the Bidder s Statement for details in relation to Redstone s source of funds. Atlas and Redstone have not agreed the terms for the provision of such funding to Atlas. If Redstone provides an unsecured loan facility to Atlas, funding may be made available promptly for the required immediate repayment of the Term Loan B Facility. However, if Redstone requires the loan facility to be secured over Atlas assets, it may require Atlas Shareholder approval and the funding may not be able to be made available sufficiently quickly for the required immediate repayment of the Term Loan B Facility. Accordingly, there is no guarantee that Atlas could repay the lenders in this scenario. (ii) (iii) (iv) Acquisition of the Term Loan B Facility by Redstone: Redstone has stated that it may offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders under the Term Loan B Facility). However, Atlas, Redstone and the lenders have not agreed as to the terms of such a deal, and as such there is no guarantee that this option can or will be able to be implemented. Renegotiation of the Term Loan B Facility by Atlas: Atlas may seek to renegotiate the Term Loan B Facility with its lenders. However, there exists material uncertainty as to whether Atlas would have the ability to renegotiate with the lenders, or whether any such renegotiation would result in more or less favourable terms for Atlas. Equity Raising by Atlas: Atlas may seek to raise additional funds from the equity markets. However, there exists material uncertainty as to whether such an equity raising would be successful in providing sufficient funding within the timeframe required for the required immediate repayment of the Term Loan B Facility. Additionally, any equity raising may potentially be dilutive to Atlas Shareholders. In the event that lenders under the Term Loan B Facility demand repayment and Atlas is unable to repay the Term Loan B Facility as it falls due, Atlas may become insolvent. 5.3 Risk if Redstone acquires a Relevant Interest in 75% or more of all Atlas Shares (a) Redstone will be able to determine the outcome of special resolutions Redstone will be in a position to cast the votes required to determine alone the outcome of a special resolution (in respect of which it is entitled to vote) at a meeting of Atlas Shareholders. This would enable it to pass resolutions, for example, to amend Atlas constitution, giving Redstone significant power to control the operations and strategy of Atlas. For Redstone s entitlement to achieve the above intention, refer to the details regarding Minority Shareholder Protections in Section 5.7. Atlas Iron Limited TARGET S STATEMENT Page 19

21 5.4 Risk if Redstone acquires a Relevant Interest in 90% or more of all Atlas Shares (a) Redstone may be able to compulsorily acquire all remaining Atlas Shares or Atlas Options If Redstone acquires 90% or more of all Atlas Shares and the compulsory acquisition provisions of the Corporations Act are satisfied, Redstone will be entitled to compulsorily acquire the Atlas Shares that it does not already own. As at the date of this Target s Statement, there is one other Atlas Shareholder in addition to Redstone who controls more than 10% of all Atlas Shares. That Atlas Shareholder is therefore capable of blocking compulsory acquisition if it chooses not to accept the Hancock Offer and does not otherwise dispose of its Atlas Shares. In section 5.10 of the Bidder s Statement, Redstone has stated that it intends to proceed with compulsory acquisition of all remaining Atlas Shares or Atlas Options. For further details of compulsory acquisition, refer to section 5.10 of the Bidder s Statement. If you choose not to accept the Hancock Offer and Redstone subsequently exercises compulsory acquisition rights, you are likely to be paid later than other Atlas Shareholders who accept the Hancock Offer. 5.5 Risks relating to Redstone s Proposed Strategic Review Should Redstone acquire control of Atlas, it has stated that it intends to undertake a strategic review of Atlas assets and operations. Redstone goes on to state that the conclusions and outcomes reached in the strategic review will inform its preferred approach to developing, operating and retaining or divesting the assets within the Atlas portfolio. As there is no minimum acceptance condition to the Hancock Offer, Redstone will not know the extent of its ultimate shareholding in Atlas until the close of the Hancock Offer. This means that the precise circumstances surrounding Redstone s ability to undertake a strategic review, let alone pursue the outcomes of the strategic review, may not necessarily be known until the close of the Hancock Offer, and are difficult to predict or preempt with any certainty at this stage. Redstone's ability, therefore, to achieve some of its intentions, including the potential integration of Atlas' business and mining assets into the Hancock group's operations, might not be able to be realised, either at all or without the approval of Atlas Shareholders in general meeting. As such, there is significant inherent uncertainty in relation to the future of the Atlas business. Changes to the business which are implemented by Redstone may mean that you may subsequently choose to dispose of your Atlas Shares at a time when market conditions are less favourable than those prevailing at the date of this Target s Statement. Refer to section 5 of the Bidder s Statement for details of the proposed strategic review. 5.6 Reduced liquidity of Atlas Shares As Redstone increases its Atlas shareholding, it will reduce the number of Atlas Shares that can be expected to be available for trading on ASX. This is likely to reduce the liquidity of Atlas Shares, and may adversely affect the price at which they might otherwise be expected to trade. 5.7 Minority shareholder protections In the event that Redstone has a Relevant Interest in less than 100% of all Atlas Shares, the implementation of Redstone s intentions as set out in sections 4 and 5 of the Bidder s Statement will be subject to: (a) (b) (c) the Corporations Act (including, without limitation, those provisions intended for the protection of minority shareholders); Atlas constitution and the statutory and fiduciary obligations of the Atlas Directors at that time to act in the best interests of Atlas and all Atlas Shareholders; minority shareholder approval, in respect of which Redstone may not be able to vote as an interested party; Atlas Iron Limited TARGET S STATEMENT Page 20

22 (d) (e) statutory and Listing Rules protection regulating minority shareholder rights; and statutory and Listing Rules protection against oppression, and that each of those matters serves to protect the rights of Atlas minority shareholders. As a result of these protections, Redstone and its associates may be excluded from voting on certain resolutions in general meeting, and should Redstone appoint any nominee directors to the Atlas Board, these directors may potentially be precluded from voting at Atlas Board meetings in certain circumstances. Where a minority shareholder maintains a blocking stake or substantial holding in Atlas which provides them with a significant proportion of the Atlas Shares which are not held by Redstone and its associates, that shareholder may have the ability to determine the outcome of any such resolutions put to Atlas Shareholders in general meetings. For example, to the extent that Redstone has a Relevant Interest in more than 50% but less than 100% of all Atlas Shares and a transaction is proposed between Redstone and Atlas, since Redstone is considered a related party of Atlas in this scenario, the transaction may be required to be subject to the prior approval of Atlas Shareholders in general meeting (with Redstone precluded from voting on the relevant resolution, and other regulatory requirements to be compiled with). Atlas Iron Limited TARGET S STATEMENT Page 21

23 6 INFORMATION ABOUT ATLAS 6.1 Overview of Atlas Atlas is an Australian company focussed on mineral exploration, development, mining and the sale of iron ore. Atlas current strategy is to focus on debt reduction, strengthening the iron ore business and diversification beyond iron ore. Atlas is a disclosing entity for the purposes of the Corporations Act and is therefore subject to regular reporting obligations under the Corporations Act and the Listing Rules. See Section 6.16 for further information. 6.2 Organisational structure Note: This table excludes certain immaterial non-australian company interests. Atlas Iron Limited TARGET S STATEMENT Page 22

24 6.3 Directors At the date of this Target s Statement, the Directors are: Non-Executive Directors Eugene I. Davis Cheryl Edwardes AM (Hon) Daniel C. Harris Alan J. Carr Chairman Director Director Director Executive Director Cliff Lawrenson CEO and Managing Director 6.4 Atlas senior management At the date of this Target s Statement, the senior management personnel of Atlas are: Senior Management Personnel Cliff Lawrenson Chris Els Mark Hancock Bronwyn Kerr Jeremy Sinclair Chief Executive Officer Chief Financial Officer & Joint Company Secretary Chief Commercial Officer General Counsel & Joint Company Secretary Chief Operating Officer 6.5 Current operations (a) Mt Webber Mine The Atlas Group owns all iron ore rights at the Mt Webber mine, located approximately 230 km (via road) south-southeast of Port Hedland. The Mt Webber mine spans mining tenements M45/1209 and M45/1197. The Atlas Group is mining at a rate of approximately 9 mtpa. Approximately 7 mtpa of ore is crushed on site. The remaining tonnes are transported by road to Atlas Mt Dove site for crushing. All crushed ore from Mt Webber and Mt Dove is then transported by road to Utah Point for export. The split of lump and fines ore exported from Mt Webber varies from time to time, but currently averages around 50% lump and 50% fines. Mine life is estimated at four years with a remaining average strip ratio of approximately 0.33:1. The mining and processing of ore at Mt Webber is contracted to BGC Contracting Pty Ltd, with road haulage contracted to Rivet Mining Services. Mt Webber s Mineral Resources and Ore Reserves at 30 June 2017 are detailed below: Atlas Iron Limited TARGET S STATEMENT Page 23

25 Measured Resources Indicated Resources Inferred Resources Total Resources Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe 27, , , , Product Type Proved Ore Reserves Probable Ore Reserves Total Ore Reserves Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe Standard Fines 24, , , In the table above, the Mineral Resources are inclusive of the Ore Reserves. Atlas mined 9.7 million tonnes from Mt Webber in the period 1 July 2017 to 30 June In light of challenging iron ore market conditions, Atlas has announced that it will reduce its annual production rate at Mt Webber to 7 mtpa with effect from late July Rights to minerals other than iron ore over certain parts of Mt Webber are held by Haoma Mining NL. (b) Mt Dove crushing hub The Mt Dove crushing hub, used for both iron ore and lithium direct shipping ore, is located approximately 65 km south of Port Hedland. The Atlas Group is crushing iron ore transported from Mt Webber at a rate of approximately 2 mtpa. Atlas is commissioning facilities for the crushing of lithium direct shipping ore sourced from the Pilgangoora Lithium Project owned by Pilbara Minerals Limited at a rate of approximately 1 mtpa. Further details of the Pilgangoora Minegate Sale Agreement are detailed in Section 6.8(b). All iron ore and lithium direct shipping ore that is crushed at Mt Dove is then transported by road to Utah Point for export. The crushing of iron ore and lithium direct shipping ore at Mt Dove is contracted to MACA Mining Pty Ltd. Road haulage of iron ore is contracted to Rivet Mining Services, and road haulage of lithium ore is contracted to MGM Bulk Pty Ltd. In light of challenging iron ore market conditions, Atlas has decided to suspend iron ore processing at Mt Dove with effect from late July The suspension will not affect lithium activities underway at Mt Dove. (c) Utah Point Bulk Handling Facility The Atlas Group exports its products through the Western Australian Government owned Utah Point facility in Port Hedland (Utah Point). The Utah Point facility is a single berth, single shiploader multi user facility, set up for truck delivery of product into multiple stockyards. Stockyard 1 is multiuser whereas Stockyard 2 has been developed by Atlas for its use. The Atlas Group s rights at Stockyard 1 are scheduled to expire in September 2018 and Atlas rights at Stockyard 2 expire in September 2025, with an option to extend for a further five years. If longer term access to Stockyard 1 cannot be negotiated with the Western Australian Government, Atlas will rely on Stockyard 2 port capacity and spot capacity at Stockyard 1 (if available). In this circumstance, and if spot capacity is not available at Stockyard 1, Atlas may need to invest further capital in to Stockyard 2 in order to fully utilise its capacity or reduce its export volumes. The Atlas Group s current combined capacity allocation is up to 13 mtpa, falling to 10 mtpa on expiry of the Stockyard 1 rights. Atlas Iron Limited TARGET S STATEMENT Page 24

26 The Atlas Group exported iron ore, lithium and manganese ore through Utah Point in the June 2018 quarter. Qube and the Pilbara Ports Authority provide port and handling services. 6.6 North Pilbara development projects (a) Corunna Downs The Corunna Downs project is located approximately 237 km from Port Hedland and 33 km from Marble Bar in Western Australia via road. Corunna Downs Mineral Resources and Ore Reserves at 30 June 2017 are detailed below: Measured Resources Indicated Resources Inferred Resources Total Resources Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe , , , Product Type Proved Ore Reserves at end June 2017 Probable Ore Reserves at end June 2017 Total Ore Reserves at end June 2017 Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe Standard Fines , , In the table above, the Mineral Resources are inclusive of the Ore Reserves. The results of the Corunna Downs Definitive Feasibility Study were announced on 21 December That study, which assumes transport by road haulage to Port Hedland, estimated capital expenditure in the range of $47-53 million and C1 cash costs in the range of $37-43/wmt. (b) McPhee Creek The McPhee Creek project is located approximately 270 km from Port Hedland and 65 km east of Corunna Downs. McPhee Creek s Mineral Resources at 30 June 2017 are detailed below: Measured Resources Indicated Resources Inferred Resources Total Resources Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe 32, , , , Other (a) Ridley Magnetite Project The Ridley Magnetite Project is a large deposit located 75 km east of Port Hedland. A Pre-Feasibility Study was announced in 2009 for that project. (b) Miralga Creek With operations now complete at the current pits of Atlas Abydos mine, Atlas is reviewing its ability to develop satellite pods of enriched Cleaverville Banded Iron Formation adjacent to existing Abydos infrastructure, including the Miralga Creek Mineral Resource and the Sandtrax Mineral Resource at 30 June 2017 set out below. Atlas Iron Limited TARGET S STATEMENT Page 25

27 Miralga Creek: Measured Resources Indicated Resources Inferred Resources Total Resources Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe , , Sandtrax: Measured Resources Indicated Resources Inferred Resources Total Resources Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe , , (c) Davidson Creek Hub The Davidson Creek Hub project is located 100 km east of Newman. Atlas owns all of the iron ore rights over the project area, which includes the Davidson Creek, Robertson Range and Jigalong deposits. At 30 June 2017, the project contains the Mineral Resource detailed below. Measured Resources Indicated Resources Inferred Resources Total Resources Atlas Interest Reporting Cut Off Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) Tonnage (Kt) Grade (% Fe) % % Fe 43, , , , A draft definitive engineering study was completed by Atlas in December (d) Cisco Lithium Prospect Atlas has entered into a farm-in and joint venture agreement with Pilbara Minerals Limited in respect of the Cisco Lithium Prospect, located in the Pilgangoora district of the Pilbara. Pilbara Minerals Limited holds a 51% interest in the lithium, tantalum and tin mineral rights. Pilbara Minerals Limited is entitled to increase its interest in the mineral rights to 70% by spending $1 million on exploration by October Pilbara Minerals Limited will then be entitled to increase its interest to 80% by completing a definitive feasibility study and making a decision to mine. Atlas will be free carried to a decision to mine. (e) Pancho Lithium Prospect In late 2017, Atlas completed a detailed on ground geological reconnaissance program on the Pancho Prospect, located in the Pilgangoora district of the Pilbara. Analytical results from surface rock chip sampling show several of the targets have geochemistry that confirms they are lithium-caesium-tantalum style pegmatites, which have the potential to host lithium enrichment. (f) Copper Range Project In October 2017, Atlas completed a drilling program at Copper Range (50 km east of Newman). With up to 9 km of historically anomalous copper and gold results along the length of the Copper Range Project, Atlas believes there is potential for a large-scale, low-grade copper deposit to be defined. (g) Walker Copper Prospect In December 2017, Atlas conducted a small drill program at the Walker Copper Prospect, located near Miralga Creek. Several holes intersected with visible sulphides, with one hole returning significant intercepts. Atlas Iron Limited TARGET S STATEMENT Page 26

28 (h) NWI South West Creek Atlas is a founding member of North West Infrastructure (NWI). In 2011, NWI completed a detailed engineering and design costing study on the development of a stockyard and two berth facility in South West Creek within the Port Hedland inner harbour. The Minister for Transport, Planning and Infrastructure has advised that the Pilbara Ports Authority will assess any application by NWI to develop these berths on its merits and in accordance with the Pilbara Port Authority s standard port development processes and that these berths are set aside for junior miners. 6.8 Atlas Group contracts A non-exhaustive summary of certain Atlas Group material contracts is set out below, along with any material impacts which the Hancock Offer may have on those contracts. (a) Term Loan B Facility As at 30 June 2018, Atlas primary source of indebtedness is US$63.54 million outstanding under a restated syndicated Term Loan B facility agreement between, among others, Atlas, Credit Suisse AG (Cayman Islands branch) and Credit Suisse AG (Sydney branch), dated 6 May 2016 as varied, amended and supplemented from time to time since that date (Term Loan B Facility). The key terms of the Term Loan B Facility are: (i) maturity date of April 2021; (ii) (iii) (iv) (v) effective cash interest rate of LIBOR plus 7.33% (LIBOR floor of 1.25%), payable quarterly; amortisation of 1.00% per annum, payable quarterly; minimum cash requirement of $15 million in cash at the end of each month; and any cash held by Atlas in excess of $80 million at quarter end must be used to repay the loan. The Term Loan B Facility is secured over assets of Atlas and each of its material Subsidiaries subject to agreed exclusions, such as assets for which third party consents are required in order to secure. It is repayable at Atlas option at par, without penalty in most circumstances. In addition to the minimum cash balance covenant, Atlas is also subject to other ongoing obligations under the Term Loan B Facility, (certain of which are detailed below) which, if breached, can result in the occurrence of events of default (also detailed below). (i) Mandatory prepayment events The Term Loan B Facility contains a number of mandatory prepayment events that, if they occur, require Atlas to partially pay down the Term Loan B Facility with the net proceeds from the relevant event. These include: (A) (B) (C) the incurrence of indebtedness not permitted by the terms of the Term Loan B Facility; certain asset sales (excluding assets sales resulting in aggregate net proceeds of less than US$5 million in two consecutive semi-annual fiscal periods, subject to reinvestment rights); and events for which insurance proceeds are payable to Atlas or a material subsidiary (excluding events resulting in aggregate net proceeds of less than US$5 million in two consecutive semi-annual fiscal periods). Atlas Iron Limited TARGET S STATEMENT Page 27

29 (ii) Undertakings to lenders The Term Loan B Facility imposes a number of financial and non-financial undertakings on Atlas and the guarantors (being certain members of the Atlas Group), including the following undertakings (subject to certain exceptions, materiality thresholds, qualifications and permissions): (A) (B) (C) (D) (E) (F) (G) (H) (I) to maintain necessary licenses, permits and other government authorisations; to comply with laws and pay required taxes; to maintain property and insurance and give prior notice of any cancellation, modification or non-renewal of insurance; to notify the administrative agent and each lender of certain defaults or events of default, or events that could have a material adverse effect on the business of the group or the ability of Atlas and the guarantors (being certain members of the Atlas Group) to comply with the terms of the loan documents; to maintain security and provide all information required to maintain continued perfection of security; to enforce and not to amend the current tax sharing arrangements; not to incur loans or other indebtedness in the nature of borrowing or amend the terms of any outstanding loans or other such indebtedness; not to engage in business other than its current business; and not to waive or amend the terms of any contracts relating to Atlas key tenements in a way that is materially adverse to the lenders. The Term Loan B Facility also imposes restrictions on the following (subject to certain exceptions, materiality thresholds, qualifications and permissions): (A) (B) (C) (D) (E) (F) (G) granting security interests; making investments or acquisitions; disposing of assets or participating in mergers; payment of dividends; entering into agreements that restrict Atlas' and its material Subsidiaries ability to create liens or make intercompany transfers of cash or assets; transacting with affiliates; and issuing certain types of equity (other than ordinary shares and options). (iii) Events of default The Term Loan B Facility contains a number of events of default, which include: (A) (B) a payment default; a breach of undertaking, including those listed above (with a 20, 5 or 3 day cure periods for certain undertakings); Atlas Iron Limited TARGET S STATEMENT Page 28

30 (C) (D) (E) (F) (G) (H) a default under any other financing arrangement in an amount of at least US$10 million (or US$5 million if the default results in the acceleration of the indebtedness prior to its express maturity); an insolvency event occurs, including the appointment of a receiver or administrator; an unsatisfied judgement in an amount of at least US$5 million; any material security required to be maintained in favour of the lenders is or becomes invalid; any indebtedness that the Term Loan B Facility requires to be subordinated is not or ceases to be subordinated; a change of control (as defined in the Term Loan B Facility), which includes any person or group becoming the beneficial owner, directly or indirectly, in the aggregate of more than 50% of the total voting power of Atlas Shares; and (I) suspension of all or substantially all of the Atlas Group's mining operations for 30 consecutive days or longer. The occurrence of an event of default permits the lenders to accelerate repayment of the loans and enforce the security. In section 4.1 of the Bidder s Statement, Redstone stated that should Redstone s voting power in Atlas exceed 50%, if Atlas requires funding support to repay the Term Loan B Facility, Redstone will offer to make available to Atlas (by way of a loan facility) such amount as may be necessary to enable Atlas to meet its repayment obligation in relation to the Term Loan B Facility, or will offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders). Redstone has stated that any such offer of funding required by Atlas from Redstone will be on terms similar to those of the Term Loan B Facility. Refer to section 2 of the Bidder s Statement for details in relation to Redstone s source of funds. If Redstone provides an unsecured loan facility to Atlas, funding may be made available promptly for the required immediate repayment of the Term Loan B Facility. However, if Redstone requires the loan facility to be secured over Atlas assets, it may require Atlas Shareholder approval and the funding may not be able to be made available sufficiently quickly for the required immediate repayment of the Term Loan B Facility. Accordingly, there is no guarantee that Atlas could repay the lenders in this scenario. Atlas and Redstone have not agreed to the terms for the provision of any funding to Atlas, nor has Atlas, Redstone and the lenders agreed to the terms of any acquisition of the debt by Redstone. Accordingly, there is no guarantee that either options will be able to be implemented. Refer to Section 8.2 detail about the risks associated with the Term Loan B Facility and Atlas indebtedness generally. (b) Pilgangoora Minegate Sale Agreement Atlas entered into an agreement with Pilbara Minerals Limited in December 2017, under which Atlas will purchase million tonnes of lithium DSO from Pilbara Minerals over a 15-month period (Pilgangoora Minegate Sale Agreement). The ore will be mined by Pilbara Minerals at its Pilgangoora Lithium Project, 120 km south-east of Port Hedland. Atlas will crush the ore at its Mt Dove operation, transport it by road haulage to Port Hedland and load it onto a ship for export at Utah Point. (c) Sinosteel Offtake Agreement Atlas signed an agreement with Sinosteel Australia Pty Ltd on 1 March 2018 for the export of lithium DSO sourced from Pilbara Minerals Pilgangoora Lithium Project under the Pilgangoora Minegate Sale Agreement Atlas Iron Limited TARGET S STATEMENT Page 29

31 referred to in Section 6.8(b) above (Sinosteel Offtake Agreement). Atlas will sell up to 1.5 million tonnes of lithium DSO to Sinosteel over a 15-month period on a fixed-priced basis. (d) Utah Point Multi-Users Agreement Atlas long-term rights to capacity at the Utah Point berth in the Port of Port Hedland are conferred by agreements with the Pilbara Ports Authority in respect of Stockyard 2 as Stockyard 1 long term lease expires in September These long-term rights at Stockyard 2 are envisaged to be supplemented by short-term allocations and spot capacity at Stockyard 1 from time to time (if available). The key terms of Atlas rights at Stockyard 2 are: (i) (ii) (iii) target throughput quantity of 10 mtpa; initial term expires in September 2025, with a right to extend for a further 5 years; and take or pay obligations relate to throughput of 5 mtpa. Atlas can be relieved of these obligations by surrendering its rights to Stockyard 2 on 12 months notice. (e) Altura Royalty Atlas holds a 5% gross sales royalty over mining tenement M45/1231 which covers the majority of Altura Mining Limited s Pilgangoora Lithium Project. (f) Alliance Agreement Atlas and MinRes entered into an Alliance Agreement on 8 April 2018 (as amended on 15 May 2018), in order to pursue various existing and new business ventures in the Western Australian resources sector. (i) Lithium and Manganese contracts Atlas Pty Ltd will carry out the lithium and manganese arrangements under the Pilgangoora Minegate Sale Agreement, Sinosteel Offtake Agreement and the Portgate Sale Agreement. Atlas Pty Ltd will also be responsible for undertaking any other business opportunities in the lithium and manganese sectors that Atlas and MinRes agree should be conducted through the company. Atlas Pty Ltd is owned 90% by Atlas and 10% by MinRes. Atlas will have the ability to appoint the majority of directors giving it board control. MinRes has contributed $4 million by way of equity to Atlas Pty Ltd on signing. Any additional funding requirements of Atlas Pty Ltd will be contributed by Atlas by way of loan. No dividends will be payable from Atlas Pty Ltd without the approval of Atlas and MinRes. Atlas will provide treasury services to Atlas Pty Ltd and be entitled to the cash flow generated by Atlas Pty Ltd. The parties will endeavour to enter into binding legal documents to govern their relationship in respect of Atlas Pty Ltd. If such agreements are not executed on or before 9 October 2018, either Atlas or MinRes may terminate the arrangements relating to lithium and manganese and MinRes must transfer all of its shares in Atlas Pty Ltd to Atlas in return for the reimbursement of the $4 million equity it originally contributed. The rights to dividends will transfer back to Atlas with these shares. (ii) Broader Alliance Initiatives In addition to the arrangements in respect of the lithium and manganese contracts, Atlas and MinRes have formed a strategic alliance in order to pursue various existing and new business initiatives in the Western Australian resources sector (Alliance Initiatives). Atlas and MinRes have formed a committee comprising two MinRes representatives and two Atlas representatives for the purposes of agreeing upon the legal and commercial arrangements to be put in place in respect of each Alliance Initiative (Alliance Committee). Atlas Iron Limited TARGET S STATEMENT Page 30

32 The Alliance Committee will make recommendations to Atlas and MinRes in respect of the legal and commercial arrangements for each Alliance Initiative. Any recommendations of the Alliance Committee must be approved by MinRes and Atlas. The termination of the Scheme Implementation Deed relating to the MinRes Proposal did not affect the Alliance Agreement, as the two agreements are not inter-conditional. 6.9 Historical financial information (a) Basis of preparation The selected historical financial information in this section has been extracted from Atlas audited consolidated financial statements for the financial years ended 30 June 2017 and 30 June 2016 and the reviewed consolidated financial statements for the half year ended 31 December These financial reports contain an emphasis of matter statement from KPMG, drawing the attention of users of the financial reports that a material uncertainty exists that may cast significant doubt on Atlas' ability to continue as a going concern, and therefore, whether it will realise its assets and discharge its liabilities in the normal course of business, at the amounts stated in the relevant financial report. On request prior to the Effective Date, Atlas will provide, within two Business Days of the request, a copy of Atlas audited consolidated financial statements for the financial years ended 30 June 2017 and 30 June 2016 and the reviewed consolidated financial statements for the half year ended 31 December 2017, free of charge to any Atlas Shareholder. The information in this section is a summary only and has been prepared solely for inclusion in this Target s Statement. Atlas full financial accounts are available on its website, or by requesting a copy from Atlas Company Secretary on (b) Consolidated Statements of Profit or Loss and Other Comprehensive Income Set out below is a summary of Atlas' audited Consolidated Statements of Profit or Loss and Other Comprehensive Income for the years ended 30 June 2017 and 30 June 2016 and the reviewed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the half year ended 31 December 2017: 31 December 2017 (Reviewed) $ June 2017 (Audited) $ June 2016 (Audited) $ 000 Revenue 308, , ,755 Operating costs (309,192) (787,543) (773,986) Gross (loss)/profit (1,158) 83,508 11,769 Other income 1,781 16,844 12,426 Exploration and evaluation expense (2,840) (3,482) (3,526) Impairment loss - (1,041) (97,098) Share of loss of equity accounted investees - - (106) Loss on listed investments - (24) - Loss on financial instruments (3,029) (22,711) (5,863) Depreciation and amortisation (576) (1,472) (2,763) Gain/(loss) on disposal of plant and equipment and liabilities - 6,999 (349) Administrative expenses (10,487) (18,395) (24,152) Other expenses (157) (1,345) (7,707) Results from operating activities (16,466) 58,881 (117,369) Finance income 810 1,021 1,116 Finance expense (5,939) (13,648) (35,143) Gain/(loss) on foreign exchange 305 1,727 (13,100) Gain on debt restructure - - 5,482 Atlas Iron Limited TARGET S STATEMENT Page 31

33 31 December 2017 (Reviewed) $ June 2017 (Audited) $ June 2016 (Audited) $ 000 Net finance expense (4,824) (10,900) (41,645) Profit/(loss) before income tax (21,290) 47,981 (159,014) Tax expense PROFIT/(LOSS) FOR THE YEAR (21,290) 47,981 (159,014) Other comprehensive income Items that may be classified subsequently to profit or loss Share of associates' movements in foreign currency translation reserve - - (39) Other comprehensive income/(loss) for the year - - (39) TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE GROUP (21,290) 47,981 (159,053) (c) Consolidated Statement of Financial Position Below is a summary of Atlas' audited Consolidated Statements of Financial Position as at 30 June 2017, and 30 June 2016 and of Atlas reviewed Consolidated Statement of Financial Position as at 31 December 2017: 31 December 2017 (Reviewed) $ June 2017 (Audited) $ June 2016 (Audited) $ 000 CURRENT ASSETS Cash and cash equivalents 71,133 80,769 80,853 Trade and other receivables 47,151 41,421 36,509 Prepayments 432 1,356 13,368 Financial assets 609 1,070 1,865 Inventories 20,371 19,094 16,728 TOTAL CURRENT ASSETS 139, , ,323 NON-CURRENT ASSETS Other receivables 6,015 6,015 5,029 Property, plant and equipment 79,098 84,351 96,579 Intangibles Mine development costs 243, , ,660 Evaluation expenditure - reserve development 4,723 4,592 21,340 Mining tenements 62,499 62,499 62,594 TOTAL NON-CURRENT ASSETS 396, , ,898 TOTAL ASSETS 536, , ,221 CURRENT LIABILITIES Trade and other payables 59,260 66,049 64,346 Interest bearing loans and borrowings 2,796 2,775 3,632 Employee benefits 1,100 1,097 1,235 Provisions 6,540 10,019 9,602 Financial liabilities 754-2,600 TOTAL CURRENT LIABILITIES 70,450 79,940 81,415 NON-CURRENT LIABILITIES Trade and other payables ,822 Interest bearing loans and borrowings 100, , ,716 Employee benefits 1,280 1, Atlas Iron Limited TARGET S STATEMENT Page 32

34 31 December 2017 (Reviewed) $ June 2017 (Audited) $ June 2016 (Audited) $ 000 Provisions 63,044 64,155 88,820 TOTAL NON-CURRENT LIABILITIES 164, , ,140 TOTAL LIABILITIES 234, , ,555 NET ASSETS 301, , ,666 EQUITY Share capital 2,203,510 2,203,203 2,197,388 Reserves 40,861 40,816 42,030 Accumulated losses (1,943,061) (1,921,771) (1,969,752) TOTAL EQUITY 301, , ,666 (d) Consolidated cash flow statement Set out below is a summary of Atlas audited consolidated statement of cash flows for the years ended 30 June 2017 and 30 June 2016 and the reviewed consolidated statement of cash flows for the half year ended 31 December 2017: 31 December 2017 (Reviewed) $ June 2017 (Audited) $ June 2016 (Audited) $ 000 CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES Cash receipts from customers 305, , ,155 Payments to suppliers and employees (284,197) (733,655) (720,379) Interest received Payments for expenditure on exploration and evaluation activities (2,849) (3,482) (3,525) NET CASH FLOWS FROM OPERATING ACTIVITIES 19, ,897 31,105 CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES Payments for property, plant and equipment (1,375) (1,743) (605) Payments for mine development (3,588) (4,493) (9,777) Payments for intangible assets - - (81) Payments for reserve development costs (131) (3,412) (4,750) Loan to joint venture - (259) (264) Net proceeds received from sale of tenements - 2,530 - Proceeds from release of bank guarantees 1,653 2, Proceedings from other entities including associated entities Stamp duty paid in relation to acquisition of tenements - - (2,581) Net payments from financial instruments (1,439) (24,678) (5,467) NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,880) (29,278) (23,407) CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES Debt restructure costs - (1,241) (16,104) Repayment of Term Loan B (865) (79,385) (16,938) Transfer to reserve account (14,093) (20,000) - Interest payments on borrowing facilities (4,465) (9,233) (29,537) Proceeds from royalty assistance program ,511 Repayment of royalty assistance program (3,072) (12,292) (6,147) Atlas Iron Limited TARGET S STATEMENT Page 33

35 31 December 2017 (Reviewed) $ June 2017 (Audited) $ June 2016 (Audited) $ 000 Proceeds from issue of shares (net of costs) 3-46,584 Repayment of finance lease (763) (1,525) (1,292) NET CASH FLOWS USED IN FINANCING ACTIVITIES (23,255) (123,676) (1,923) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (9,112) 943 5,775 Cash and cash equivalents at 1 July 80,769 80,853 73,305 Effect of exchange rate changes on cash and cash equivalents* (524) (1,027) 1,773 CLOSING CASH AND CASH EQUIVALENTS 71,133 80,769 80,853 * Foreign exchange (loss)/gain on cash at bank held in USD during the period 6.10 Material changes in Atlas' financial position and financial performance To the Directors' knowledge, and except as disclosed in this Section 6.10 or elsewhere in this Target s Statement, the financial position and financial performance of Atlas has not materially changed since 31 December Atlas key operating metrics and cash results are fully disclosed in the June 2018 Quarterly Report published on 12 July As noted in the Report, the Group was loss making at an operating level. This was due to: (a) (b) (c) (d) lower production due to the planned closure of Abydos mine; sustained elevated discount on lower-grade iron ore; increased haulage costs due to longer average distance from mine to Port from remaining operations relative to previous operations such as Abydos and Wodgina; and elevated freight costs from Port Hedland to China. Since 31 December 2017, Atlas has withdrawn all funds from the Reserve Account. Cash at 30 June 2018 was A$57 million and the AUD equivalent of the outstanding USD term loan was A$85 million (US$0.74/$). The benchmark Platts 62% Fe IODEX averaged US$65/dmt in the June 2018 Quarter and the discount for lower-grade material remained elevated, continuing the pressure on margins and cash flow. Atlas recorded an operating loss during the June 2018 Quarter with an average sale price of $59/wmt and Full Cash Costs of $62/wmt on volume of 2.1 million wmt. The carrying value of Atlas assets is particularly sensitive to assumptions around production costs and realised iron ore price. Adverse movements in ongoing discounts applied to Atlas lower-grade iron ore coupled with elevated sea freight and fuel prices are increasing the likelihood of an impairment at 30 June If these challenging market conditions persist, a non-cash impairment charge in a $ million range is likely to be recorded in Atlas FY2018 Financial Statements. The actual impairment will not be known until Atlas FY2018 Financial Statements are finalised and audited in August An impairment charge will not affect Atlas cash flow or compliance with debt obligations. As part of the Alliance Agreement, MinRes was issued 10% of the share capital of Atlas Pty Ltd, a special purpose vehicle, for $4 million cash consideration. In accordance with the terms of the Scheme Implementation Deed, Atlas paid a A$3.12 million break fee to Mineral Resources in June Atlas Iron Limited TARGET S STATEMENT Page 34

36 6.11 Forecasts Atlas does not provide cashflow or profit & loss forecasts to the market. However, Atlas does provide production and cost guidance, which allows market participants to formulate their own view on the forecast cashflows using their own iron ore pricing assumptions Recent Atlas Share price history Figure 1 depicts the trading history of Atlas over the 12 months up to 13 July 2018, being the last practicable date prior to the date of this Target s Statement. Share Price in cents Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Figure 1: Trading history of Atlas Shares (Source: Bloomberg - Sourced without consent throughout this Target's Statement) At 13 July 2018, being the last practicable date prior to the date of this Target s Statement: (a) (b) (c) (d) (e) (f) the last recorded traded price of Atlas Shares was 4.20 cents; the 30 day VWAP of Atlas Shares was 3.70 cents; the 60 day VWAP of Atlas Shares was 3.55 cents; the 90 day VWAP of Atlas Shares was 3.32 cents; the highest recorded traded price of Atlas Shares in the previous 3 months was 4.50 cents on 20 June 2018; and the lowest recorded traded price of Atlas Shares in the previous 3 months was 2.70 cents on 17 April The current price of Atlas Shares on ASX can be obtained from the ASX website ( or Atlas issued securities At the date of this Target s Statement, there are 9,279,607,773 Atlas Shares and 339,364,291 Atlas Options on issue. At the date of this Target s Statement, the following Atlas Options are on issue: Number Class 17,001,045 Nil cash exercise unlisted ESOP options expiring 13/11/ vested on 6 May ,285,282 Nil cash exercise unlisted ESOP options expiring 23/11/2021 subject to the following vesting conditions: Atlas Iron Limited TARGET S STATEMENT Page 35

37 Number Class I. 30% of the Options will vest in thirds on the first 3 anniversaries of grant (10% each year) on condition the employee remains in the employment of Atlas at the vesting date. The first 10% have vested and the 7,233,901 remaining unexercised are shown below; II. 30% of the Options will vest at the end of FY2019 on the basis of improvement in Atlas return on invested capital (ROIC) for FY2019 equal to or greater than 15% over ROIC for FY2016; III. 40% of the Options will vest at the end of FY2019 on the basis of an absolute improvement in Atlas total shareholder return (TSR) in FY2019 over FY2016; and IV. 100% of all unvested Options will vest on a change of control. 7,233,901 Nil cash exercise unlisted ESOP options expiring 23/11/2021 vested on 15 September ,844,063 Nil cash exercise unlisted ESOP options expiring 25/10/2022 subject to the following vesting conditions: I. 30% of the Options will vest in thirds on the first 3 anniversaries of grant (10% each year) on condition the employee remains in the employment of Atlas at the vesting date; II. 30% of the Options will vest at the end of FY2020 on the basis of improvement in Atlas return on invested capital (ROIC) for FY2020 equal to or greater than 15% over ROIC for FY2017; III. 40% of the Options will vest at the end of FY2020 on the basis of an absolute improvement in Atlas total shareholder return (TSR) during the three year period commencing 1 July 2017; and IV. 100% of all unvested Options will vest on a change of control. In accordance with the terms and conditions of the Atlas Options on issue, all unvested Atlas Options will vest and all Atlas Options will become capable of being exercised into Atlas Shares if a change of control event occurs, or the Atlas Board determines that such an event is likely to occur. Relevantly, a change of control event will occur if a takeover bid is made to acquire more than fifty per cent of all Atlas Shares (or such lesser number of Atlas Shares that when combined with the Atlas Shares that the bidder (together with its associates (as defined in section 12 of the Corporations Act)) already owns will amount to more than 50% of all Atlas Shares) and the takeover bid becomes unconditional and the bidder (together with those associates) has a Relevant Interest in more than 50% of all Atlas Shares. Or if a person has a Relevant Interest in greater than 50% of all Atlas Shares. There are other "change of control" events which will also cause the unvested Atlas Options to vest (and thereby become exercisable) under their terms and conditions, including: (a) (b) (c) a change in control (as defined in section 50AA of the Corporations Act) of Atlas; where a person becomes entitled to acquire, hold or has an equitable interest in more than fifty per cent of all Atlas Shares; and a court orders a meeting of Atlas Shareholders to be convened to consider a proposed scheme of arrangement and Atlas Shareholders approve the proposed scheme of arrangement, but, for the avoidance of doubt, does not include any internal reorganisation of the structure, business and/or assets of the Atlas Group. Pursuant to the Atlas Iron Limited Option Plan rules, the Atlas Board has determined that all unvested Atlas Options will vest upon Redstone obtaining a Relevant Interest in more than 50% of all Atlas Shares on the basis that a change of control event would have occurred. Atlas Optionholders will then be able to exercise their Atlas Options into Atlas Shares at their discretion. The Hancock Offer extends to Atlas Shares that are issued during the Offer Period due to the exercise of Atlas Options Dividend Policy Atlas does not currently pay dividends to its shareholders. The Atlas Board is not able to indicate if and when dividends will be paid in the future if the Hancock Offer is not implemented, as payment of any dividend will depend on the future profitability, financial position and cash requirements of Atlas. Atlas Iron Limited TARGET S STATEMENT Page 36

38 6.15 Litigation Atlas is involved in litigation but, other than as disclosed in this Target s Statement, Atlas management does not expect the outcome of such litigation to have a significant impact on Atlas Group Publicly available information As an ASX listed company and a disclosing entity for the purposes of section 111AC(1) of the Corporations Act, Atlas is subject to regular reporting and disclosure obligations. Broadly, these require it to announce price sensitive information to ASX as soon as it becomes aware of the information, subject to exceptions for certain confidential information. Atlas most recent announcements are available from Atlas website at ASX maintains files containing publicly available information about entities listed on their exchange. Atlas files are available for inspection at Atlas registered office during normal business hours and are available on the ASX website ( Additionally, copies of documents lodged with ASIC in relation to Atlas may be obtained from or inspected at an ASIC service centre. Please note, ASIC may charge a fee in respect of such services. The following documents are available for inspection during normal business hours at the registered office of Atlas: (a) (b) (c) Atlas constitution; Atlas annual report for the financial year ended 30 June 2017; and Atlas public announcements. The annual report and public announcements are available at Atlas website at or may be requested to be provided free of charge by contacting Atlas. Atlas Iron Limited TARGET S STATEMENT Page 37

39 7 INFORMATION ABOUT REDSTONE AND HANCOCK 7.1 Disclaimer The information in this Section and all information concerning Redstone and Hancock contained in other sections of this Target's Statement has been prepared by Atlas using the information contained in the Bidder's Statement and publicly available information, and has not been independently verified by Atlas. Accordingly, subject to the Corporations Act, Atlas does not make any representation (express or implied) as to the accuracy or completeness of such information. 7.2 Corporate information Redstone was incorporated on 19 April 2018 and is a wholly-owned subsidiary of Hancock, a privately held Australian company that focusses on the exploration, development, mining and export iron ore. 7.3 Redstone directors According to the Bidder s Statement, Redstone s directors are: (a) (b) Tadeusz Jozef Watroba; and Jay Eliot Newby. 7.4 Funding of the Offer Price The Hancock Offer is a 100% cash offer. The maximum amount of cash that will be payable by Redstone if acceptances are received for all Atlas Shares on issue at the date of the Bidder s Statement is $311,959,258. If the: (a) (b) (c) Atlas Options on issue at 18 June 2018 vest; those holders accept their rights in respect of the Atlas Options; and the holders accept the Hancock Offer in respect to the Atlas Shares issued to them, then the maximum amount payable by Redstone if acceptances are received will be approximately $326,212,558. Redstone and Hancock have entered into a funding agreement, whereby, at any time after the Hancock Offer has become unconditional, Hancock must make available to Redstone the funds necessary to pay the maximum available amount of consideration payable under the Hancock Offer and all associated transaction costs. Hancock holds existing cash reserves of over $3 billion and is obligated to provide the funds within two Business Days after receipt of a draw down request from Redstone. 7.5 Further information about Redstone and Hancock Section 1 of the Bidder s Statement provides further information relating to Redstone and Hancock. Atlas Iron Limited TARGET S STATEMENT Page 38

40 8 RISK FACTORS 8.1 Introduction In considering the Hancock Offer, Atlas Shareholders should be aware of the risks related to Atlas and its assets. Atlas is subject to a number of investment risk factors which may affect the operating and financial performance of Atlas and the value of Atlas Shares. Many of the risks are outside the control of Atlas and the Directors, and there can be no certainty that Atlas objectives or anticipated outcomes will be achieved. The risk factors presented in this Section are not an exhaustive list of all risks and risk factors related to Atlas or the Hancock Offer. Additional risks and uncertainties not currently known to Atlas may also have an adverse impact on the Atlas Group. This Section does not take into account the investment objectives, financial situation, position or particular needs of Atlas Shareholders. Each Atlas Shareholder should consult their legal, financial, taxation or other professional adviser if they have any queries. 8.2 Risks of holding Atlas Shares (a) Continued significant single commodity exposure If Atlas remains as a stand-alone entity, it will continue to operate its existing business which is reliant on lower-grade iron ore, and thus is exposed to fluctuations in iron ore benchmark prices and discounts related to lower-grade iron ore. The graph below highlights the impact of the discounts applied to Atlas lower-grade iron ore, which have kept Atlas realised price low. USD/DMT 85.0 Monthly Average Benchmark Iron Ore Price vs. Atlas Realised Price Implied Discount $18.8 $65.3 $ Platts spot 62% Fe (Rolling Monthly Average) USD/DMT Atlas Realised CFR Price USD/DMT Furthermore, the graph below shows how the discounts to the 62% Fe index implied by the price realised for Atlas lower-grade iron ore have significantly increased in the last two years. USD Discount 35.0 Atlas' Implied Discount to the Benchmark Iron Ore Price % Discount 40% 33% $ % 20% % Implied Discount USD/DMT Implied Discount (as % of Platts spot 62% Fe) Atlas Iron Limited TARGET S STATEMENT Page 39

41 Atlas Shareholders continue to be exposed to the substantial risks inherent in an exploration, project development and production business with a largely single commodity exposure. As a result, relatively minor movements in iron ore prices and discounts (and movements in exchange rates (see Section 8.2(g)) could substantially impact the cash flow generation capability and overall value of Atlas (refer to Section 2.1 for further details). (b) Capital and cash flow requirements Atlas is currently not in a position to fund development opportunities that exist within the Atlas portfolio without sourcing additional capital or entering into a partnership. There can be no guarantee that Atlas will be able to complete fundraising, or as to the terms of such fundraising. The latest financial and operational results show Atlas is currently operating at a loss. Based on Atlas latest financial results for the six months ending 31 December 2017, Atlas incurred a consolidated statutory loss of approximately $21 million. The two most recent Atlas Quarterly Activities Reports for March and June 2018 showed Full Cash Costs were $62/wmt CFR, and the average realised price was $59/wmt CFR, implying an operating loss of $3/wmt across the total approximate 4.1 million wmt of iron ore shipped in the six months ending 30 June 2018 (results include the impact of financial instruments). If these conditions persist, Atlas will continue to generate losses. Atlas anticipates that it will require future capital expenditure for the further development of its existing assets, including Corunna Downs and McPhee Creek. As Atlas is currently operating at a loss, Atlas will have to raise the capital necessary to develop its existing assets. Without significant additional funding to develop these assets, when operations cease at Mt Webber (currently scheduled in 2022), Atlas will have no significant operating assets generating revenue. Atlas audited consolidated financial statements for the financial years ended 30 June 2017 and 30 June 2016 and the reviewed consolidated financial statements for the half year ended 31 December 2017 contained an emphasis of matter statement from KPMG, drawing the attention of users of the financial reports that a material uncertainty exists that may cast significant doubt on Atlas' ability to continue as a going concern, and therefore, whether it will realise its assets and discharge its liabilities in the normal course of business, at the amounts stated in the relevant financial report. There is a risk that difficult conditions in the equity and debt markets may exist in future, making it more difficult and costly for Atlas to obtain funding (or potentially making it impossible to obtain funding). Furthermore, there is no certainty that Atlas would be able to fund the development of its existing assets on favourable terms, or at all. If Atlas is unable to obtain additional funding as and when needed, it may have a material adverse effect on Atlas financial condition, results of operations or prospects. Prior to receipt of the MinRes Proposal and the Hancock Offer, the Atlas Board and its advisors actively considered a number of strategic alternatives including debt refinancing, equity raising and asset sales. In the view of the Atlas Board, those alternative strategic options would be likely to produce a less favourable outcome for Atlas Shareholders than the MinRes Proposal or the Hancock Offer, and potentially a materially worse outcome as the financial viability of such alternative strategies is uncertain. Given the persistent low iron ore benchmark prices and higher discounts for lower-grade iron ore, combined with the prospect of decreasing production volumes, Atlas faces significant challenges and risks should it remain as a stand-alone entity. (c) Potential operating cost increases In the recent historic period Atlas has been impacted by increasing operating costs, as can be seen in the graph below. Atlas Iron Limited TARGET S STATEMENT Page 40

42 AUD/WMT 70.0 Full Cash Cost (CFR) 60.0 $ The increase in costs has been driven by a number of factors which may continue to impact Atlas in the future. Key drivers of potential cost increases include lapsing of the current discounts offered by the Pilbara Port Authority, declining production volumes, higher strip ratio driven by more onerous quality requirements, as well as increasing haulage and sea freight costs. Any cost increases will increase the risk of Atlas operating at a loss in the future. (d) Risks associated with Atlas level of indebtedness In the event the Hancock Offer is not successful, Atlas' corporate family and senior secured credit ratings may be further downgraded. Also, if the Hancock Offer is not successful, Atlas performance may continue to deteriorate to such a point that Atlas becomes unable to service its debt or breaches the terms of its debt and thereby enters into a state of default. Under the terms of its debt Atlas is required to maintain a minimum cash balance of $15 million at the end of each month. Amongst its other covenants is a requirement to not suspend all, or substantially all, of the Atlas Group's mining operations for a period longer than 30 consecutive days (although Atlas can and does adjust its operations from time to time, based on market conditions). If Atlas cannot operate profitably and is unable to cease operations to preserve cash without it constituting a breach of covenants, there is a risk that cash is diminished to the point where the covenant is breached and lenders under the Term Loan B Facility will have the option to accelerate repayment of the debt. If the lenders choose to accelerate repayment of the debt, the debt will immediately become due and payable. There exists material uncertainty whether Atlas, on a stand-alone basis and in such a state of default, would have the ability to renegotiate terms with its lenders or source additional funds through debt or equity markets. As such, Atlas may be forced to recapitalise its balance sheet or liquidate its assets, resulting in Atlas Shareholders likely receiving little to no return or recovery, and potentially losing their ownership stake in Atlas entirely. (e) Uncertainty in relation to the available capacity at Utah Point Stockyard 1 Atlas has long-term rights in relation to exporting up to 10 mtpa of production through Stockyard 2 at Utah Point. These long-term rights are supplemented by short-term allocations and spot capacity at Stockyard 1, which are allocated to Atlas from time to time. Please refer to Section 6.5(c) for further details. Should Stockyard 1 capacity not be made available, Atlas may need to reduce its export volumes or incur additional capital investment in order to increase its throughput capacity at Stockyard 2. Both options would have a significant negative impact on Atlas. (f) Reliance on key contractors Atlas relies on a number of key contractors for the provision of mining, crushing, haulage, port and handling services. Any delay in contractors completing work or encountering operational difficulties may lead to a loss of revenue and increased costs. There is also a risk that the loss of one or more contracts with key contractors (including due to insolvency of the contractor) may lead to an increase in Atlas costs of production. Atlas Iron Limited TARGET S STATEMENT Page 41

43 Atlas has considered and continues to consider various mitigants to deal with the loss of a key contractor, but cannot guarantee the loss of a key contractor will not lead to adverse impacts such as an increase in costs and/or decrease in revenue. (g) Currency and foreign exchange risks The Atlas Group earns revenue in US dollars and incurs expenses predominantly in Australian dollars and is consequently exposed to foreign exchange movements. The Atlas Group also has significant exposure to foreign exchange movements on its USD debt under the Term Loan B Facility. This is partially offset by USD currency held in cash. The interest rate on the Term Loan B Facility is a floating interest rate referenced to the 1 month USD LIBOR plus a fixed margin and is unhedged. Refer to Section 2.1 for further information. (h) Other risks In the event the Hancock Offer is not successful, an investment in Atlas Shares will continue to be exposed to various further risk factors, including those which currently apply to a shareholding in Atlas. 8.3 General investment risks (a) Global economic conditions Atlas funding position, financial performance and ability to execute its strategy is impacted by a variety of general global economic, political, social and business conditions. In addition to commodity prices and currency fluctuations, factors that have the potential to impact Atlas business include inflation, interest rates and other general economic factors. Deterioration in any of these conditions could have an adverse impact on Atlas. Domestic and global conditions may affect the value of Atlas Shares. General worldwide economic conditions, changes in government policies, investor perceptions, movements in interest rates and stock markets, prices of Atlas products, variations in the operating costs and development and sustaining capital expenditure which Atlas will require in the future will all impact the value of the shares, some outside of the control of Atlas. (b) Share market risks There can be no guarantee that there will continue to be an active market for Atlas Shares or that the price of Atlas Shares will increase. There may be relatively few buyers or sellers of Atlas Shares on ASX at any given time. This may affect the volatility of the trading price of Atlas Shares on ASX. It may also affect the prevailing trading price at which Atlas Shareholders are able to sell their Atlas Shares on ASX. (c) Tax risks Future changes in tax laws in Australia and other jurisdictions in which Atlas has activities and investment interests, including changes in interpretation or application of existing laws by the courts or taxation authorities, may affect taxation treatment of Atlas securities or the holding or disposal of those securities. The tax consequences for individual investors in Atlas will depend on the individual tax profile and circumstances of the investor and all investors should obtain independent taxation advice with respect to their personal position. 8.4 Risks related to the outcome of the Hancock Offer If you do not accept the Hancock Offer, maintaining your investment in Atlas may also involve the following risks, depending on the outcome of the Hancock Offer: (a) The Atlas Shares acquired by Redstone under the Hancock Offer will reduce the number of Atlas Shares that can be expected to be available for trading on ASX. This is likely to reduce the liquidity of Atlas Shares, and may adversely affect the price at which they might otherwise be expected to trade. Atlas Iron Limited TARGET S STATEMENT Page 42

44 (b) (c) (d) (e) If Redstone acquires control of Atlas, it will have enhanced capacity to influence the manner in which Atlas business is conducted. Redstone s intentions for Atlas are detailed in sections 4 and 5 of the Bidder s Statement, but those intentions may change, particularly as a result of the strategic review that Redstone intends to undertake. Changes to the business which are implemented by Redstone may mean that you may subsequently choose to dispose of your Atlas Shares at a time when market conditions are less favourable than those prevailing at the date of this Target s Statement. Atlas Term Loan B Facility contains a number of events of default, including change of control as defined in the Term Loan B Facility (which includes any person or group becoming the beneficial owner, directly or indirectly, in the aggregate of more than 50% of the total voting power of Atlas Shares). The occurrence of such events of default permits the lenders to accelerate repayment of the loans and enforce the security. Details of the Term Loan B Facility are set out in Section 6.8(a). If Redstone acquires a Relevant Interest in less than 50% of all Atlas Shares and the Hancock Offer becomes or is declared unconditional, the change of control event of default will not be triggered and the debt repayment schedule for Atlas Term Loan B Facility will remain unchanged. If Redstone acquires a Relevant Interest in between 50% and 90% of all Atlas Shares and the Hancock Offer becomes or is declared unconditional, the lenders under the Term Loan B Facility will have the option to accelerate repayment of the debt. If the lenders choose to accelerate repayment of the debt, the debt will immediately become due and payable. Set out below is a non-exhaustive list of funding options for the repayment of the Term Loan B and their potential implications for Atlas minority shareholders in this scenario: (a) Loan Facility from Redstone: In section 4.1 of the Bidder s Statement, Redstone has stated that should Redstone s voting power in Atlas exceed 50%, if Atlas requires funding support to repay the Term Loan B Facility, Redstone will offer to make available to Atlas (by way of a loan facility) such amount as may be necessary to enable Atlas to meet its repayment obligation in relation to the Term Loan B Facility, or will offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders). Redstone has stated that any such offer of funding required by Atlas from Redstone will be on terms similar to those of the Term Loan B Facility. Refer to section 2 of the Bidder s Statement for details in relation to Redstone s source of funds. If Redstone provides an unsecured loan facility to Atlas, funding may be made available promptly for the required immediate repayment of the Term Loan B Facility. However, if Redstone requires the loan facility to be secured over Atlas assets, it may require Atlas Shareholder approval and the funding may not be able to be made available sufficiently quickly for the required immediate repayment of the Term Loan B Facility. Accordingly, there is no guarantee that Atlas could repay the lenders in this scenario. Atlas and Redstone have not agreed to the terms for the provision of any funding to Atlas, nor has Atlas, Redstone and the lenders agreed to the terms of any acquisition of the debt by Redstone. Accordingly, there is no guarantee that either options will be able to be implemented. (b) (c) (d) Acquisition of the Term Loan B Facility by Redstone: Redstone has stated it may offer to step-in to the Term Loan B Facility (by way of acquiring that debt from the lenders). However, Atlas, Redstone and the lenders have not agreed as to the terms of such a deal, and as such there is no guarantee that this option will be able to be implemented. Renegotiation of the Term Loan B Facility by Atlas: Atlas may seek to renegotiate the Term Loan B Facility with its lenders. However, there exists material uncertainty as to whether Atlas would have the ability to renegotiate with lenders, or whether any such renegotiation would result in more or less favourable terms for Atlas. Equity Raising by Atlas: Atlas may seek to raise additional funds from the equity markets. However, there exists material uncertainty as to whether such an equity raising would be successful in providing sufficient funding within the timeframe required for the required immediate repayment of the Term Loan B Facility. Additionally, any equity raising would be dilutive to Atlas Shareholders. In the event that lenders under the Term Loan B Facility demand repayment and Atlas is unable to repay the Term Loan B Facility, Atlas may become insolvent. Atlas Iron Limited TARGET S STATEMENT Page 43

45 If Redstone acquires 90% or more of all Atlas Shares and the compulsory acquisition provisions of the Corporations Act are satisfied, Redstone intends to compulsorily acquire the Atlas Shares that it does not already own. If Redstone subsequently exercises compulsory acquisition rights, you will cease to be an Atlas Shareholder and will not be exposed to any risk associated with the Term Loan B Facility. Redstone has stated that if it acquires a Relevant Interest in more than 50% of all Atlas Shares, it intends to procure that Atlas is removed from the official list of ASX (if it becomes entitled to do so). If Atlas is removed from the official list of ASX it may adversely impact your ability to sell your shares, the price at which you can sell your shares, and the level of relevant Atlas information you are able to access. Refer to Section 5.2(a) for further details. If Redstone acquires a Relevant Interest in 75% or more of all Atlas Shares, it may be in a position to cast the votes required to determine the outcome of a Special resolution at a meeting of Atlas Shareholders. This would enable it to pass resolutions, for example, to amend Atlas constitution, giving Redstone significant power to control the operations and strategy of Atlas. If Redstone acquires 90% or more of all Atlas Shares and the compulsory acquisition provisions of the Corporations Act are satisfied, Redstone will be entitled to compulsorily acquire the Atlas Shares that it does not already own. In section 5.10 of the Bidder s Statement, Hancock has stated that it intends to proceed with compulsory acquisition of all remaining Atlas Shares or Atlas Options. For further details of compulsory acquisition refer to section 5.10 of the Bidder s Statement. If you choose not to accept the Hancock Offer and Redstone subsequently exercises compulsory acquisition rights, you are likely to be paid later than other Atlas Shareholders who accept the Hancock Offer. Atlas Iron Limited TARGET S STATEMENT Page 44

46 9 AUSTRALIAN TAXATION CONSIDERATIONS The following is intended only as a general guide to the Australian income tax position, and other indirect tax implications, under current Australian (federal and state/territory) tax law and administrative practice as at the date of this Target s Statement. Australian tax is a complex, and ever changing, area of law and the tax implications for you may differ from those detailed below, depending on your particular circumstances. It is unlikely two (2) shareholders circumstances are the same. As these statements are of a general nature only, it is imperative that you obtain your own independent professional advice in respect of the tax implications of the Hancock Offer. The following is an overview of the likely Australian tax considerations for an Australian tax resident or non- Australian tax resident Shareholder who holds their Atlas Shares on capital account and disposes of their shares under the Hancock Offer. The following may not apply to certain other Atlas Shareholders, such as if you are a dealer in shares, you hold Atlas Shares on revenue account or as trading stock, if you are an insurance company or a collective investment scheme, or if Division 230 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) applies to you and you have made an election to apply certain methods to calculating gains and losses. In addition, the following may not apply to you if you acquired your shares as a result of an employment or services arrangement. Such persons may be subject to special rules or any gain on the disposal of their Atlas Shares may be assessed as ordinary income. The Australian income tax implications for non-australian tax resident Shareholders are also complex and will depend upon their own specific circumstances. Non-Australian tax resident Shareholders may also have tax implications in their country of residence. 9.1 Income Tax (a) Australian tax resident Atlas Shareholders The transfer of Atlas Shares to Redstone pursuant to the Hancock Offer will give rise to a capital gains tax (CGT) event for you. Australian tax resident Shareholders may make a capital gain or a capital loss. If you accept the Hancock Offer, the time of the CGT event will be the date when you accept the Hancock Offer to dispose of your Atlas shares. You may make a capital gain equal to the capital proceeds received (the cash consideration received from Redstone) less the cost base of your Atlas Shares, all generally expressed in Australian dollars (AUD).The cost base of your Atlas Shares is generally the AUD cost of their acquisition plus certain other amounts associated with their acquisition and disposal such as brokerage or duty. However, there are provisions that may adjust the cost base of your shares. If you are an individual, trustee of a trust or a complying superannuation entity, and you acquired your Atlas Shares at least 12 months prior to accepting the Hancock Offer, you may be entitled to concessional discount CGT treatment under Division 115 of the ITAA 1997 in respect of any capital gain. This will depend upon your individual circumstances. If the reduced cost base of your Atlas Shares (noting there are provisions that may adjust the reduced cost base of your shares) is greater than the capital proceeds you received, you may realise a capital loss equal to the difference. This capital loss may be applied to reduce a capital gain in the same or a future tax year. (b) Non-Australian tax resident Shareholders This section applies to Atlas Shareholders who are not residents of Australia for income tax purposes (non- Australian tax resident) and that hold Atlas Shares on capital account and are not used at any time in carrying on a business through a permanent establishment (as defined) in Australia. Such Shareholders may only be subject to Australian CGT upon disposal of their Atlas Shares where those Atlas Shares constitute an indirect Australian real property interest. Atlas Shares will constitute an indirect Australian real property interest where both of the following tests are met: (i) the non-australian tax resident Shareholder, together with its associates (as defined for Australian tax purposes), holds 10 per cent or more of Atlas issued shares at the time of the CGT event or for any 12 month period in the 24 months prior to disposal (the non-portfolio interest test) ; and Atlas Iron Limited TARGET S STATEMENT Page 45

47 (ii) more than 50 per cent of the market value of the assets of Atlas is represented (directly or indirectly) by real property or mining, quarrying or prospecting rights in Australia (the principal asset test). Non-Australian tax resident shareholders should seek independent advice on applying these tests. If your shares do not constitute an indirect Australian real property interest, any capital gain or loss realised on the disposal of your Atlas Shares should be disregarded for Australian income tax purposes. If your shares do constitute an indirect Australian real property interest, the transfer of Atlas Shares to Redstone pursuant to the Hancock Offer will trigger a CGT event for you. Non-Australian tax resident Shareholders may make a capital gain or a capital loss in relation to the sale of shares on capital account (again generally calculated in AUD). You may make a capital gain equal to the capital proceeds received (the cash consideration received from Redstone) less the cost base of your Atlas Shares. The cost base of your Atlas Shares is generally the cost of their acquisition plus certain other amounts associated with their acquisition and disposal such as brokerage or duty. However, there are provisions that may adjust the cost base of your shares. If the reduced cost base of your Atlas Shares (noting there are provisions that may adjust the reduced cost base of your shares) is greater than the capital proceeds you received, you may realise a capital loss equal to the difference. A non-australian tax resident Atlas Shareholder who has previously been a resident of Australia and chose to disregard a capital gain or loss on ceasing to be an Australian resident in relation to their Atlas Shares will be subject to Australian CGT consequences on disposal of the Atlas Shares. Further, you should also seek advice from your tax advisor as to the taxation implications in your country of residence and in Australia (c) Foreign resident capital gains tax withholding A foreign resident CGT withholding applies from 1 July 2016 to any transaction involving the acquisition of the legal ownership of an asset that is an indirect Australian real property interest from a relevant foreign resident. The withholding tax rate is currently 12.5%. Under these rules, a relevant foreign resident is any entity that, at the time the transaction is entered into: (i) (ii) (iii) (iv) is known by the purchaser to be a foreign resident; is reasonably believed by the purchaser to be a foreign resident; is not reasonably believed by the purchaser to be an Australian resident, and either has an address outside Australia or the purchaser is authorised to provide a financial benefit relating to the transaction to a place outside Australia; or has a connection outside Australia of a kind specified in the regulations. Under these rules, Redstone will be required to withhold 12.5% of the cash consideration payable under the Hancock Offer where it considers an Atlas shareholder to be a relevant foreign resident and the Atlas shares of the shareholder to be an indirect Australian real property interest. However, Redstone will not be required to withhold any amounts from the cash consideration payable to an Atlas Shareholder under these rules if Redstone is provided with one of the following declarations by an Atlas shareholder (unless Redstone considers the declaration to be false): (i) (ii) the Atlas Shareholder is an Australian tax resident (residency declaration); or the Atlas Shares held by the Atlas Shareholder are not indirect Australian real property interests (interest declaration). Please refer to Section 9.1 above for the definition of indirect Australian real property interest. Atlas Iron Limited TARGET S STATEMENT Page 46

48 Any Atlas Shareholder who believes they may be impacted by the foreign resident CGT withholding rules, or is unsure about whether they are able to make, and how to make, a residency declaration or an interest declaration, should seek their own professional tax advice prior to accepting the Hancock Offer. Any Atlas Shareholders who receive their cash proceeds net of foreign resident CGT withholding may be entitled to a credit in Australia for the amount paid, upon lodging an Australian income tax return. If you are unsure about whether a credit for the withholding tax may be claimed, Atlas recommends you seek your own tax advice in this regard. 9.2 Indirect Taxes (a) Duty Under the respective transfer / stamp duty and landholder duty provisions of each of the Australian states and territories, no duty should be payable by the Atlas Shareholders on their sale of the Atlas Shares. (b) GST Under current GST legislation, no GST should be payable by Atlas Shareholders in respect of the disposal of their shares in Atlas, regardless of whether or not the Atlas Shareholder is registered for GST. Atlas Shareholders may incur Australian GST on costs (such as third party brokerage and adviser fees) that relate to the Scheme. Atlas Shareholders that are registered for Australian GST may be entitled to recover the Australian GST payable on the costs. However, in some circumstances, recovery of the Australian GST payable on the costs, or a portion thereof, may be restricted. This will depend on each Atlas Shareholder's individual circumstances and it is recommended that professional tax advice be sought. Atlas Iron Limited TARGET S STATEMENT Page 47

49 10 KEY FEATURES OF THE HANCOCK OFFER 10.1 Offer Price The price being offered by Redstone is $0.042 per Atlas Share Offer Period The Hancock Offer is currently open for acceptance and will close at 5.00pm (Perth time) on 3 August 2018, unless extended or withdrawn in accordance with the Corporations Act. The circumstances in which Redstone may extend or withdraw the Hancock Offer are set out in Sections 10.6 and Offer Conditions The Offer is subject to none of the following occurring during the period commencing on 18 June 2018 and ending at the end of the Offer Period (each inclusive), none of the following events occur (each as a separate condition): (a) (b) (c) Atlas converts all or any of its shares into a larger or small number of shares; Atlas or a subsidiary of Atlas resolves to reduce its share capital in any way; Atlas or a subsidiary of Atlas: (i) (ii) enters in to a buy-back agreement; or resolves to approve the terms of a buy-back agreement under section 257C(1) or 257D(1) of the Corporations Act; (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) Atlas or a subsidiary of Atlas issues shares, other than Atlas Shares issued as a result of exercise of the Atlas Options, or grants an option of its shares, or agrees to make such an issue or grant such an option; Atlas or a subsidiary of Atlas issues, or agrees to issue, convertible notes; Atlas or a subsidiary of Atlas disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property; Atlas or a subsidiary of Atlas grants, or agrees to grant, a security interest over the whole, or a substantial part, of its business or property; Atlas or a subsidiary of Atlas resolves to be wound up; a liquidator or provisional liquidator of Atlas or of a subsidiary of Atlas is appointed; a court makes an order for the winding up of Atlas or a subsidiary of Atlas; an administrator of Atlas or a subsidiary of Atlas, is appointed under section 436A, 436B or 436C of the Corporations Act; Atlas or a subsidiary of Atlas executes a deed of company arrangement; or a receiver, or a receive and manager, is appointed in relation to the whole, or a substantial part, of the property of Atlas or a subsidiary of Atlas, (the Offer Conditions). Atlas Iron Limited TARGET S STATEMENT Page 48

50 If any of the Offer Conditions are not satisfied or have not been waived, Redstone will have an option as to whether to proceed with the Hancock Offer or allow the Hancock Offer to lapse. If the Hancock Offer lapses, all acceptances of the Hancock Offer will be void and of no effect Status of Offer Conditions Section 8.14 of the Bidder's Statement states that Redstone will give the notice on the status of the Offer Conditions on 27 July 2018 (subject to extension in accordance with the Corporations Act if the Offer Period is extended). Redstone is required to set out in this notice: (a) (b) (c) whether the Hancock Offer is free of the Offer Conditions; whether, so far has Redstone knows, the Offer Conditions have been fulfilled; and Redstone s voting power in Atlas at that time Lapse of Hancock Offer The Hancock Offer will lapse if the Offer Conditions are not waived or satisfied by the end of the Offer Period. If the Hancock Offer lapses, all contracts resulting from acceptance of the Hancock Offer and all acceptances that have not yet resolved in binding contracts are void and you will retain ownership of your Atlas Shares Variation of the Hancock Offer Redstone may vary the Hancock Offer in any of the ways permitted by the Corporations Act, including by extending the Offer Period or by increasing the Offer Price, provided the varied terms and conditions are not less favourable to Atlas Shareholders than the Hancock Offer. If Redstone varies the Hancock Offer in any of those ways, it must give written notice to ASIC and Atlas and send you a copy of that notice (provided, however, that Redstone will not be required to send you a copy of the notice if, at the time of the variation, you have already accepted the Hancock Offer, the Hancock Offer is unconditional and the variation merely extends the Offer Period) Extension of Offer Period Redstone may extend the Offer Period at any time before giving the notice on the status of the Offer Conditions (refer to Section 10.4 above) while the Hancock Offer is subject to the Offer Conditions. However, if the Hancock Offer is unconditional, Redstone may extend the Offer Period at any time before the end of the Offer Period. In addition, there will be an automatic extension of the Offer Period if, within the last seven days of the Offer Period, Redstone s voting power in Atlas increases to more than 50% or the Hancock Offer is varied to improve the Offer Price. In this case the Offer Period will be automatically extended so that it ends 14 days after the increase in Redstone s voting power in Atlas increases to more than 50% or the improvement in the Offer Price (as applicable) Withdrawal of Hancock Offer Redstone may not withdraw the Hancock Offer if you have already accepted it. However, if the Offer Conditions have not been satisfied or waived at the end of the Offer Period, then all acceptances will be void. Before you accept the Hancock Offer, Redstone may withdraw the Hancock Offer with the written consent of ASIC and subject to the conditions (if any) specified in such consent Effect of acceptance Once you have accepted the Hancock Offer, you will be unable to revoke your acceptance and the contract resulting from your acceptance will be binding on you. In addition, you will be unable to withdraw your acceptance of the Hancock Offer or otherwise dispose of your Atlas Shares, except as follows: (a) if, at the end of the Offer Period, an Offer Condition has not been satisfied or waived, the Hancock Offer will automatically terminate and your Atlas Shares will be returned to you; or Atlas Iron Limited TARGET S STATEMENT Page 49

51 (b) if the Hancock Offer is varied in accordance with the Corporations Act in a way that postpones for more than one month the time when Redstone has to meet its obligations under the Hancock Offer, and, at the time, the Hancock Offer is subject to one or more Offer Conditions, you may be able to withdraw your acceptance in accordance with section 650E of the Corporations Act. If Redstone improves the Offer Price, all Atlas Shareholders who accept the Hancock Offer (whether or not they have accepted prior to that improvement) will be entitled to the benefit of that improved price. The effect of acceptance of the Hancock Offer is further detailed in section 8.5 of the Bidder's Statement. You should read those provisions in full to understand the effect that acceptance will have on your ability to exercise the rights attaching to your Atlas Shares and the representations and warranties that you are deemed to give to Redstone by accepting the Hancock Offer When you will receive the Offer Price In summary, if you accept the Hancock Offer: (a) (b) before the Unconditional Date, Redstone will pay you the Offer Price within seven days after the Unconditional Date; and after the Unconditional Date, Redstone will pay you the Offer Price within seven days after you accept the Hancock Offer. Refer to section 8.16 of the Bidder's Statement for further details on when you will be paid the Offer Price by Redstone Compulsory acquisition Redstone has indicated in section 5.10 of its Bidder's Statement that if it satisfies the required thresholds it presently intends to compulsorily acquire any outstanding Atlas Shares or Atlas Options. Redstone will be entitled to compulsorily acquire any outstanding Atlas Shares for which it has not received acceptances on the same terms as the Hancock Offer if, during or at the end of the Offer Period, Redstone (taken together with its associates) has a Relevant Interest in at least 90% (by number) of Atlas Shares. At the date of this Target s Statement, there is one other Atlas Shareholder in addition to Redstone who controls more than 10% of the Atlas Shares. That Atlas Shareholder is therefore capable of blocking compulsory acquisition if it chooses not to accept the Hancock Offer and does not otherwise dispose of its Atlas Shares. If the compulsory acquisition thresholds are met, Redstone will have one month from the end of the Offer Period within which to give compulsory acquisition notices to Atlas Shareholders who have not accepted the Hancock Offer, but it may choose to commence compulsory acquisition as soon as the relevant thresholders are satisfied. An Atlas Shareholder has statutory rights to challenge compulsory acquisition, however this will require the relevant Atlas Shareholder to establish that the terms of the Hancock Offer do not represent fair value for the Atlas Shares. Atlas Shareholders should be aware that, if their Atlas Shares are acquired compulsorily, they are not likely to receive any payment until at least one month after the compulsory acquisition notices are sent. It is also possible that Redstone will, at some time after the end of the Offer Period, become the beneficial holder of 90% of the Atlas Shares. Redstone would then have rights to compulsorily acquire Atlas Shares not owned by it within six months of becoming the holder of 90%. Redstone s price for compulsory acquisition under this procedure would have to be considered in a report of an independent expert. Atlas Iron Limited TARGET S STATEMENT Page 50

52 11 ADDITIONAL INFORMATION 11.1 Interests of Directors (a) Atlas marketable securities The number, description and amount of Atlas marketable securities controlled or held by, or on behalf of, each Director as at the date of this Target s Statement are: Director Atlas Shares Atlas Options Eugene Davis - - Cliff Lawrenson 8,891, ,123,243 2 Alan Carr - - Cheryl Edwardes 208,100 - Daniel Harris - - Notes: 1. Mr Lawrenson holds 8,891,024 Atlas Shares through Solution Management Pty Ltd, a company which Mr Lawrenson controls. 2. Comprised of: (a) 60,281,100 unvested, unlisted nil cash exercise Atlas Options exercisable on or before 23 November 2021; and (b) 47,842,143 unvested, unlisted nil cash exercise Atlas Options exercisable on or before 25 October Please refer to Section 6.13 for the vesting conditions in relation to Mr Lawrenson s Atlas Options. No Director acquired or disposed of a Relevant Interest in any Atlas securities in the four month period ending on the date immediately before the date of this Target s Statement. However, Directors may indirectly, and without their knowledge, hold Atlas Shares through memberships of professional superannuation or investment funds where such funds hold Atlas Shares for investment purposes. (b) Redstone or Hancock marketable securities There are no marketable securities of Redstone or Hancock controlled or held by, or on behalf of, any Directors as at the date of this Target s Statement. No Director acquired or disposed of a Relevant Interest in any Redstone or Hancock securities in the four month period ending on the date immediately before the date of this Target s Statement. (c) Participation in the Hancock Offer Except as set out in this Section 11.1 or elsewhere in this Target s Statement, all Directors will be treated in the same way under the Hancock Offer as all other Atlas Shareholders. (d) Interests of Directors in contracts entered into by Redstone or Hancock Except as set out in this Section 11.1 or elsewhere in this Target s Statement, none of the Directors have any interests in contracts entered into by Redstone or Hancock. (e) Other agreements or arrangements with Directors in connection with the Hancock Offer Except as set out in this Section 11.1 or elsewhere in this Target s Statement there are no other agreements or arrangements between any Director and any other person in connection with or conditional upon the outcome of the Hancock Offer, other than in their capacity as an Atlas Shareholder or Atlas Optionholder (as applicable). Atlas Iron Limited TARGET S STATEMENT Page 51

53 Except as set out in this Section 11.1 or elsewhere in this Target s Statement no Director has a material interest in relation to the Hancock Offer other than in their capacity as an Atlas Shareholder or Atlas Optionholder (as applicable) Agreements or arrangements with Directors and executive officers (a) Deeds of indemnity, access and insurance Atlas has entered into Deeds of Indemnity, Insurance and Access with its Directors and various executive officers, on customary terms. Atlas pays premiums in respect of a directors and officers insurance policy for the benefit of the Directors and executive officers. Atlas may, prior to or on the Implementation Date, enter into arrangements to secure directors and officers run-off insurance for any and all directors and executive officers of each member of the Atlas Group for up to a 7 year period from their respective retirement dates. (b) Other termination benefits Except as set out in this Section 11.2(b) (including the termination notice and redundancy entitlements in the table below) or elsewhere in this Target s Statement, there are no payments or other benefits that are proposed to: (i) (ii) be made or given to any director, secretary or executive officer of Atlas as compensation for loss of, or as consideration for or in connection with his or her retirement from, office in Atlas or in a Related Body Corporate of Atlas; or be made or given to any director, secretary or executive officer of any Related Body Corporate of Atlas as compensation for the loss of, or as consideration for or in connection with his or her retirement from, office in that body corporate or in Atlas. Cliff Lawrenson Mark Hancock Jeremy Sinclair Chris Els Bronwyn Kerr Total fixed remuneration per annum (inclusive of superannuation) Termination notice without cause (which can be paid out in lieu of notice) Redundancy entitlement $669,790 $492,750 $574,875 $427,050 $383, months 6 months 6 months 6 months 6 months National Employment Standards Greater of 4 weeks for every year of service or 6 months Greater of 4 weeks for every year of service or 6 months Greater of 4 weeks for every year of service or 6 months Greater of 4 weeks for every year of service or 6 months 11.3 Substantial holders At 13 July 2018, being the last practicable date prior to the date of this Target s Statement, the following persons had notified Atlas that they had Voting Power in 5% or more of Atlas Shares: Shareholder Name Number of Atlas Shares % of Atlas Shares Georgina Hope Rinehart, Hancock Prospecting Pty Ltd, Redstone Corporation Pty Ltd Bianca Rinehart (in her capacity as trustee of the Hope Margaret Hancock Trust) 1,852,006, % 1,852,006, % 1 Fortescue Metals Group Ltd 1,391,941, % 2 Note: 1. The interest disclosed in the initial substantial holder notice in relation to a relevant interest held by Bianca Rinehart (in her capacity as trustee of the Hope Margaret Hancock Trust) arises by virtue of the operation of section 608(3)(a) of the Corporations Act and Atlas Iron Limited TARGET S STATEMENT Page 52

54 relates to the same shares which are the subject of the notice of initial substantial shareholding lodged by Hancock Prospecting Pty Ltd. 2. Fortescue Metals Group Limited has an economic interest in an additional approximate 4.9% of Atlas Shares. As a result, Fortescue Metals Group Limited has an aggregate physical and economic interest in 19.19% of Atlas Shares ASX announcements The following announcements have been lodged on Atlas' ASX platform since the lodgement of Atlas' half yearly report of 31 December 2017: Date Description of Announcement Date Description of Announcement 12/07/2018 Extension of time for dispatch of Target's 13/06/2018 Becoming a substantial holder Statement 12/07/2018 June 2018 Quarterly Activities Report 12/06/2018 Becoming a substantial holder from FMG 02/07/2018 Notice that Offers have been sent 12/06/2018 Ceasing to be a substantial holder 02/07/2018 FAU: Multiple conductors with VMS potential identified EMU 02/07/2018 TOV: AGO Panel Declines to Conduct Proceedings 08/06/2018 Change to Credit Rating 08/06/2018 Atlas Announces Changes to the SID with Mineral Resources 29/06/2018 Supplementary Bidder s Statement 08/06/2018 Becoming a substantial holder 29/06/2018 Replacement Bidder s Statement 07/06/2018 Ceasing to be a substantial holder 29/06/2018 Interim activities update 07/06/2018 FMG: Fortescue announces acquisition of a stake in Atlas Iron 29/06/2018 Atlas recommends Hancock Offer 22/05/2018 Change in substantial holding 28/06/2018 Response to Fortescue media release 18/05/2018 Change in substantial holding 26/06/2018 Supplementary Bidder s Statement 17/05/2018 Financial Update 26/06/2018 TOV: AGO - Panel Receives Application 16/05/2018 Change in substantial holding from MQG 21/60/2018 Notice of Register Date (Redstone Offer) 15/05/2018 Change in substantial holding 21/06/2018 MinRes terminates Scheme Implementation Deed 21/06/2018 Atlas withdraws MinRes Scheme recommendation 11/05/2018 Change in substantial holding 10/05/2018 Change in substantial holding 20/06/2018 MIN: Atlas Iron Ltd Redstone Offer 07/05/2018 Becoming a substantial shareholder 19/06/2018 Change in substantial holder 26/04/2018 Clarification regarding Unmarketable Parcel sale facility 19/06/2018 Ceasing to be a substantial holder 24/04/2018 Becoming a substantial holder 19/06/2018 Atlas commences matching rights process 24/04/2018 Atlas implements Unmarketable Parcel share sale facility 18/06/2018 MIN: Redstone s proposal to acquire Atlas Iron 23/04/2018 Becoming a substantial holder 18/06/2018 Unmarketable Parcel Sale Facility update 20/04/2018 Chairman's letter - Scheme of Arrangement 18/06/2018 Change in substantial holding 20/04/2018 Becoming a substantial holder 18/06/2018 Bidder s Statement from Hancock Prospecting Pty Ltd 18/06/ cents per share takeover offer from Hancock 17/04/2018 Becoming a substantial holder from MQG 17/04/2018 March 2018 Quarterly Activities Report 18/06/2018 Trading Halt 13/04/2018 Ceasing to be a substantial holder (WAMCO) 18/06/2018 Atlas ships first lithium DSO 09/04/2018 MIN: Acquisition of Atlas Iron Limited 18/06/2018 PLS: First DSO Shipment for Pilgangoora 09/04/2018 Atlas executes Scheme Implementation Deed with MRL 15/06/2018 Change to Credit Rating 05/04/2018 Trading Halt 14/06/2018 Becoming a substantial holder 27/03/2018 Appendix 3B 14/06/2018 Ceasing to be a substantial holder 14/03/2018 March 2018 Investor Presentation 14/06/2018 North West Infrastructure update 12/03/2018 Atlas to export manganese as part of diversification plan 13/06/2018 Ceasing to be a substantial holder from MQG 13/06/2018 Trading Halt 02/03/2018 Atlas to export Pilgangoora lithium DSO to Sinosteel Atlas Iron Limited TARGET S STATEMENT Page 53

55 11.5 Consents (a) Consents The following parties have given and have not withdrawn, before the date of issue of this Target s Statement, their written consent to be named in this Target s Statement in the form and context in which they are named: (i) (ii) (iii) (iv) (v) (vi) (vii) DLA Piper Australia as legal advisers to Atlas; BDO as Independent Expert; KPMG as auditor of Atlas; CSA Global as Independent Technical Specialist; Houlihan Lokey as financial adviser to Atlas; Computershare as Atlas Share Registry; and McMahon Mining Title Services Pty Ltd as Atlas' tenement manager. BDO has also given and has not withdrawn, before the date of issue of this Target s Statement, its written consent to the inclusion of its Independent Expert's Report in this Target s Statement in the form and context in which it is included and to all references in this Target s Statement to that Independent Expert's Report in the form and context in which they appear. CSA Global has also give and not withdrawn, before the date of issue of this Target s Statement, its written consent to inclusion of its Independent Technical Specialist s Report in this Target s Statement in the form and context in which it is included and to all references in this Target s Statement to that Report in the form and context in which they appear. McMahon Mining Title Services Pty Ltd has also give and not withdrawn, before the date of issue of this Target s Statement, its written consent to inclusion of its Atlas Iron Limited Tenure Review in the Independent Technical Specialist s Report forming part of this Target s Statement, in the form and context in which it is included and to all references in this Target s Statement to that Tenure Review in the form and context in which they appear. (b) Disclaimer Each person referred to in Section 11.5(a): (i) (ii) (iii) has not authorised or caused the issue of this Target s Statement; does not make, or purport to make, any statement in this Target s Statement or any statement on which a statement in this Target s Statement is based other than as specified in Section 11.5(a); and to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for any part of this Target s Statement other than a reference to its name and any statement or report which has been included in this Target s Statement with the consent of that person referred to in Section 11.5(a). As permitted by ASIC Class Order 13/521, this Target s Statement contains statements that are made, or based on statements made, in documents lodged with ASIC or ASX (in compliance with the Listing Rules). Pursuant to this Class Order, the consent of persons such statements are attributed is not required for the inclusion of those statements in this Target s Statement. Refer to Section In accordance with ASIC Class Order 13/521, any Atlas Shareholder who would like to receive a copy of those documents (or relevant extracts from those documents) may obtain a copy free of change by contacting Atlas. Atlas Iron Limited TARGET S STATEMENT Page 54

56 Additionally, as permitted by ASIC Corporations (Consents to Statements) Instrument 2016/72, this Target s Statement may include or be accompanied by certain statements: (a) (b) fairly representing a statement by an official person; or a public official document or published book, journal or comparable publication. Pursuant to this Class Order, the consent of persons such statements are attributed to is not required for inclusion of those statements in this Target s Statement. As permitted by ASIC Corporations (Consents to Statements) Instrument 2016/72, this Target s Statement also contains trading data obtained from Bloomberg without its consent Competent Persons' Statements (a) Atlas Group Ore Reserve Estimations The information in this Target s Statement that relates to Ore Reserve estimations for Atlas Group projects, is based on, and fairly represents, information compiled by Mr Adam Liebenberg, a Competent Person who is a member of the Australasian Institute of Mining and Metallurgy. Adam Liebenberg is a full time employee of Atlas and is an Atlas Optionholder. Adam Liebenberg has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Adam Liebenberg consents to the inclusion in this Target s Statement of the matters based on his information in the form and context in which it appears. (b) Mineral Resource Estimation Davidson Creek Hub Project (excluding Miji Miji deposit) The information in this Target s Statement that relates to Mineral Resource estimations on Atlas Davidson Creek Hub Project (excluding the Miji Miji deposit) is based on, and fairly represents, information compiled by Mr John Graindorge, a Competent Person who is a Chartered Professional member of the Australasian Institute of Mining and Metallurgy. John Graindorge is a full time employee of Snowden Mining Industry Consultants Pty Ltd. John Graindorge has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. John Graindorge consents to the inclusion in this Target s Statement of the matters based on his information in the form and context in which it appears. (c) Atlas Group Exploration Results and Mineral Resource Estimations The information in this Target s Statement that relates to Exploration Results and Mineral Resource estimations for Atlas Group projects (including the Miji Miji deposit but excluding the Davidson Creek Hub Project Mineral Resources and the Ridley Project Mineral Resource), is based on, and fairly represents, information compiled by Mr Leigh Slomp, a Competent Person who is a member of the Australasian Institute of Mining and Metallurgy. Leigh Slomp is a full time employee of Atlas and an Atlas Shareholder and Atlas Optionholder. Leigh Slomp has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Leigh Slomp consents to the inclusion in this Target s Statement of the matters based on his information in the form and context in which it appears. (d) Mineral Resource Estimation Ridley The information in this Target s Statement that relates to Mineral Resource estimation for the Ridley project, is based on, and fairly represents, information compiled by Malcolm Titley, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. Malcolm Titley is a part time consultant of CSA Global (UK) Ltd. Malcolm Titley has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Malcolm Titley consents to the inclusion in this Target s Statement of the matters based on his information in the form and context in which it appears. Atlas Iron Limited TARGET S STATEMENT Page 55

57 The Mineral Resource at Ridley was publicly reported by Atlas to the ASX on 26 November Malcolm Titley confirms he is not aware of any new information or data that materially affects the information included in that market announcement and that all material assumptions and technical parameters underpinning the estimates in that market announcement continue to apply and have not materially changed Other material information There is no other information that Atlas Shareholders or their professional advisers would reasonably require to make an informed assessment on whether to accept the Hancock Offer, being information which: (a) (b) is reasonable for Atlas Shareholders and their professional advisers to expect to find in this Target s Statement; and is known to any of the Directors. In deciding what information should be included in this Target s Statement, the Directors have had regard to, amongst other things, the matters which Atlas Shareholders (or their professional advisers) may reasonably be expected to know, including information contained in documents previously sent to Atlas Shareholders and information available from public sources such as the ASX, ASIC and Atlas website at Atlas Iron Limited TARGET S STATEMENT Page 56

58 12 AUTHORISATION This Target s Statement is dated 16 July 2018 and was approved pursuant to a unanimous resolution passed at a meeting of the Directors. Signed for and on behalf of Atlas Iron Limited Cliff Lawrenson Managing Director Atlas Iron Limited TARGET S STATEMENT Page 57

59 13 GLOSSARY In this Target s Statement, unless the context requires otherwise: $ or AUD means the lawful currency of Australia. AEST means Australian Eastern Standard Time. Annexure means an annexure to this Target s Statement. ASIC means the Australian Securities & Investments Commission. ASX means ASX Limited (ABN ) or the Australian Securities Exchange, as appropriate. Atlas means Atlas Iron Limited (ACN ). Atlas Board means the board of directors of Atlas. Atlas Group means Atlas and its Subsidiaries, and a member of the Atlas Group means any one of them. Atlas Option means an unlisted option to acquire an Atlas Share. Atlas Optionholder means a holder of one or more Atlas Options. Atlas Register means the share register of Atlas Shareholders kept pursuant to the Corporations Act. Atlas Share means a fully paid ordinary share in the capital of Atlas. Atlas Shareholder means a person registered in the Atlas Register as the holder of one or more Atlas Shares. Bidder s Statement means the replacement statement by Redstone under Part 6.5 of the Corporations Act relating to the Hancock Offer dated 29 June BDO means BDO Corporate Finance (WA) Pty Ltd. Business Day means a day that is not a Saturday, Sunday or a public holiday on which banks are open for general banking business in Perth, Western Australia. C1 means costs of mining, processing, port and other direct costs incurred to the point of a wet metric tonne passing the ship's rail. CFR means cost and freight. CGT means capital gains tax. Competing Minority Shareholder has the meaning given to that term in Section 5.1(c). Computershare means Computershare Investor Services Pty Limited. Control has the meaning given to that term in section 50AA of the Corporations Act and Controlled has the corresponding meaning. Corporations Act means the Corporations Act 2001 (Cth). CSA Global means CSA Global Pty Ltd. Directors mean the directors of Atlas. dmt means dry metric tonne. DSO means Direct Shipping Ore. Atlas Iron Limited TARGET S STATEMENT Page 58

60 FOB means free on board. Full Cash Costs means costs including C1 costs, royalties, freight, corporate and administration, exploration and evaluation, interest expense, contractor profit share and sustaining capital expenditure, but excludes depreciation and amortisation, one-off restructuring costs, suspension and ramp up costs of operating mine sites, and other non-cash expenses. Full cash costs are derived from unaudited management accounts. FY means financial year. GST means the tax levied under the A New Tax System (Goods and Services Tax) Act 1999 (Cth). Hancock means Hancock Prospecting Pty Ltd ACN Hancock Offer means the offer by Hancock, through Redstone, under Chapter 6 of the Corporations Act contained in the Bidder s Statement. Houlihan Lokey means Houlihan Lokey (Australia) Pty Limited. Independent Expert means BDO. Independent Expert s Report means the report of BDO in Annexure 1. Independent Technical Specialist means CSA Global. Independent Technical Specialist s Report means the report of the Independent Technical Specialist in Appendix 5 to the Independent Expert s Report. JORC Code means the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 edition. KPMG means KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. LIBOR means the London Interbank Offered Rate. Listing Rules means the official listing rules of ASX. Mineral Resource has the meaning given to that term in the JORC Code. Mining Tenement means all tenure granted under the Mining Act 1978 (WA). MinRes means Mineral Resources Limited (ACN ). MinRes Proposal means the proposed acquisition of Atlas by MinRes by way of a scheme or arrangement for under the Scheme Implementation Deed. mt means million tonnes. mtpa means millions of tonnes per annum. NWI has the meaning given in Section 6.7(h). Offer Conditions has the meaning given in Section Offer Period means the period during which the Hancock Offer will remain open for acceptance. Offer Price means $0.042 per Atlas Share. Ore Reserve has the meaning given to that term in the JORC Code. Pilgangoora Minegate Sale Agreement has the meaning given in Section 6.8(b). Q means a quarter of a financial year. Atlas Iron Limited TARGET S STATEMENT Page 59

61 Redstone means Redstone Corporation Pty Ltd ACN Related Body Corporate of a person, means a related body corporate of that person under section 50 of the Corporations Act and includes any body corporate that would be a related body corporate if section 48(2) of the Corporations Act was omitted. Relevant Interest has the meaning given to that term in section 9 of the Corporations Act. ROIC means return on invested capital. Scheme Implementation Deed means the scheme implementation deed dated 8 April 2018 (as amended) between Atlas and MinRes relating to the MinRes Proposal. Share Registry means Computershare. Sinosteel Offtake Agreement has the meaning given to that term in Section 6.8(c). Subsidiary has the meaning given to that term in section 46 of the Corporations Act. Target s Statement means this target s statement, being the statement issued by Atlas under Part 6.5 of the Corporations Act relating to the Hancock Offer. Term Loan B Documentation means the restated syndicated facility agreement dated 6 May 2016 between, among others, Atlas, Credit Suisse AG (Cayman Islands branch) and Credit Suisse AG (Sydney branch), as varied, amended and supplemented from time to time since that date. Term Loan B Facility means the facility provided under the Term Loan B Documentation. Unconditional Date means the date that the Hancock Offer is declared free from the Offer Conditions. US$ means the lawful currency of the United States of America. Utah Point has the meaning given in Section 6.5(c). Voting Power has the meaning given to it in the Corporations Act. VWAP means the volume weighted average price. wmt means wet metric tonnes. WST means Western Standard Time in Australia. In this Target s Statement (other than in Annexures 1): (a) (b) (c) (d) (e) all dates and times are Perth, Western Australia times unless otherwise indicated; words and phrases not otherwise defined in this Target s Statement (excluding the Annexures) have the same meaning (if any) as is given to them by the Corporations Act; the singular includes the plural and vice versa. A reference to a person includes a reference to a corporation; headings are for ease of reference only and do not affect the interpretation of this Target s Statement; and a reference to a Section is to a Section in this Target s Statement unless stated otherwise. Atlas Iron Limited TARGET S STATEMENT Page 60

62 ANNEXURE 1 INDEPENDENT EXPERT'S REPORT Atlas Iron Limited TARGET S STATEMENT Page 61

63 Financial Services Guide 13 July 2018 BDO Corporate Finance (WA) Pty Ltd ABN ( we or us or ours as appropriate) has been engaged by Atlas Iron Limited ( Atlas Iron ) to provide an independent expert s report on the proposed off-market takeover bid by Redstone Corporation Pty Ltd ( Redstone ) for all of the ordinary shares in Atlas Iron in which Redstone does not have a relevant interest. The proposed offer is a cash bid at $0.042 per share ( the Offer ). You will be provided with a copy of our report as a retail client because you are a shareholder of Atlas Iron. Financial Services Guide In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide ( FSG ). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees. This FSG includes information about: Who we are and how we can be contacted; The services we are authorised to provide under our Australian Financial Services Licence, Licence No ; Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice; Any relevant associations or relationships we have; and Our internal and external complaints handling procedures and how you may access them. Information about us BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services. We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business. Financial services we are licensed to provide We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients. When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you. General Financial Product Advice We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. BDO CORPORATE FINANCE (WA) PTY LTD Atlas Iron Limited TARGET'S STATEMENT Page 62

64 Financial Services Guide Page 2 Fees, commissions and other benefits that we may receive We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee payable to BDO Corporate Finance (WA) Pty Ltd for this engagement is approximately $85,000 plus GST and out of pocket expenses. Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report. Other Assignments BDO Corporate Finance (WA) Pty Ltd were engaged by Atlas Iron to provide an Independent Expert s Report on the scheme of arrangement with Mineral Resources which was announced on 9 April Our report was lodged in draft with the Australian Securities and Investments Commission ( ASIC ) which was attached to the Scheme Booklet. To ensure that we undertook appropriate critical analysis of the transaction on hand we have put safeguards in place to ensure that any self-review threat, including perceived threats were mitigated. This included appointing a new engagement partner, the rotation of the staff involved in the preparation of our report and a critical analysis of previous work completed. Our fee for the aforementioned report was approximately $300,000. Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report. Remuneration or other benefits received by our employees All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee from Atlas Iron for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report. Referrals We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide. Complaints resolution Internal complaints resolution process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 West Perth WA When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination. Referral to External Dispute Resolution Scheme A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service ( FOS ). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is Further details about FOS are available at the FOS website or by contacting them directly via the details set out below. Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Free call: Facsimile: (03) info@fos.org.au Contact details You may contact us using the details set out on page 1 of the accompanying report. Atlas Iron Limited TARGET'S STATEMENT Page 63

65 TABLE OF CONTENTS 1. Introduction 1 2. Summary and Opinion 1 3. Scope of the Report 4 4. Outline of the Offer 5 5. Profile of Atlas Iron 6 6. Profile of Hancock Economic analysis Industry analysis Valuation approach adopted Valuation of Atlas Iron Valuation of the Offer consideration Is the Offer fair? Is the Offer reasonable? Conclusion Sources of information Independence Qualifications Disclaimers and consents 91 Appendix 1 Glossary and copyright notice Appendix 2 Valuation Methodologies Appendix 3 Discount Rates Appendix 4 Comparable company descriptions Appendix 5 Independent Technical Assessment and Valuation Report prepared by CSA Global 2018 BDO Corporate Finance (WA) Pty Ltd Atlas Iron Limited TARGET'S STATEMENT Page 64

66 13 July 2018 The Directors Atlas Iron Limited Level 17, Raine Square 200 Murray Street PERTH WA 6000 Dear Directors INDEPENDENT EXPERT S REPORT 1. Introduction On 18 June 2018, Atlas Iron Limited ( Atlas Iron or the Company ) announced that it had received an off-market takeover offer from Redstone Corporation Pty Ltd ( Redstone ), a wholly owned subsidiary of Hancock Prospecting Pty Ltd ( Hancock ). The takeover bid relates to 100% of the Atlas Iron shares that Redstone does not already have a relevant interest in, and is a cash bid of $0.042 per share ( the Offer ). The Offer is unconditional other than the usual prescribed occurrences which are detailed further in Section 4 of our Report. The Offer is not subject to a minimum acceptance condition. The announcement of the Offer from Redstone occurred while the Scheme of Arrangement with Mineral Resources Limited ( MinRes ), which was announced on 9 April 2018, was still on foot. The Scheme of Arrangement involved the acquisition of Atlas Iron by MinRes, whereby Atlas Iron shareholders would have received one share in MinRes for every 571 Atlas Iron shares they held ( MinRes Scheme ). On 19 June 2018, Atlas Iron commenced the matching rights process and gave MinRes the opportunity to make a counter proposal to the Offer. On 21 June 2018, a majority of the board of Atlas Iron withdrew their recommendation in relation to the MinRes Scheme and MinRes elected to terminate the Scheme Implementation Deed. All currencies are quoted in Australian dollars ( AUD or A$ ) unless otherwise stated. 2. Summary and Opinion 2.1 Requirement for the report The directors of Atlas Iron have requested that BDO Corporate Finance (WA) Pty Ltd ( BDO ) prepare an independent expert s report ( our Report ) to express an opinion as to whether or not the Offer is fair and reasonable to the non-associated shareholders of Atlas Iron ( Shareholders ). 2.2 Approach Our Report has been prepared having regard to Australian Securities and Investments Commission ( ASIC ), Regulatory Guide 111 Content of Expert s Reports ( RG 111 ) and Regulatory Guide 112 Independence of Experts ( RG 112 ). BDO Corporate Finance (WA) Pty Ltd ABN AFS Licence No is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN , an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. Atlas Iron Limited TARGET'S STATEMENT Page 65

67 In arriving at our opinion, we have assessed the terms of the Offer as outlined in the body of this report. We have considered: how the value of an Atlas Iron share prior to the Offer on a control basis compares to the value of the Offer consideration; the likelihood of an alternative offer being available to Atlas Iron; the position of Shareholders should the Offer not be accepted; and other factors which we consider to be relevant to the Shareholders in their assessment of the Offer. 2.3 Opinion We have considered the terms of the Offer as outlined in the body of this report and have concluded that, in the absence of an alternate offer, the Offer is fair and reasonable to Shareholders. 2.4 Fairness In Section 12, we determined that the Offer consideration compares to the value of Atlas Iron, as detailed below. Ref Low $ Midpoint $ High $ Value of an Atlas Iron share prior to the Offer on a control basis Value of the Offer consideration Source: BDO analysis The above valuation ranges are graphically presented below: Valuation Summary Value of one Atlas Iron share prior to the Offer (on a control basis) Value of the Offer Consideration Value ($) Source: BDO analysis The above pricing indicates that, in the absence of any other relevant information, and an alternate offer, the Offer is fair for Shareholders. 2.5 Reasonableness We have considered the analysis in Section 13 of this report, in terms of both: advantages and disadvantages of accepting the Offer; 2 Atlas Iron Limited TARGET'S STATEMENT Page 66

68 advantages and disadvantages of rejecting the Offer; and other considerations, which Shareholders might contemplate prior to accepting the Offer. In our opinion, the position of Shareholders if the Offer is accepted is more advantageous than the position if the Offer is not accepted. Accordingly, in the absence of any other relevant information, we believe that the Offer is reasonable for Shareholders. The respective advantages and disadvantages of accepting the Offer considered are summarised below: ADVANTAGES AND DISADVANTAGES OF ACCEPTING THE OFFER Section Advantages Section Disadvantages The Offer is fair Shareholders may perceive to be losing the opportunity for the Atlas Iron share price to increase if and when market conditions improve The Offer provides Shareholders with an opportunity to realise their investment with certainty Shareholders forego the opportunity to receive a competing bid, should one emerge The Offer is at a premium to the Company s last traded price prior to both the MinRes Scheme and the Offer The Offer is not subject to a minimum acceptance condition The respective advantages and disadvantages of rejecting the Offer considered are summarised below: ADVANTAGES AND DISADVANTAGES OF REJECTING THE OFFER Section Advantages Section Disadvantages Shareholders retain their exposure to the potential upside of Atlas Iron s operations, should market conditions improve Shareholders who reject the Offer could become minority shareholders in a company in which Hancock would have a controlling interest If Redstone compulsorily acquires, Shareholders will still receive $0.042 per share, but will experience a delay in receiving consideration for their shares Atlas Iron Limited TARGET'S STATEMENT Page 67 3

69 Other key matters we have considered include: Section Description Alternative Proposal Post-announcement pricing Atlas Iron may need to recapitalise the Company Likelihood of the Company ending up in financial distress Change of control event Tax consequences 3. Scope of the Report 3.1 Purpose of the Report Redstone has prepared a Bidder s Statement in accordance with Section 636 of the Act. Under Section 633 Item 10 of the Act, Atlas Iron is required to prepare a Target Statement in response to the Bidder s Statement. Section 640 of the Act requires the Target Statement to include an independent expert s report to shareholders if: The bidder s voting power in the target is 30% or more; or The bidder and the target have a common director or directors. Neither of the above conditions are met, therefore there is no requirement for the directors of Atlas Iron to engage an independent expert to opine on the Offer. Notwithstanding the above, Atlas Iron engaged BDO to prepare this report for provisions to Shareholders to assist them in deciding whether to accept or reject the Offer. 3.2 Regulatory guidance Neither the ASX Listing Rules nor the Corporations Act defines the meaning of fair and reasonable. In determining whether the Offer is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions. This regulatory guide suggests that where the transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism used to effect it. In our opinion, the Offer is a control transaction as defined by RG 111 and we have therefore assessed the Offer as a control transaction to consider whether, in our opinion, it is fair and reasonable for Shareholders. Atlas Iron Limited TARGET'S STATEMENT Page 68 4

70 3.3 Adopted basis of evaluation RG 111 states that a transaction is fair if the value of the offer price or consideration is equal to or greater than the value of the securities subject of the offer. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm s length. RG 111 states that when considering the value of the securities subject of the offer in a control transaction the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that an offer is reasonable if it is fair. It might also be reasonable if despite being not fair, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of a higher bid. Having regard to the above, BDO has completed this comparison in two parts: a comparison between the value of an Atlas Iron share prior to the Offer on a control basis and the value of the Offer consideration (fairness see Section 12 Is the Offer Fair? ); and an investigation into other significant factors to which Shareholders might give consideration, prior to accepting the Offer, after reference to the value derived above (reasonableness see Section 13 Is the Offer Reasonable? ). This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 Valuation Services ( APES 225 ). A Valuation Engagement is defined by APES 225 as follows: an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time. This Valuation Engagement has been undertaken in accordance with the requirements set out in APES Outline of the Offer On 18 June 2018, Atlas Iron announced that it had received an off-market takeover bid from Redstone, a wholly owned subsidiary of Hancock. The Offer is at $0.042 cash per Atlas Iron share for 100% of the shares in Atlas Iron in which Redstone does not already have a relevant interest. As at the date of the Bidder s Statement, Redstone had a relevant interest in 19.96% of the issued ordinary share capital of Atlas Iron. On 26 June 2018, a media release was made by the Takeovers Panel ( the Panel ) in relation to the Offer, which stated that the Panel had received an application from NCZ Investments Pty Ltd ( NCZ Investments ), a wholly owned subsidiary of Fortescue Metals Group Ltd ( FMG ) in relation to the affairs of Atlas Iron. NCZ Investments claimed, among other things described in the media release that the Bidder s Statement contained misleading statements about the merits, terms and operation of Redstone s takeover bid. On 26 June 2018, Hancock provided a Supplementary Bidder s Statement in accordance with Section 647(3)(b) of the Act. The Supplementary Bidder s Statement provided further information in relation to Atlas Iron Limited TARGET'S STATEMENT Page 69 5

71 Redstone s intentions such as those regarding the Term Loan B and general on-going funding requirements. Following discussions with the Panel and ASIC, Redstone incorporated additional disclosures from its Supplementary Bidder s Statement in a Replacement Bidder s Statement (as per the Panel s media release of 2 July 2018). Further detail of the Panel application and outcome can be found in Section 5.2 of our Report. The Replacement Bidder s Statement was provided in accordance with Section 633A(2)(c) of the Act, as modified by ASIC Class Order 13/528, and clarified the operations of the bid s conditions. On 29 June 2018, Hancock also lodged a Second Supplementary Bidder s Statement with ASIC. The Second Supplementary Bidder s Statement was provided in accordance with Section 647(3)(a)(ii) of the Act, as modified by ASIC Class Order 13/528. The Atlas Iron board unanimously recommended that Shareholders accept the Offer, in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the Offer is fair and reasonable to Shareholders. On 2 July 2018, the Panel declined to conduct proceedings on the application from NCZ Investments. The media release stated that following discussions with the Panel and ASIC, Redstone agreed to incorporate disclosures from its Supplementary Bidder s Statement in a Replacement Bidder s Statement (including further information in relation to its intentions) and clarify the operation of the bid s conditions. Given these developments, the Panel concluded there was no reasonable prospect that it would make a declaration of unacceptable circumstances. Accordingly, the Panel declined to conduct proceedings. The Offer is unconditional except on certain prescribed occurrences which includes Atlas Iron being impacted by an event of insolvency, or the board of Atlas Iron electing to undertake certain transactions such as the sale of major assets or restructuring Atlas Iron s share capital. The Offer is also not subject to a minimum acceptance condition. Redstone s intentions if the Offer is accepted The intentions of Redstone have been disclosed in the Bidder s Statement. See Section 5 of the Bidder s Statement for further details. 5. Profile of Atlas Iron 5.1 History Atlas Iron is an ASX-listed Australian iron ore company with its head office located in Perth, Western Australia ( WA ). The Company s operations include mining and exporting Direct Shipping Ore ( DSO ) from its Mount Webber operations in the Northern Pilbara region of WA. Atlas Iron has a portfolio of projects including multiple iron ore projects, as well as interests in gold, copper and lithium. Previously, Atlas Iron also operated the Pardoo, Wodgina, Abydos and Mt Dove projects which have all ceased mining operations. The directors of Atlas Iron are: Mr Eugene Davis, Non-Executive Chairman; Mr Cliff Lawrenson, Chief Executive Officer and Managing Director; Mr Alan Carr, Non-Executive Director; Atlas Iron Limited TARGET'S STATEMENT Page 70 6

72 Hon. Cheryl Edwardes, Non-Executive Director; and Mr Daniel Harris, Non-Executive Director. Atlas Iron exports its iron ore through the WA Government-owned Utah Point bulk handling facility in Port Hedland ( Utah Point ). Utah Point is a single berth, single ship loader multi-user facility which is set up for truck delivery of product into multiple stockyards. Atlas Iron was a foundation customer of the facility and assisted in funding its development. Atlas Iron has a multi-user agreement and lease with the Pilbara Port Authority ( PPA ) which gives it the right to use a berth and a multi-user out-loading facility as well as the right to construct delivery and storage facilities for shipping bulk commodities. Atlas Iron has a lease of Lots 1 and 2 of Stockyard 1 and exclusive use of Stockyard 2. The capacity allocated for Stockyard 1 and Stockyard 2 are three million tonnes per annum and 10 million tonnes per annum respectively. Atlas Iron s lease of Stockyard 1 expires in September 2018 and Stockyard 2 remains partially developed. The WA Government announced on 18 November 2016 that it had passed legislation allowing the sale of Utah Point to the private sector via a long-term lease. Atlas Iron was also a founding member and is a major shareholder in North West Infrastructure ( NWI ), an incorporated joint venture ( JV ) company which represents the interests of its three shareholder companies being Atlas Iron (which has a 63% interest), Brockman Mining Limited ( Brockman ) and FerrAus Pty Ltd which is a wholly-owned subsidiary of Atlas Iron. NWI held the rights to develop new berths at South West Creek in Port Hedland, and was conferred a 50 million tonne per annum ( mtpa ) channel capacity allocation (31.5mtpa for Atlas Iron s 63% share in the JV) to facilitate the development of the port facilities. NWI has undertaken substantial technical work for this project. On 14 June Atlas Iron advised that NWI had received notice from the office of the Minister for Transport, Planning and Lands that implied that NWI does not have a priority right to develop the Stanley Point Berths 3 and 4, with the Minister confirming the berths have been set aside for junior miners, and that the Pilbara Ports Authority would assess any application by NWI to develop these berths on its merits, in accordance with its standard port development process. Following a media release from FMG on 27 June 2018, seeking further clarification on the position of Atlas Iron, Atlas Iron released a response. In the response, dated 28 June 2018, Atlas Iron noted that in its 2015 Prospectus, it advised the market that the berth allocation was not yet the subject of a firm lease agreement with the Pilbara Ports Authority, and that an independent valuation report released in 2016, attributed no value to Atlas Iron s interest in NWI. In the response Atlas Iron stated that the shareholders of NWI remain in aggregate the owners of the largest undeveloped Pilbara resources, other than existing major producers. The iron ore produced by Atlas Iron has an average grade of 57% to 58% iron ( Fe ), which trades at a discount to the 62% Fe price index. Over the past 18 months, the discounts for product grades have widened. Analysts suggest that widening discounts are a result of higher steel prices and changes to the Chinese steel industry, which have resulted in buyers seeking higher grade ore to maximise steel output. In March 2018, Atlas Iron announced that discounts on its low grade iron ore had been more than double historic levels, which was negatively impacting realised prices for its low grade iron ore. Atlas Iron Limited TARGET'S STATEMENT Page 71 7

73 Atlas Iron has 19 wholly-owned subsidiaries, with 15 incorporated in Australia, two incorporated in Panama, one incorporated in Chile and one incorporated in the United States of America. 5.2 Corporate events On 29 March 2017, Atlas Iron announced that it had entered into an agreement in which Pilbara Minerals Limited ( PLS or Pilbara Minerals ) would acquire an initial 51% interest for $2.3 million in Atlas Iron s Cisco lithium prospect and up to an interest of 80% subject to conditions of the farm-in and joint venture agreement between the parties. In addition, the announcement also stated that Atlas Iron and PLS had entered into a memorandum of understanding which set out the terms for Atlas Iron to provide logistics services to a DSO phase of PLS Pilgangoora lithium tantalite project. On 20 December 2017, Atlas Iron announced that it had signed an agreement with PLS, with Atlas Iron to purchase from one to 1.5 million tonnes of lithium DSO from PLS over a 15-month period. Pursuant to the agreement, Atlas Iron will crush the ore at its Mt Dove operation, transport it and load it onto a ship in preparation for export using its facilities at Utah Point. In addition, the announcement also detailed that Atlas Iron was focussed on finalising export sales arrangements, which would likely incorporate funding for prepayments to PLS. On 2 March 2018, Atlas Iron announced that it had signed an agreement with Sinosteel Australia Pty Ltd ( Sinosteel ) for the export of lithium DSO sourced from Pilbara Minerals Pilgangoora lithium-tantalite project. Under the terms of the agreement, Atlas Iron will sell up to 1.5 million tonnes of lithium DSO to Sinosteel over a 15-month period on a fixed price basis, and Sinosteel will advance funds to Atlas Iron in order to cover prepayments due to PLS for mine development costs associated with lithium DSO. On 18 June 2018, Atlas Iron announced that it had sent its first shipment of lithium DSO to China, under its offtake agreement with Sinosteel. On 12 March 2018, Atlas Iron announced that it had finalised an agreement with privately-owned Horseshoe Manganese Pty Ltd ( Horseshoe ) pursuant to which up to 100,000 tonnes of product would be mined and crushed on a campaign basis by Horseshoe, then loaded onto road trains for transport from the Murchison mine site. Subject to finalising port approvals and offtake arrangements, Atlas Iron will then purchase the manganese as it reaches the north Pilbara. On 9 April 2018, Atlas Iron announced that it had entered into a binding Scheme Implementation Deed with MinRes to combine operations by way of a Scheme of Arrangement, pursuant to which MinRes would acquire all of the issued capital of Atlas Iron. Under the Scheme Implementation Deed, Atlas Iron Shareholders would receive 1 MinRes share for every 571 Atlas Iron shares. The MinRes Scheme was subject to several conditions precedent, including Atlas Iron Shareholder approval and Court approval. Under the Scheme Implementation Deed, following the receipt of a competing proposal, MinRes would have the right, but not the obligation, during the three business days following receipt of details of the competing proposal to amend the terms of the transaction or increase the consideration offered under the transaction ( Matching Rights Clause ). On 17 May 2018, the Company announced that if challenging market conditions persist, it will likely record a non-cash impairment of between $75-$100 million, with the final quantum of the impairment to be determined upon completion of the audit in August On 7 and 11 June 2018, FMG announced that its wholly owned subsidiary NCZ Investments Pty Ltd ( NCZ Investments ), had acquired a 15% interest in the ordinary share capital of Atlas Iron and a further 4.9% economic interest using a cash settled swap, giving FMG a combined physical and economic interest of Atlas Iron Limited TARGET'S STATEMENT Page 72 8

74 19.9% of Atlas Iron s ordinary share capital. FMG also announced on 7 June 2018, that it did not intend to support the MinRes Scheme on its current terms but reserved the right to do so. On 8 June 2018, Atlas Iron advised that Standard and Poor s Rating Services ( S&P ) had reduced the Company s corporate and senior secured credit rating from B- to CCC, it also noted that S&P and Moody s Investor Services ( Moody s ) had both placed the Company s ratings on a credit watch list. On 15 June 2018, Atlas Iron advised that Moody s had reduced the Company s corporate and senior secured credit rating from B3 to Caa2. On 19 June 2018, following the announcement of the Offer from Redstone, the Company announced that it had issued a notice to MinRes under the Matching Rights Clause, giving MinRes three business days to make a counter proposal. On 21 June 2018, MinRes announced that it would not make a counter proposal, and that the MinRes Scheme had been terminated. On 26 June 2018, the Panel advised that it had received an application from NCZ Investments, a wholly owned subsidiary of FMG in relation to the affairs of Atlas Iron. In its application NCZ Investments submitted that Redstone s bidder s statement contained: misleading statements and material omissions regarding Redstone s intentions in relation to Atlas Iron s business, assets and employees and Redstone s ability to achieve those intentions; material omissions regarding the implications of Redstone s takeover bid for Atlas Iron s Term B Loan Facility and Hancock s intentions in respect of the financing repayment of that facility; and misleading statements about the merits, terms and operation of Redstone s takeover bid. On 2 July 2018, following additional disclosures made by Redstone in a Replacement Bidder s Statement, the Panel announced that it would decline to conduct proceedings on the application made by NCZ Investments, noting that there was no reasonable prospect that it would make a declaration of unacceptable circumstances. On 12 July 2018, Atlas Iron released its June 2018 quarterly report. The report detailed the Company s decision to suspend iron ore crushing at Mount Dove and to reduce the mining rate at the Mount Webber Project from late July 2018, in light of challenging market conditions. The report also announced that Atlas completed its first shipment of lithium and manganese lump during the quarter. Term Loan B Facility On 18 October 2012, Atlas Iron announced that it had secured an underwritten senior secured term loan facility ( Term Loan B Facility ) for a funding facility of US$325 million as part of its strategy to grow its north Pilbara iron ore production. The announcement further stated the facility would be fully underwritten, with syndication expected to be completed by December The Term Loan B Facility represented Atlas Iron s first material debt facility. On 10 December 2012, the Company announced that the Term Loan B Facility had been subsequently amended to a principal amount of US$275 million. In addition, the Company also put in place an undrawn AU$50 million three-year revolving facility. A summary of the key terms of the Term Loan B Facility include a maturity of five years, a coupon of London Interbank Offer Rate ( LIBOR ) plus 7.50%, LIBOR floor of 1.25% and quarterly amortisation payments. The Term Loan B Facility is also secured over the assets of Atlas Iron and each material subsidiary. Atlas Iron Limited TARGET'S STATEMENT Page 73 9

75 On 23 December 2015, Atlas Iron announced it had entered into a Restructuring Support Agreement with some of the lenders to its Term Loan B Facility, and agreed an interim agreement to the Term Loan B Facility. The agreements were aimed at achieving a financial restructuring of the Company. On 4 April 2016, the Company announced that the restructure would be implemented by way of a creditors scheme of arrangement involving the issue of a significant number of Atlas Iron s shares to lenders which required Shareholders approval. The Company announced the implementation of the creditors scheme on 6 May Atlas Iron announced on 16 February 2017 that the requisite majority of lenders, including several significant Shareholders, agreed to sign an amendment to the Term Loan B Facility. Completion of the amendment was subject to a number of conditions precedent. Following satisfaction of the abovementioned conditions precedent, the Company announced on 30 March 2017 that it had implemented the amendment to its Term Loan B Facility. The amendment was intended to allow a portion of operating cash flows generated over three quarters to be exempted from cash sweep provisions (and set aside in a separate reserve account) so that Atlas Iron may be able to accumulate sufficient cash over time to fund the Corunna Downs Project or support working capital requirements while still repaying its Term Loan B Facility. The amount of funds that could be accumulated in the reserve account was capped at $45 million. On 29 January 2018, Atlas Iron announced that it had repaid $20 million of the Term Loan B Facility. As a result of the repayment, the lenders of the Term Loan B Facility agreed to ease loan covenants, including reducing the minimum cash balance at the end of each month from $35 million to $15 million. 5.3 Projects Iron ore assets Corunna Downs Iron Ore Project Atlas Iron s Corunna Downs Project ( Corunna Downs Project ) is an iron ore project located in the Pilbara region of WA, approximately 237km by road from Port Hedland and 33km from Marble Bar. On 23 December 2015, the Company released results of its pre-feasibility study ( PFS ) for the Corunna Downs Project. This was followed by an announcement on 21 December 2016 which contained results for the Corunna Downs Project definitive feasibility study ( DFS ). The DFS concluded that the Corunna Downs Project has the potential to deliver a total production of four million tonnes per annum of lump and fines DSO over an initial life of mine of five to six years. The conclusions from the DFS were based on the following key assumptions: four open pit mines that would utilise a conventional drill and blast and truck and excavator load and haul mining method; a semi mobile processing plant that would dry crush and screen the ore; a 152-man camp; and a 22km public road upgrade and a new 13km mine access road. Atlas Iron announced Board approval of the development of the Corunna Downs Project on 16 February 2017, with construction of the project to be funded from operating cash flow following the amendment to the Term Loan B Facility. However, the commencement of the development of Corunna Downs was Atlas Iron Limited TARGET'S STATEMENT Page 74 10

76 deferred in June 2017 largely due to lengthy government approval processes and prevailing market conditions at the time. During the December 2017 quarter, the Company completed additional geotechnical and hydrogeological investigations on the proposed road for the Corunna Downs Project. During the quarter ended 31 March 2018, the Company advised that it has secured all approvals required from the Commonwealth departments. However, it is still liaising with the State departments in relation to obtaining final mining approvals. Mount Webber Iron Ore Project The Mount Webber Project ( Mount Webber Project ) is located approximately 230km by road southsoutheast of Port Hedland. The Mount Webber Project was officially opened in July 2014 following completion of the first stage of the project. Construction of the second stage was completed in late On 10 April 2015, Atlas Iron announced that, in light of significant falls in the iron ore price and internal assessments of the viability of continuing production, it would cease mining and crushing at the Mount Webber Project the following week. Mining operations subsequently recommenced at the Mount Webber Project in early July During the year ended 30 June 2017, Atlas Iron secured environmental approvals to increase the mining rate at the Mount Webber Project from 7mtpa to 9mtpa, with the incremental production to be processed at the Company s recommissioned Mt Dove site. This was enabled due to the Company spending $1 million recommissioning the Mt Dove crushing plant, and modifying the Mount Webber Project stockyards to facilitate transport of iron ore. On 29 June 2018, the Company announced that it would suspend iron ore processing at its Mount Dove processing facility and therefore will reduce its mining rate at its Mount Webber Project from 9mtpa to 7mtpa. According to the Company, this change to production and processing was a result of challenging market conditions. McPhee Creek Iron Ore Project The McPhee Creek Iron Ore Project ( McPhee Creek Project ) is located approximately 270km southeast of Port Hedland and approximately 65km east of Corunna Downs, in the northern Pilbara region of Western Australia. In 2014, Atlas Iron undertook early studies on the McPhee Creek Project, which concluded that the McPhee Creek Project had the potential to produce 15 million tonnes per annum of DSO through a wet processing plant based on obtaining rail access. Its proximity to Corunna Downs would allow its DSO to be blended with that mined at Corunna Downs, before being transported to Port Hedland for exporting to Asia. Atlas Iron is currently continuing to work on iron ore exploration and evaluation activities at McPhee Creek Project to progress the project towards production. The current work includes considering a haulage solution. Mt Dove Infrastructure Hub Mt Dove is located 65km south of Port Hedland, in WA. It is an infrastructure hub for the Mount Webber Project and the Pilbara Minerals Pilgangoora lithium DSO, with the final crushed product from the mine being transported to the Utah Point Port Facility at Port Hedland. Atlas Iron Limited TARGET'S STATEMENT Page 75 11

77 There are currently two separate crushers operating at Mt Dove, one is used to crush Pilbara Minerals Pilgangoora lithium DSO from PLS, and the other is used to process excess ore from Mt Webber. Both crushers are owned by MACA Limited ( MACA ). During the 2017 financial year, the crushing and screening plant was recommissioned and the infrastructure and the project was expanded. During the September 2017 quarter, the iron ore crushing plant at Mt Dove was converted to a lump and fines circuit to increase its proportion of lump product. On 29 June 2018, the Company announced that it would suspend iron ore processing at Mt Dove due to challenging market conditions. Miralga Creek Iron ore Project Drilling at Atlas Iron s 100% owned Miralga Creek Project ( Miralga Creek Project ), located 35km from the former Abydos mine, has indicated continuity of mineralisation along strike from the former Abydos pits and higher grade intercepts point to strong blending potential across Atlas Iron s existing mine portfolio. Ridley Magnetite Project The Ridley Magnetite Project ( Ridley Magnetite Project ) is located 75 kilometres east of Port Hedland. Atlas Iron had undertaken early studies on the Ridley Magnetite Project for a 15 million tonnes per annum of blast furnace grade magnetite that could be produced over 30 years by way of a truck and shovel open pit mining operation, delivering ore to a concentrator via a system of mobile mining In-Pit Crushing and Conveyancing stations. However, no further work has been done since to upgrade the mineral resource to ore reserves. Other iron assets in the southeast Pilbara region Atlas Iron has several assets in the southeast Pilbara region, including the Davidson Creek Hub DSO project ( Davidson Creek Project ), the Warrawanda Iron project ( Warrawanda Project ) and Western Creek Iron Ore Project ( Western Creek Project ). The other iron ore assets in the southeast Pilbara region are not significant in the context of the Company s portfolio of mineral assets. Further information on these projects can be found in the Independent Technical Assessment and Valuation Report in Appendix 5. Cisco Project Non-iron ore assets The Cisco Project is located in the Pilgangoora district of Western Australia. Atlas Iron acquired the Cisco Project (exploration lease E45/4270) in During 2016, Atlas Iron analysed rock chips, which had been preserved from historical tantalum-tin exploration drilling, for lithium. Anomalous lithium results were received from two holes in the central area. In March 2017, Atlas Iron entered into a binding farm in and joint venture agreement ( JV agreement ) with PLS, resulting in PLS acquiring a 51% interest in the lithium, tantalum and tin mineral rights ( Mineral Rights ). Currently, PLS has the right to spend a further $1 million in exploration (prior to October 2018), to increase its interest in the mineral rights to 70%. Upon completion of a DFS and decision to mine, PLS will increase its interest in the mineral rights by a further 10%. Atlas Iron will be free carried for its share Atlas Iron Limited TARGET'S STATEMENT Page 76 12

78 of expenditure up to when a decision to mine is made, subsequent to which Atlas Iron will be entitled to contribute to the costs of the mining project in accordance with its 20% participating interest. Pancho Lithium Project In late 2017, Atlas Iron completed a detailed on ground geological investigation across the Pancho project area ( Pancho Project ) to investigate several potential lithium-caesium-tantalum pegmatites. Sixteen desktop targets were investigated and two additional targets were identified in the field. Information gathered in the field has enabled Atlas Iron to define a specific zone of focus for the next stage of exploration work. Copper Range Copper Project The Copper Range Copper Project ( Copper Range Project ) is located 50km east of Newman. In October 2017, Atlas Iron undertook a six-hole reverse circulation ( RC ) drill program, with all holes encountering anomalous copper mineralisation. The results extended the historically identified copper enrichment and confirmed continuity between near surface mineralisation and previously drilled deeper zones. Walker Copper Project The Walker Copper Project ( Walker Project ) is located near Miralga Creek and adjacent to Abydos infrastructure. During the December 2017 quarter, a first pass drilling program over an undercover geophysical target near the Miralga Creek Project, intersected, disseminated semi-massive sulphides, possibly indicating the presence of copper mineralisation. Further exploration on Walker is planned. Emu Creek Copper Gold Project The Emu Creek Copper Gold Project ( Emu Creek Project ) is located near Nullagine. In November 2016, Atlas Iron agreed to a farm-out and joint venture agreement with Great Sandy Pty Ltd ( Great Sandy ). Under the terms of the agreement, Great Sandy had the right to earn a 51% equity interest in the tenements by expenditure of $190,000 in a 24-month period, and an additional 19% interest on completion of a Bankable Feasibility Study. On 10 January 2018, First Au Limited ( First Au ) announced that it had entered into a conditional binding agreement with Great Sandy to acquire Great Sandy s interests in the projects. On 2 July 2018, First Au announced that a versatile time domain electromagnetic survey had identified eight conductors at the Emu Creek Project, and that as a result it would proceed to undertake a field examination to determine their source. Pilgangoora Minegate Agreement Atlas Iron entered into a contract with Pilbara Minerals for the purchase of lithium DSO from the Pilgangoora lithium-tantalite project at mine gate and for the provision of services of crushing, haulage, ship loading and ocean freight of between one million tonnes and 1.5 million tonnes of ore ( Pilgangoora Minegate Agreement ). The Pilgangoora lithium-tantalite project is located 120 kilometres south of Port Hedland in the Pilbara region of Western Australia ( Pilgangoora Lithium-Tantalite Project ). Atlas Iron has a 90% interest in the Pilgangoora Minegate Agreement. In June 2018, Atlas Iron commenced shipping lithium DSO purchased from Pilbara Minerals to China, under its offtake agreement with Sinosteel. Atlas Iron Limited TARGET'S STATEMENT Page 77 13

79 Altura Royalty Atlas Iron holds a 5% gross sales royalty ( Altura Royalty Agreement ) over mining lease M45/1231, which is one of the two mining leases that cover the Altura Mining Limited ( Altura ) Pilgangoora lithium project ( Pilgangoora Lithium Project ). The mining lease subject to the Atlas Iron royalty covers the majority of Altura s Pilgangoora Lithium Project. Altura is nearing completion of the construction and development of its Pilgangoora Lithium Project. In an announcement dated 18 June 2018, Altura announced that it expected the first shipment to be made by mid-august Balla Balla Royalty Atlas Iron holds a gross sales royalty of 4% on revenue on the initial 5.5 million tonnes of contained iron within magnetite concentrate sales and 200,000 tonnes of contained titanium oxide within ilmenite sales from the Balla Balla magnetite project, which was sold to Forge Resources Limited in December Thereafter, a 1% gross sales royalty on the remaining tonnages up to a total of 36 million tonnes of contained iron within magnetite concentrate sales and 1.2 million tonnes of contained titanium oxide within ilmenite sales. The Balla Balla magnetite project is a polymetallic iron, vanadium and titanium mining project with diversified income streams. However, there appears to be uncertainty in the financial and technical viability of the Balla Balla project under the current iron ore price environment. We note that given the status of this project we do not consider the royalty to have material value to Atlas Iron. 5.4 Historical Consolidated Statements of Financial Position Consolidated Statement of Financial Position (Group) CURRENT ASSETS Reviewed as at Audited as at Audited as at 31-Dec Jun Jun-16 $ 000 $ 000 $ 000 Cash and cash equivalents 71,133 80,769 80,853 Trade and other receivables 47,151 41,421 36,509 Prepayments 432 1,356 13,368 Inventories 20,371 19,094 16,728 Financial assets classified as held for trading 609 1,070 1,865 TOTAL CURRENT ASSETS 139, , ,323 NON-CURRENT ASSETS Other receivables 6,015 6,015 5,029 Property, plant and equipment 79,098 84,351 96,579 Intangibles Mine development costs 243, , ,660 Evaluation expenditure - reserve development 4,723 4,592 21,340 Mining tenements 62,499 62,499 62,594 TOTAL NON-CURRENT ASSETS 396, , ,898 TOTAL ASSETS 536, , ,221 CURRENT LIABILITIES Trade and other payables 59,260 66,049 64,346 Interest bearing loans and borrowings 2,796 2,775 3,632 Employee benefits 1,100 1,097 1,235 Provisions 6,540 10,019 9,602 Financial liabilities 754-2,600 Atlas Iron Limited TARGET'S STATEMENT Page 78 14

80 Consolidated Statement of Financial Position (Group) Reviewed as at Audited as at Audited as at 31-Dec Jun Jun-16 $ 000 $ 000 $ 000 TOTAL CURRENT LIABILITIES 70,450 79,940 81,415 NON-CURRENT LIABILITIES Trade and other payables ,822 Interest bearing loans and borrowings 100, , ,716 Employee benefits 1,280 1, Provisions 63,044 64,155 88,820 TOTAL NON-CURRENT LIABILITIES 164, , ,140 TOTAL LIABILITES 234, , ,555 NET ASSETS 301, , ,666 EQUITY Share capital 2,203,510 2,203,203 2,197,388 Reserves 40,861 40,816 42,030 Accumulated losses (1,943,061) (1,921,771) (1,969,752) TOTAL EQUITY 301, , ,666 Source: Atlas Iron s audited financial statements for the years ended 30 June 2016 and 30 June 2017, and reviewed financial statements for the half-year ended 31 December 2017 We note that the Company s auditor outlined the existence of material uncertainty relating to going concern in Atlas Iron s Annual Reports for the years ended 30 June 2016 and 30 June 2017 as well as the Half-Year Report for the period ended 31 December Commentary on Consolidated Historical Statements of Financial Position Cash and cash equivalents decreased from $80.77 million at 30 June 2017 to $71.13 million at 31 December 2017 from the ordinary operations of Atlas Iron and including a transfer of $14.09 million into a cash reserve account in relation to the Term Loan B Facility. Trade and other receivables of $47.15 million at 31 December 2017, primarily comprised a $34.36 million cash reserve account held under the terms of the Term Loan B, $7.94 million in trade receivables including provisional pricing amounts (negative provisional pricing of $9.28 million is included in payables), other receivables of $5.00 million and $0.05 million in security deposits. Prepayments of $13.37 million at 30 June 2016 included $6.88 million, in contributions made under a long term infrastructure sharing agreement for Wodgina operations, which were expected to be recouped during the year ended 30 June The remaining prepayment balance at 30 June 2016, primarily consisted of amounts paid in advance to certain contractors for services to be provided at a later date. Property, plant and equipment decreased from $84.35 million as at 30 June 2017 to $79.10 million at 31 December The decrease of $5.25 million was primarily the result of depreciation on property of $3.19 million and depreciation on plant and equipment of $3.41 million, partly offset by additions to property of $0.23 million and additions to plant and equipment of $1.12 million. Mine development costs of $ million at 31 December 2017 comprised carried forward mine development costs of $ million, additions of $3.59 million and amortisation expense of $28.46 million. On 17 May 2018 the Company issued a financial update in which it advised that it is Atlas Iron Limited TARGET'S STATEMENT Page 79 15

81 likely to make a non-cash impairment to the carrying value of its producing assets at 30 June Mining tenements of $62.50 million at 31 December 2017 comprised wholly of tenement acquisition costs. Trade and other payables of $59.26 million as at 31 December 2017 included $49.98 million in trade payable and accruals as well as negative provisional pricing adjustments of $9.28 million. Current provisions of $6.54 million at 31 December 2017, included an onerous lease provision of $3.23 million, which related to Atlas Iron s non-cancellable office lease (a portion of which is currently sublet), a rehabilitation and demobilisation provision of $2.30 million and other provisions of $1.01 million. Non-current interest bearing loans and borrowings of $ million at 31 December 2017, included the non-current component of the Term Loan B Facility, amounting to $ million and finance leases of $4.68 million for the building and laboratory operations at the Mt Webber mine. This was offset by capitalised borrowing costs of $5.68 million. Non-current provisions of $63.04 million at 31 December 2017, included a rehabilitation and demobilisation provision of $44.79 million and an onerous lease provision of $18.25 million, which related to Atlas Iron s non-cancellable office lease (a portion of which is currently sublet). 5.5 Historical Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Profit or Loss and Other Comprehensive Income Reviewed for the Audited for the Audited for the half-year ended 31-Dec-17 year ended 30-Jun-17 year ended 30-Jun-16 $ 000 $ 000 $ 000 Revenue 308, , ,755 Operating costs (309,192) (787,543) (773,986) Gross Profit (1,158) 83,508 11,769 Other income 1,781 16,844 12,426 Exploration and evaluation expenses (2,840) (3,482) (3,526) Impairment loss - (1,041) (97,098) Share of loss of equity accounted investees - - (106) Loss on listed investments - (24) - Loss on financial instruments (3,029) (22,711) (5,863) Depreciation and amortisation (576) (1,472) (2,763) Gain/(loss) on disposal of plant and equipment and liabilities - 6,999 (349) Administration expenses (10,487) (18,395) (24,152) Other expenses (157) (1,345) (7,707) Results from operating activities (16,466) 58,881 (117,369) Finance income 810 1,021 1,116 Finance expense (5,939) (13,648) (35,143) Gain/(loss) on foreign exchange 305 1,727 (13,100) Gain on debt restructure - - 5,482 Atlas Iron Limited TARGET'S STATEMENT Page 80 16

82 Consolidated Statement of Profit or Loss and Other Comprehensive Income Reviewed for the Audited for the Audited for the half-year ended 31-Dec-17 year ended 30-Jun-17 year ended 30-Jun-16 $ 000 $ 000 $ 000 Net finance expense (4,824) (10,900) (41,645) Profit/(loss) before income tax expense (21,290) 47,981 (159,014) Tax expense Profit/(loss) attributable to owners of the Group (21,290) 47,981 (159,014) Other comprehensive income Items that may be classified subsequently to profit or loss Share of associates' movements in foreign currency translation reserve - - (39) Other comprehensive income/(loss) for the period - - (39) Total comprehensive income/(loss) attributable to the owners of the Group (21,290) 47,981 (159,053) Source: Atlas Iron s audited financial statements for the years ended 30 June 2016 and 30 June 2017, and reviewed financial statements for the half-year ended 31 December 2017 Commentary on Consolidated Historical Statements of Profit or Loss and Other Comprehensive Income Operating costs of $ million for the half-year ended 31 December 2017, primarily comprised haulage costs of $89.98 million, mining and processing costs of $66.81 million, shipping costs of $58.68 million, port costs of $38.19 million, depreciation and amortisation costs of $32.50 million and royalties of $20.50 million. Other income of $1.78 million for the half year ended 31 December 2017, primarily comprised rental income of $0.90 million, shipment termination payment of $0.78 million and gain on sale of assets of $0.10 million. Other income of $16.84 million for the year ended 30 June 2017, included a rehabilitation provision adjustment of $7.41 million, an onerous lease provision adjustment of $3.35 million, farm in consideration of $2.30 million, a provision reversal of $2.00 million and rental income of $1.78 million. The impairment loss of $97.10 million for the year ended 30 June 2016, consisted of a $78.70 million impairment to mining tenements, a $9.80 million impairment to mine and reserve development assets, a $4.17 million impairment on property, plant and equipment, and a $4.43 million impairment on a loan receivable. The impairment losses on the mining tenements and the mine and reserve development assets were mainly as a result of a decline in forecast iron ore prices. Loss on financial instruments of $3.03 million for half-year ended 31 December 2017, included an unrealised financial instrument loss of $1.08 million and a realised financial instrument loss of $1.95 million. The financial instruments consisted of iron ore derivatives measured at fair value. A gain on debt restructure of $5.48 million for the year ended 30 June 2016 was a result of the difference between the carrying value of the Company s borrowings converted and the fair value of the equity issued. Atlas Iron Limited TARGET'S STATEMENT Page 81 17

83 Finance expenses of $5.94 million for the half-year ended 31 December 2017 included an interest expense of $4.47 million, amortisation of debt establishment costs of $0.80 million and other finance expenses of $0.67 million. 5.6 Capital Structure The share structure of Atlas Iron as at 29 June 2018 is outlined below: Number Total ordinary shares on issue 9,279,607,773 Top 20 shareholders 5,909,813,959 Top 20 shareholders - % of shares on issue 63.69% Source: Atlas Iron share registry The range of shares held in Atlas Iron as at 29 June 2018 is as follows: Range of Shares Held Number of Ordinary Shareholders Number of Ordinary Shares Percentage of Issued Shares (%) 1-1,000 4,791 2,474, % 1,001-5,000 7,319 19,642, % 5,001-10,000 2,732 20,794, % 10, ,000 8, ,330, % 100,001 - and over 5,080 8,878,365, % Total 28,607 9,279,607, % Source: Atlas Iron share registry Outlined below are the unlisted options Atlas Iron has on issue at 27 March 2018: Unlisted options Vesting conditions 17,001,045 unlisted options with nil exercise price expiring on 13 November 2020 Vested on 6 May ,285,282 unlisted options with nil exercise price expiring on 23 November 2021 See Note One 7,233,901 unlisted options with nil exercise price expiring on 23 November 2021 Vested on 15 September ,844,063 unlisted options with nil exercise price expiring on 25 October 2022 See Note Two Source: Atlas Iron s Appendix 3B dated 27 March 2018 Note One: Nil cash exercise unlisted Employee Share Option Plan ( ESOP ) options subject to the following vesting conditions: 30% of the options will vest in thirds on the first three anniversaries of grant (10% each year) conditional on the employee being employed by the Company at the vesting date (the first 10% vested and the 7,233,901 remaining unexercised are shown in the table above); 30% of the options will vest at the end of the 2019 financial year ( FY2019 ) on the basis of improvement in Atlas Iron s return on invested capital ( ROIC ) for FY2019 equal to or greater than 15% over ROIC for the 2016 financial year ( FY2016 ); 40% of the options will vest at the end of FY2019 on the basis of an absolute improvement in Atlas Iron s total shareholder return in FY2019 over FY2016; 18 Atlas Iron Limited TARGET'S STATEMENT Page 82

84 100% of all unvested options will vest on a Change of Control Event (as that term is defined in the Option Plan Rules) occurring. Note Two: Nil cash exercise unlisted ESOP options subject to the following vesting conditions: 30% of the options will vest in thirds on the first three anniversaries of grant (10% each year) conditional on the employee being employed by the Company at the vesting date; 30% of the options will vest at the end of the 2020 financial year ( FY2020 ) on the basis of improvement in Atlas Iron s ROIC for FY2020 equal to or greater than 15% over ROIC for the 2017 financial year ( FY2017 ); 40% of the options will vest at the end of FY2020 on the basis of an absolute improvement in Atlas Iron s total shareholder return during the three-year period commencing 1 July 2017; and 100% of all unvested options will vest on a Change of Control Event (as that term is defined in the Option Plan Rules) occurring. Management have confirmed that the above option summary is unchanged at 8 July Profile of Hancock Redstone is a wholly owned subsidiary of Hancock. Redstone was incorporated in April 2018, for the purpose of making the Offer and acquiring and holding Atlas Iron shares. The current directors of Redstone are: Mr Tadeusz Jozef Watroba Executive Director; and Mr Jay Eliot Newby Executive Director. The ownership structure of Redstone is as follows: Source: Bidder s Statement Atlas Iron Limited TARGET'S STATEMENT Page 83 19

85 Hancock Hancock is a privately held Australian company with both mining and agricultural investments. Mining Hancock has interests in major iron ore projects in the Pilbara region of Western Australia, including the Hope Downs Iron Ore Project ( Hope Downs ) and Roy Hill Project ( Roy Hill ). Hope Downs is located 100 kilometres north west of Newman. The project is a 50/50 joint venture between Hancock and Rio Tinto Limited ( Rio Tinto ). First production from Hope Downs was achieved in November Roy Hill is located approximately 340 kilometres south east of Port Hedland. Roy Hill is an integrated mine railway and port project, with the largest single feed processing plant in the Pilbara. The first shipment of iron ore from Roy Hill was achieved in December Roy Hill has an independently owned and operated 344km single line railway, which transports ore from the mine to Roy Hill s port facility in Port Hedland. Hancock has a 70% interest in Roy Hill. Agricultural Interests Hancock also holds a diversified portfolio of agricultural assets in Australia, including cattle stations located in Western Australia and the Northern Territory. 7. Economic analysis 7.1 Global Conditions in the global economy remain positive. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth picked up in the Asian economies in 2017, partly supported by increased international trade. Growth in China was strong through 2017, however it has eased slightly in the recent quarter, reflecting the Chinese authorities objective of more sustainable growth. In March 2018, the Chinese Government released a gross domestic product ( GDP ) growth target of approximately 6.5 percent for 2018, down from its published GDP growth rate of 6.9% in 2017, suggesting some tolerance for a gradual slowing of growth. Investment in infrastructure and residential property remains strong, with demand from these sectors supporting modest growth in crude steel production, which in turn has supported demand for iron ore and coking coal. The pick-up in the global economy has contributed to a rise in oil and other commodity prices over the past year. Even so, Australia's terms of trade are expected to decline over the next few years, but remain at a relatively high level. Globally, inflation remains low, although it has increased in some economies and further increases are imminent given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are to be expected. Both Chinese and United States of America authorities recently announced trade protectionist measures. The US increased import tariffs on certain items including steel and aluminium. The effect of the US Atlas Iron Limited TARGET'S STATEMENT Page 84 20

86 tariffs on other economies is expected to be small, with many countries being granted temporary exemptions. The Chinese economy will be little affected as steel and aluminium exports to the US are only a small share of Chinese production. In response to the US tariffs on steel and aluminium, the Chinese authorities imposed tariffs on US$3 billion of US goods. With both countries foreshadowing further tariffs, there is a risk that trade protectionism could escalate, harming global growth significantly. Rising geopolitical risks, including tensions in the Korean Peninsula could also dampen confidence and create bouts of financial market volatility. 7.2 Australia Domestic growth The Reserve Bank of Australia ( RBA ) is expecting faster growth in the next couple of years, with forecasts suggesting that average growth in 2018 and 2019 will be above 3%. Business conditions are positive, with overall business investment expected to continue growing over the next few years, as non-mining business investment increases. Mining investment is expected to slightly decline as construction on large liquefied natural gas projects concludes. Public spending is also supporting domestic economic activity. Public consumption has been growing strongly, in part supported by spending on the National Disability Insurance Scheme. Recent higher commodity prices have provided a boost to national income. Stronger growth in exports is expected after temporary weakness at the end of Household spending picked up in the December quarter of 2017, and recent indicators suggest that household consumption growth has remained steady into early 2018, however low growth in household income and high debt levels remains a key risk to the outlook for household consumption. Unemployment Employment grew by 3.5% over the past year, with employment figures rising in all states. The strong growth in employment has been accompanied by a significant rise in labour force participation, particularly by women and older Australians. Indicators of labour demand, including job vacancies continue to point to above average growth in employment over the next six months. The unemployment rate has declined slightly over recent years, but from mid-2017 has remained relatively unchanged, at around 5.5%. Conventional measures of full employment suggest the current unemployment rate is around 0.5% above full employment, implying spare capacity in the labour market. The various forward-looking indicators continue to point to strong growth in employment in the period ahead, with a further gradual reduction in the unemployment rate expected. Wages growth has picked up slightly, but remains low. The RBA cites spare capacity in the labour market, low inflation and continuing adjustments to the economy following the mining investment boom, as reasons for low wages growth. Low wages growth is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time. Inflation Inflation remains low and stable. Headline inflation and underlying inflation were both close to 0.5% for the March quarter, and around 2% over the year. Inflation is likely to remain low for some time, reflecting spare capacity in the economy, low wages growth and strong competition in retailing. Inflation is expected to be slightly above 2% in 2018, and long term inflation expected to be around 2.5%. Atlas Iron Limited TARGET'S STATEMENT Page 85 21

87 Currency movements Since the start of the year, the Australian dollar has depreciated against the US dollar and on a trade weighted basis, however it remains within its narrow range of the past two years. The decline was a result of lower bulk commodity prices and narrowing interest rate differentials. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation. Source: Statement by Philip Lowe, Governor: Monetary Policy Decision 3 July 2018, Statement on Monetary Policy May 2018, World Bank 8. Industry analysis 8.1 Iron Ore Iron ores are rocks from which metallic iron can be economically extracted. The principal iron ores are hematite (Fe 2O 3) and magnetite (Fe 3O 4). Hematite is a pure iron oxide mineral, with pure hematite mineral containing 69.9% Fe. Australia s hematite ores average from 56% Fe to 62% Fe. Goethite is an iron bearing hydroxide mineral most commonly formed by the weathering of other iron-rich minerals. Australian goethitic iron ores average from 54% Fe to 60% Fe. High grade iron ore preparation involves a relatively simple crushing and screening process before being exported. Magnetite is an iron oxide mineral containing 72.4% Fe in its pure form. Magnetite iron ores typically occur in sedimentary rocks, including banded iron formations as detrital grains. While the iron ore content of pure magnetite is higher than hematite and goethite, the presence of impurities and gangue material results in a lower ore grade, making it costlier to produce the concentrates. Iron is the world s most used metal with approximately 98% of world iron ore production being used to make steel. It is primarily used in structural engineering, automobiles and other general industrial applications. Commercial development of iron ore deposits is largely constrained by the position of the iron ore relative to its market and the cost of establishing proper transportation infrastructure such as ports and railways. There are three main categories of iron ore exports: Fines: fines are the smallest size category and typically have a granular size less than 9.50mm. They are the most heavily traded category of iron ore; Lump Ore: lump ore consists of golf ball sized pieces, and generally has a higher iron content than fines; and Pellets: particle sizes range from 9.50mm to 16.00mm. Pellets are made by agglomeration of finely ground and concentrated ore. In 2017, an estimated 2.4 billion metric tonnes of usable ore were mined. The chart below shows the countries in which the majority of estimated iron ore was produced in 2017: Atlas Iron Limited TARGET'S STATEMENT Page 86 22

88 4.2% Global iron ore production - usable ore (2017 estimate) 13.4% Australia Brazil 4.6% 37.0% China 8.0% India Other 14.3% 18.5% Russia Other countries Source: US Geological Survey In 2017, Australia was the largest iron ore producer, accounting for 37.0% of global estimated production. Western Australia accounted for approximately 98% of Australian iron ore production in 2017, with most of the iron ore in Western Australia produced from the Pilbara region. The quantity of iron ore produced from Western Australia, has increased significantly over the past decade, driven by demand from China. Brazil accounted for approximately 18.5% of global estimated production in Production in Brazil has increased over the last decade, assisted by improved technology to explore, mine and concentrate its iron orebodies, and demand from China. The chart below shows the location of the world s iron ore reserves, with Australia and Russia accounting for approximately 44% of the world s estimated ore reserves in Global ore reserves (2017 estimate) 3.8% 3.5% 4.8% 12.3% 29.3% Australia Other countries Russia Brazil 13.5% 14.7% 18.1% China India Ukraine Canada Source: US Geological Survey Atlas Iron Limited TARGET'S STATEMENT Page 87 23

89 Global Market China s steel mills produce about one-half of the world s steel and as such the largest demand for iron ore is from China. Below is a chart of the major suppliers of iron ore to China. Major Suppliers of Iron Ore to China 4.0% 1.1% 1.0% 1.0% 0.9% 1.7% 2.5% 4.2% 20.7% 0.7% 62.1% Australia Brazil South Africa All Others India Iran Peru Chile Ukraine Mauritania Canada Source: West Australian Department of Mines, Industry Regulation and Safety In 2017, Australia and Brazil were the largest suppliers of iron ore to the Chinese market, supplying approximately 62.1% and 20.7% of imported ore, respectively. As Australia does not have any significant steel producers, almost all iron ore produced in Australia is exported. In 2017 approximately 82% of iron ore exports, were to China. As a result, Australian iron ore producers are significantly exposed to changes in the Chinese steel industry. Recently the Chinese steel industry has undergone reforms, with the introduction of policies targeting overcapacity and pollution. China has stated it intends to reduce overcapacity, partly in response to a number of trade petitions lodged in North America and Europe. The Chinese Government has pledged to remove as much as 150 million tonnes per year of steel production by The Chinese Ministry of Industry and Information Technology has also announced that it plans to ban the launch of any new steelmaking facilities in This is expected to increase competition between steelmakers, and may see some consolidation within the Chinese steel industry. China s changing attitude toward the environment is expected to have an impact on the purchasing decisions of steelmakers. Structural changes to the Chinese Steel industry, have resulted in reduced steel production. This has resulted in favourable margins for Chinese steel makers, driving demand for premium grade ore from Australian and Brazil (in order to maximise productivity and output). Source: West Australian Department of Mines, Industry Regulation and Safety, Bloomberg intelligence Price Trends A summary of the nominal iron ore spot price, based on the 62% Fe import dry metric tonne, fine ore Cost and Freight ( CFR ) Qingdao index, from January 2013 to July 2018 and Consensus Economics (June 2018 edition) long-term forecast for iron ore (fine) China CFR dry metric tonne to December 2027 is set out below: Atlas Iron Limited TARGET'S STATEMENT Page 88 24

90 US$/dry metric tonne Iron Ore Spot and Forecast Forecast Spot Source: Bloomberg, BDO Analysis and Consensus Economics Historical prices Iron ore prices decreased from US$158/tonne in February 2013 to US$113/tonne in May Iron ore prices recovered in July 2013, driven by heavy steel re-stocking in China following improvements in the Chinese property sector and miscalculations from Chinese steel makers. During this period, steel makers ran down stockpiles in the hope that the price of iron ore would fall. However, when prices did not fall, and steel makers were required to purchase significant amounts of iron ore, the increase in demand from the steel makers, coupled with a fall in supply following disruptions to production in Brazil, resulted in higher iron ore prices. In October 2013 through to December 2013, global iron ore prices stabilised with a monthly average range of US$134-US$136/tonne. Weaker iron ore prices, compared to those recorded in July 2013 and August 2013, were driven by a slowdown in steel production and consumption in China. At the beginning of 2014, global iron ore prices fell to US$110/tonne. In May 2014, iron ore prices dropped below US$100/tonne for the first time in almost two years. Falling prices were largely a result of a slowdown in steel production in China and an oversupply of iron ore. Inventories at ports in China were at record levels, increasing from 84 million tonnes to a two year high of 106 million tonnes. The price of iron ore continued to fall in the second half of 2014, reaching US$69.3/tonne by 31 December The decline was primarily driven by concerns regarding the health of the Chinese economy, and a ramp up in production by major producers, which flooded the market with high quality iron ore. A slowdown in growth in steel consumption in China was influenced by a number of factors, including a fall in GDP growth (the lowest in two decades), a tightening of credit policy which resulted in increased borrowing costs for iron ore buyers, and a drop in China s Purchasing Managers Index. During 2015 the price of iron ore continued to follow a downward trend, reaching a low of US$37.5/tonne in December 2015, as a result of oversupply and concerns regarding the health of the Chinese economy. Stimulus measures implemented by the Chinese government during this period had little effect on price, and the stock market declines further eroded investors confidence. Atlas Iron Limited TARGET'S STATEMENT Page 89 25

91 Prices trended upwards in 2016, reaching a high of approximately US$83.7/tonne in December This was largely due to an increase in Chinese demand, stimulated by spending on infrastructure and property development, which are steel intensive industries. During 2017, prices trended downwards during the first half of the year, reaching a low of US$54/tonne in June. However, prices recovered to reach US$80/tonne in August, following stronger growth in infrastructure. Prices in 2018 were steady from January through to the beginning of March, fluctuating between US$70/tonne and US$75/tonne. However, prices have declined since, reaching a low of US$59.31/tonne on 2 July Forecast prices Iron ore prices are forecast to remain relatively stable over the next two years, and expected to average US$62/tonne in Despite the fact that iron ore production in India is expected to decrease due to restrictions on mining, the largest producers have all proceeded with a number of expansions. While Chinese steel smelting companies will continue to require high iron ore volumes to meet demand, higher production and output from Australian mines along with increases in output from Brazil are expected to lead to oversupply and weakened prices. Price differentials Discounts for low grade iron ore have widened over the last 18 months, deviating from historical norms. Analysts cite several reasons for the high discounts, including higher steel prices and changes to the Chinese steel industry. Analysts note that higher iron ore prices and Chinese steel industry reforms (resulting in supply rationalisation) have led to higher margins for steel mills. As a result, steel mills have favoured higher grade ore, in order to maximise productivity and output. It is uncertain whether the low grade discounts will persist. Some analysts suggest that discounts for low grade ore will return to historical levels, while some expect grade driven price diversions to continue, believing structural changes to the Chinese steel industry will see larger discounts for low grade ore become the norm. Whether low grade discounts persist, will largely be determined by steel mill margins. A moderation of steel mill margins could see steel mills favour low grade ore, increasing the price for low grade ore and narrowing the existing grade price differential. Some analysts anticipate a slowdown in property infrastructure construction in the coming years, which may potentially see demand for steel to fall and grade price differentials narrow. Conversely, some analysts suggest that steel margins are unlikely to moderate, particularly if steel production cuts in China are permanent. It is also argued that steel makers purchasing decisions are being impacted by more than just profit, suggesting steelmakers are factoring the cost of emissions into their operation margins. While it is uncertain whether low grade discounts will persist in the longer term, discounts are unlikely to decline in the immediate future, with FMG recently amending its iron ore price guidance to reflect an expected contractual realisation of approximately 65% of the average Plats 62 CFR Index for the financial year ended 30 June 2018, down from initial price guidance of 70-75% realisation. FMG stated that slower than expected recovery in the contractual realisations was the result of subdued Chinese construction Atlas Iron Limited TARGET'S STATEMENT Page 90 26

92 activity, extensions to temporary production restrictions in some Chinese provinces and speculation regarding the potential impact of global trade tensions. Source: S&P intelligence and Consensus Economics Outlook for Australian Iron Ore IBISWorld forecasts that iron ore output in Australia is anticipated to increase at an annualised 1.7% over the next five years, with productivity improvements and additions to capacity expected. Many of the iron ore industry s major producers, including Rio Tinto Limited ( Rio Tinto ), BHP Billiton Limited ( BHP ) and FMG have new developments or expansion projects planned. Iron ore projects under development include the following: Koodaideri Project (Rio Tinto) - Following the recent completion of the US$388 million Silvergrass Project, Rio Tinto is now assessing the Koodaideri Project. A feasibility study, commenced in 2017, is assessing a number of options for the project, including a 40mtpa dry crushing and screening plant, with a suggested capital requirement of US$2.2 billion. Construction has the potential to begin in South Flank Project (BHP) On 14 June 2018, BHP s Board approved capital expenditure of US$2.8 billion for the South Flank Deposit in the central Pilbara region. The South Flank Project would replace 80mtpa of production from BHP s Yandi Mine when it reaches the end of its economic life in the early to mid-2020 s. First production at the South Flank Project is targeted for 2021, with the mine expected to produce ore for at least 25 years. Eliwana Project (FMG) - The approval processes for FMG s Eliwana Project commenced at the end of The Eliwana project is expected to be a replacement for FMG s Solomon Hub Firetail operation. On 28 May 2018, FMG announced that its Board approved the development of the Eliwana mine and rail project. Iron Bridge Magnetite Project (Joint venture between FMG, Formosa Group and Baosteel Group) - Feasibility studies for the Iron Bridge Magnetite Project are ongoing and a decision is expected during Marillana Project - (Brockman) - Brockman was progressing with a two phase commercial development for its Marillana Project. However, on 17 November 2017, Brockman executed a term sheet with BBIG Group Pty Ltd ( BBIG ). BBIG has targeted being the completion of a definitive feasibility study in the next few years. 8.2 Lithium Lithium is a soft, silver-white metal belonging to the alkali metal group of chemical elements and is the world s 25 th most abundant element. It is approximately half as dense as water and is the lightest of all metals. Lithium is highly reactive and therefore does not occur naturally as a metal in nature, rather as chemical compounds which are extracted from ores of petalite, lepidolite, spodumene or subsurface brines. In the extraction of lithium from brines, the salt-rich waters are pumped to the surface into evaporation ponds where solar evaporation occurs over approximately 18 to 24 months per batch. Lithium can be processed to form various compounds including lithium carbonate, lithium hydroxide, lithium bromide and lithium chloride. Once processed, lithium metal has several industrial applications, the most prominent being in that of batteries for phones, laptops and electric vehicles. Atlas Iron Limited TARGET'S STATEMENT Page 91 27

93 Lithium is widely used in rechargeable batteries due to the higher energy density, greater durability and cost advantages it provides compared to other rechargeable batteries. It can also be used to strengthen and improve resistance in glasses and ceramics, along with being alloyed with aluminium and copper to reduce weight in airframe structural components. According to the United States Geological Survey ( USGS ), global-end use markets for lithium are estimated at 46% for batteries, 27% for ceramics and glass, 7% for lubricating greases, 5% for polymer production, 4% for continuous casting mould flux powders, 2% for air treatment and 9% for other uses. Lithium production in Australia is focussed primarily on the extraction of high-grade lithium from pegmatite ore bodies. Pegmatite lithium bodies, also known as hard-rock lithium bodies, host high-grade lithium found in the mineral spodumene, which can be extracted through open pit mining. Although this method of extraction incurs higher operating costs, pegmatite deposits host more concentrated sources of lithium and can be developed more rapidly than lithium occurring in subsurface brines 8.3 Lithium Direct Shipping Ore The market has recently been introduced to the emergence of Lithium Direct Shipping Ore ( Lithium DSO ) as a saleable product. Lithium DSO is unprocessed ore that is mined and shipped to China to be processed. Lithium DSO remains a high cost source of lithium units, requiring high prices to be viable. The Lithium DSO requires further processing in China in order to produce a suitable lithium concentrate, and the acceptance of this low grade form further illustrates the strong demand for lithium and the impact of supply delays of high grade concentrate from hard rock operations and lithium carbonate from brine operations. Given the current tight market conditions for the supply of lithium mineral resources in China, Lithium DSO has become a suitable alternative to temporarily fill the supply gap. 8.4 Lithium Spodumene Concentrate Lithium occurring in spodumene is highly concentrated and pure, containing fewer contaminants than lithium occurring in subsurface brines or clays. As a result, it is the preferred choice for battery applications. Spodumene concentrate is generated from ores through various methods of mineral separation, depending on the coarseness of the ore grain. Once separated, high-grades of concentrate are suitable for lithium extraction. 8.5 Lithium Hydroxide Lithium hydroxide is one of the primary lithium compounds used in battery applications. The sulfation route to lithium hydroxide, is the most common method used to extract lithium hydroxide from spodumene concentrate. The sulfation method entails acid roasting, leaching, purification and precipitation, and has been proven effective at commercial scales. 8.6 Lithium demand Demand for Lithium has increased steadily in recent years, driven mainly by growing demand from the transport, technology and energy sectors for use in rechargeable batteries. Increasing demand from foreign manufacturers especially, has driven demand growth for Australian lithium over the five years through Atlas Iron Limited TARGET'S STATEMENT Page 92 28

94 Growth in the electric car manufacturing industry particularly is a key driver for lithium demand, as major players within the industry, including Tesla and China s MIIT, expand production and increasingly target mainstream markets. According to Bloomberg New Energy Finance, electric car production globally is expected to increase more than thirty fold by 2030, sustaining demand for Lithium. The use of lithium-ion batteries in technological devices such as computers and smartphones has also continued to be a key driver for lithium demand, and lithium supply security has become a top priority for technology companies in the United States of America ( USA ) and Asia. The acquisition of a 15% interest in Orocobre Limited by Toyota Tsusho Corporation in January 2018 is an example of this. 8.7 Lithium production and reserves Since the late 1990s, subsurface brines have become the dominant raw material for lithium carbonate production worldwide. Subsurface brines offer lower production costs compared with the mining and processing of hard-rock ores. According to the USGS, two brine operations each in Argentina and Chile and three spodumene operations in Australia currently account for the majority of world lithium production. As depicted in the figure below, Australia led global Lithium production in 2017, accounting for 42% of total production. Despite growing global production, Australia also increased its share of production fractionally on Domestic production increased almost 34% as two new mines entered production, bringing the number of producing mines to three. In 2017, four countries including Australia accounted for 93% of global production, Chile, Argentina and China were the next largest producers accounting for 32%, 12% and 7% of global production respectively. 12% 2% 1% 4% 7% 32% Global Lithium Production (2017 Estimate) 0% 42% Australia Chile Argentina China Zimbabwe Portugal Brazil Other Source: US Geological Survey Global lithium extraction is dominated by four large companies; being Albemarle Corporation, FMC Lithium Corporation, Sociedad Quimica y Minera de Chile S.A. ( SQM ) and Tianqi Lithium Corporation. Albemarle, SQM and FMC Corporation recover lithium from subsurface brines in both Chile and Argentina, and Talison Lithium Pty Ltd which is jointly owned by Albemarle and Tianqi Lithium Corporation extract lithium carbonate concentrate from hard-rock ore in Australia. According to Bloomberg Intelligence, together these four companies account for approximately 85% of the world s lithium supply, although they will face more intense competition in the next four years from new market entrants. Atlas Iron Limited TARGET'S STATEMENT Page 93 29

95 According to the USGS, global lithium resources have increased significantly due to continued exploration and are now estimated to total more than 53 million tons. As depicted in the figure below, Chile accounted for approximately 47% of global lithium reserves, followed by China at 20% and Australia at 17%. 0.2% 0.3% 0.4% 13% Global Lithium Reserves (2017 Estimate) 0.1% 2.7% Chile China Australia Argentina 17% 47% Portugal Brazil United States 20% Zimbabwe Other Source: US Geological Survey 8.8 Lithium prices Lithium trade is usually confined to a small number of producers and their customers, and as such, contract terms such as pricing are privately negotiated. Furthermore, there is an extensive range of products that can be made from lithium which leads to a range of prices that are dependent on the product and its purity. The strong Australian dollar reduced lithium export values within Australia from 2010 through to 2012 however, export prices benefited from strong Chinese demand for lithium from and the weaker Australian dollar over recent times through to The lithium market has experienced significant change due to the current growth in demand for electric vehicles and the potential for static power storage devices. According to Bloomberg intelligence, the price of battery-grade Lithium has more than doubled since 2015 spurred by growing demand. 8.9 Lithium outlook According to Bloomberg Intelligence, traditional industrial demand for lithium is expected to rise in line with global GDP. Battery applications are expected to be the driving force behind growth within the lithium industry going forward, led by the development of electric vehicles and underpinned by the use of portable electronics. The recycling of batteries is also said to play a key role in the supply of lithium in the medium to long term. As lithium is a resource with the ability to be recycled repeatedly, this reduces the need for new sources of lithium in the future. It is expected that global demand will continue to outstrip supply in the short-term at least, as a number of large-scale battery and energy plants complete construction. Tesla is building the world s largest 30 Atlas Iron Limited TARGET'S STATEMENT Page 94

96 lithium battery plant in the USA, while a number of new developments in China will contribute substantially to global capacity for electric vehicles and energy-storage systems, which is expected to triple by Australian lithium output is forecast to continue increasing in 2018, supported by a number of mine development and expansion projects nearing completion. Continued growth in foreign demand however will continue to outstrip supply, allowing prices to strengthen despite increased production. According to IBISWorld, lithium s contribution to the salt and other mineral mining industry in Australia will see industry revenue grow at an annualised 2.4% to reach 1.9 billion over the five years through to Source: US Geological Survey, Bloomberg Intelligence and IBIS World 9. Valuation approach adopted There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows: Capitalisation of future maintainable earnings ( FME ) Discounted cash flow ( DCF ) Quoted market price basis ( QMP ) Net asset value ( NAV ) Market based assessment (such as a resource multiple) A summary of each of these methodologies is outlined in Appendix 2. Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information. It is possible for a combination of different methodologies to be used together to determine an overall value where separate assets and liabilities are valued using different methodologies. When such a combination of methodologies is used, it is referred to as a sum-of-parts ( Sum-of-Parts ) valuation. The approach using the Sum-of-Parts involves separately valuing each asset and liability of the company. The value of each asset may be determined using different methods as described above. The component parts are then valued using the NAV methodology, which involves aggregating the estimated fair market value of each individual company s assets and liabilities. 9.1 Valuation of Atlas Iron In our assessment of the value of Atlas Iron shares we have chosen to employ the following methodologies: Sum-of-Parts method, as our primary method, which estimates the market value of a company by separately valuing each asset and liability of the company and then aggregating their fair market values; and QMP method, as our secondary method, which represents the value that a Shareholder can receive for a share if sold on the market. Atlas Iron Limited TARGET'S STATEMENT Page 95 31

97 Sum-of-Parts We have employed the Sum-of-Parts method in estimating the fair market value of Atlas Iron by aggregating the estimated fair market values of its underlying assets and liabilities, having consideration to the following: Asset Ownership Valuation approach Mount Webber Project 100% Atlas DCF and reliance on independent technical expert Corunna Downs Project 100% Atlas DCF and reliance on independent technical expert McPhee Creek Project 100% Atlas Reliance on independent technical expert Miralga Creek Project 100% Atlas Reliance on independent technical expert Ridley Magnetite Project 100% Atlas Reliance on independent technical expert Iron assets in Southeast Pilbara 1 100% Atlas Reliance on independent technical expert Non-iron ore exploration assets 2 100% Atlas Reliance on independent technical expert Pilgangoora Minegate Agreement 3 90% Atlas DCF Altura Royalty Agreement 4 100% Atlas DCF Port access rights at Utah Point 5 100% Atlas Refer to the analysis below Present value of debt 100% Atlas Included in DCF Present value of corporate costs 100% Atlas Included in DCF Other assets and liabilities 100% Atlas NAV method Source: BDO analysis Notes: 1 Material iron ore assets in the Southeast Pilbara region principally Davidson Creek, and including Western Creek and Warrawanda 2 Comprising lithium tenements at Cisco and Pancho, copper tenements at Copper Range and Walker as well as gold potential of the Company s tenure portfolio 3 Pilgangoora Minegate Agreement with Pilbara Minerals or PLS for the purchase of lithium DSO from the Pilgangoora Lithium-Tantalite Project at mine gate and for the provision of services of crushing, haulage, ship loading and ocean freight of between one million tonnes and 1.5 million tonnes of ore. Atlas Iron has a 90% interest in the Pilgangoora Minegate Agreement. 4 Rights to receive royalties under the Altura Royalty Agreement of 5% of the value of all lithium concentrates produced from tenement M45/1231 at Altura s Pilgangoora Lithium Project (or Altura Royalty Agreement) 5 Port allocation and access rights at Utah Point, a bulk commodities port in Port Hedland Methodologies adopted We have chosen these methodologies for the following reasons. Mount Webber Project and Corunna Downs Project The Mount Webber Project is an operating mine which has approximately four years of mine life remaining. Mining is forecast to be carried out at a rate of seven million tonnes per annum. In view of the volatility of iron ore prices, Atlas Iron has been able, in the past, to adjust production volumes to maximise profits in favourable market conditions and to minimise losses in less favourable conditions. Atlas Iron Limited TARGET'S STATEMENT Page 96 32

98 The Corunna Downs Project is an advanced stage project where a definitive feasibility study has been completed and is ready to be developed upon receipt of mining approval in the coming months. The Corunna Downs Project is expected to have a five-year mine life, capable of producing approximately five million tonnes per annum of lumps and fines, following expected capital investment of approximately $58 million. The Mount Webber Project and the Corunna Downs Project are collectively referred to as Atlas Operating Projects. Atlas Iron has experienced steadily increasing price discounts for its low grade iron ore. Over the past year, discounts have grown to reach substantially higher levels when compared to the historical average. As our industry analysis observes, there are diverse market analyst opinions on whether these discounts will be sustained or reduced in the medium to long term. We have considered three alternative scenarios in our valuation of the Atlas Operating Projects. These reflect three alternative assumptions for the future discount to benchmark iron ore prices that the Company will experience. Under a sustained high discount scenario (subsequently defined as Current Discount Scenario), the Mount Webber Project is expected to become non-viable and the Corunna Downs Project may not be developed. The DCF methodology requires the project to be commercially viable to be developed in order to provide a sufficiently reasonable basis for this methodology to be applied. Therefore, under this scenario, the current and forecast pricing discounts for iron ore do not provide for a commercially viable case for the Atlas Operating Projects to continue operating or to be developed. Accordingly, we have relied on the market valuation carried out by the independent technical expert we engaged, using market based assessment methods. We also considered a reduced discount scenario where the discount to benchmark iron ore prices reverts to levels observed historically, which the management of Atlas Iron believes may be in the range of 0% to 20%. Assuming a 12% discount scenario (subsequently defined as Low Discount Scenario), the Mount Webber Project is economically viable and the Company is expected to proceed with the development of the Corunna Downs Project. Accordingly, we have adopted the DCF methodology to value the Atlas Operating Projects under this scenario. We note that pursuant to RG 111, we are unable to incorporate special value to a specific purchaser and have therefore valued the Atlas Operating Projects under the control of Atlas Iron. We note that other purchasers may have the ability to operate these projects with different cost structures due to the use of rail networks, which may not be available to other market participants. The third scenario we have considered is based on the assumption that the discount to benchmark iron ore prices reduces gradually to remain at a stable level of 20% (subsequently defined as Medium Discount Scenario). Under this scenario, both the Mount Webber Project and the Corunna Downs Project are expected to be operationally viable before corporate costs and financing cash flows. Given the marginality of profits under this scenario, it may be unlikely for Atlas Iron to develop the Corunna Downs Project. However, it is possible that, since the Corunna Downs Project is expected to be operationally viable, the Corunna Downs Project may be developed to reduce the overall loss. As such, we have assumed that Atlas Iron will operate the Mount Webber Project and develop the Corunna Downs Project to cover and to reduce ongoing fixed costs. Accordingly, in this third scenario, we have adopted the DCF methodology to value both the Mount Webber Project and the Corunna Downs Project. Further details of the different discount scenarios may be found in Section 11. Atlas Iron Limited TARGET'S STATEMENT Page 97 33

99 Our valuation methodology using the DCF approach is referred to as DCF Valuation. McPhee Creek Project and Miralga Creek Project Resources of advanced projects such as the McPhee Creek Project and the Miralga Creek Project ( Atlas Advanced Projects ) are valued as in-ground resources by an independent technical expert, using market based assessment methods, as we do not have reasonable grounds to adopt the DCF methodology. The valuation approach undertaken by the independent technical expert is contained in its report in Appendix 5. Ridley Magnetite Project, Southeast Pilbara and non-iron ore exploration assets Other exploration assets consist of the Ridley Magnetite Project, iron ore assets in the Southeast Pilbara comprising Davidson Creek, Western Creek and Warrawanda, and non-iron ore exploration assets comprising lithium tenements at Cisco and Pancho, copper tenements at Copper Range and Walker as well as gold potential of the Company s tenure portfolio ( Atlas Exploration Assets ). The Atlas Exploration Assets are still early stage assets and incapable of generating earnings or cash flows in the near future. Therefore, we have relied on the market valuation carried out by the independent technical expert using market based assessment methods. The valuation approach undertaken by the independent technical expert is contained in its report in Appendix 5. Pilgangoora Minegate Agreement and Altura Royalty Agreement We have adopted the DCF methodology to value the Pilgangoora Minegate Agreement and the Company s rights to receive royalties under the Altura Royalty Agreement as both Pilbara Minerals and Altura s lithium projects at Pilgangoora are at an advanced stage and will be in production in the short term. Based on publicly available information, including their JORC ore reserve statements, we believe that we have reasonable grounds to apply the DCF methodology. Balla Balla Royalty The development of port and rail infrastructure is vital for the development of the Balla Balla magnetite project, a polymetallic iron, vanadium and titanium mining project, over which Atlas Iron holds the magnetite royalty as described in Section In view of the uncertainty surrounding the financial and technical viability of the Balla Balla project under the current iron ore price environment, we have no reasonable grounds to assume any cash flows from this royalty. Hence, we were unable to perform a valuation of the Balla Balla royalty. Given the early stage of this project, we do not consider the royalty to have material value. Port access rights at Utah Point Utah Point is a bulk commodity handling facility in Port Hedland in Western Australia. Port Hedland is the world s largest bulk commodity port with annual exports of over 500 million tonnes per annum. The capacity of Utah Point is currently capped at approximately 25 million tonnes per annum. Atlas Iron has a multi-user agreement and lease with the PPA which gives it the right to use a berth and a multi-user out-loading facility as well as the right to construct delivery and storage facilities for shipping bulk commodities. Atlas Iron Limited TARGET'S STATEMENT Page 98 34

100 Atlas Iron has a lease of Lots 1 and 2 of Stockyard 1 and exclusive use of Stockyard 2. The capacity allocated for Stockyard 1 and Stockyard 2 are three million tonnes per annum and 10 million tonnes per annum respectively. Atlas Iron s lease of Stockyard 1 expires in September 2018 and Stockyard 2 remains partially developed. It is estimated that between $6 million and $9 million capital expenditure invested in Stockyard 2 can increase actual throughput to eight million tonnes per annum even though it has rights to 10 million tonnes per annum at Stockyard 2. The value of Atlas Iron s port capacity at Utah Point is dependent on its rights and its restrictions. Some of these rights and restrictions are: restrictions on assignment to third parties without PPA consent; requirement to seek PPA s approval for new products; and PPA is entitled to terminate Atlas Iron s rights on the basis of abandonment if Atlas Iron does not carry out in-loading or out-loading activities at the port for a period longer than 90 days. Therefore, the non-assignability and non-saleability of these rights, together with the obligation that Atlas Iron will need to move its own ore through the port to retain these rights (and not merely moving a third party s ore on a service type agreement, which may only be incidental), means that the value of Atlas Iron s rights is valuable only to the extent that Atlas Iron is able to utilise the port capacity at Utah Point for its own use (allowance for third party ore to be shipped is only where it is incidental). Fair market value is defined as the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm s length The value of an asset, other than for its own use, should be based on the asset s ability to generate income or cash flows and/or be able to be sold to a third party, that is, separable. We do not consider that Atlas Iron s port access rights meet the fair market value definition in their own right nor are the access rights separable and able to be sold. Therefore, we have not separately valued Atlas Iron s port access rights and consider them valuable only to the extent that Atlas Iron is able to utilise the port capacity at Utah Point for its own use. As such, the value of the port access rights at Utah Point is embedded in the value of Atlas Iron s Operating Projects. We further note that Atlas Iron had impaired its port access rights which were recorded at cost in its financial year ended 30 June The impairment amount of $68.63 million, together with amortisation expense of $2.961 million reduced the opening balance of $ million to nil. There has been no reversal of the impairment since and hence the port access rights were not carried in the Company s financial statements as at 31 December Other assets and liabilities Other assets and liabilities are valued using the NAV approach, based on the asset and liability values of those items not already included in our DCF Valuation. Other comments The FME approach is not appropriate due to the varying stages that each of Atlas Iron s projects are at, and with numerous mineral assets that are not income generating at this stage. Atlas Iron Limited TARGET'S STATEMENT Page 99 35

101 Technical expert In performing our valuation of Atlas Operating Projects using the DCF method, we have relied on the Technical Assessment and Valuation Report prepared by CSA Global Pty Ltd ( CSA Global ) dated 12 July 2018 ( Independent Technical Assessment and Valuation Report ), based on CSA Global s review of the technical project assumptions contained in the cash flow models of the Atlas Operating Projects. Additionally, we have relied on CSA Global s valuation of the residual resources not included in our DCF Valuation, the resources of Atlas Advanced Projects and Atlas Exploration Assets. As stated above, we have also relied on CSA Global s valuation of the Mount Webber Project and the Corunna Downs Project under various discount scenarios where the DCF Valuation is not adopted. CSA Global s Independent Technical Assessment and Valuation Report has been prepared in accordance with the Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets 2015 ( the Valmin Code 2015 ). We are satisfied with the valuation methodologies adopted by CSA Global, which we believe are in accordance with the industry practices and compliant with the requirements of the Valmin Code CSA Global s Independent Technical Assessment and Valuation Report is attached in Appendix QMP We have chosen the QMP methodology as our secondary methodology and as a cross check. The QMP basis is a relevant methodology to consider because Atlas Iron s shares are listed on the ASX. This means that there is a regulated and observable market where Atlas Iron shares can be traded. However, in order for the QMP to be considered appropriate, the Company s shares should be liquid and the market should be fully informed of the Company s activities. 10. Valuation of Atlas Iron In our assessment of the value of Atlas Iron prior to the Offer, we have chosen to employ the following methodologies: Sum-of-Parts as our primary valuation methodology (Section 10.1); and QMP of Atlas Iron shares as our secondary valuation methodology and a cross-check to our Sum-of- Parts (Section 10.2) Sum-of-Parts We have employed the Sum-of-Parts methodology in estimating the fair market value of an Atlas Iron share on a control basis prior to the Offer, by aggregating the estimated fair market values of its underlying assets and liabilities, having consideration for the following: value of the Atlas Operating Projects, being the Mount Webber Project including the remaining stockpile at the Mount Dove processing plant, and the Corunna Downs Project; value of Atlas Iron s other mineral assets including: o o a resource valuation of the Atlas Advanced Projects, being the McPhee Creek Project and the Miralga Creek Project, which was performed by CSA Global; a resource valuation of the Ridley Magnetite Project, conducted by CSA Global; Atlas Iron Limited TARGET'S STATEMENT Page

102 o o o assessment of material value or expenditure commitments at Abydos, Davidson Creek, Warrawanda and Western Creek as determined by CSA Global; a resource valuation of Atlas Iron s copper exploration assets at Copper Range and Walker Range as determined by CSA Global; and a valuation of Atlas Iron s lithium exploration assets being Cisco and Pancho as determined by CSA Global. present value of forecast cash flows from the Altura Royalty; present value of forecast cash flows from the Pilgangoora Minegate Agreement; present value of Atlas Iron s debt cash flows; present value of Atlas Iron s corporate costs; and value of Atlas Iron s other assets and liabilities. Given the level of uncertainty surrounding the discounts Atlas Iron will incur on its ore, we have conducted the above valuation using scenario analysis. Set out below are our assumptions regarding the DCF valuation of Atlas Iron, which are applicable to each of the three scenarios we have considered in our Sum-of-Parts. Our conclusion on the valuation of Atlas Iron prior to the Offer is set out in Section DCF valuation of Atlas Iron The management of Atlas Iron has prepared a detailed cash flow model which consolidates the forecast cash flows of its Mount Webber Project including the remaining stockpile at the Mount Dove processing plant, and the Corunna Downs Project ( the Atlas Model ). The Atlas Model estimates the future cash flows expected from production over the respective mine lives of the Atlas Operating Projects, which have been determined based on JORC Code compliant reserves. The Atlas Model also includes the Company s debt cash flows and corporate costs. We have assessed the reasonableness of the Atlas Model and the material assumptions that underpin it. We have made certain adjustments to the Atlas Model where it was considered appropriate, to arrive at an adjusted model ( Adjusted Atlas Model ). In particular, we have adjusted the Atlas Model to reflect any changes to technical assumptions as a result of CSA Global s review, in addition to any changes to the economic and other input assumptions that we consider appropriate as a result of our research. The Atlas Model was prepared based on estimates of the Atlas Operating Projects respective production profiles, operating costs and capital expenditure. The main assumptions underpinning the Atlas Model and Adjusted Atlas Model include: mining and processing volumes; commodity prices; operating costs; development and sustaining capital expenditure; foreign exchange rates; corporate costs; debt cash flows; royalties; corporate tax; and discount rate. Atlas Iron Limited TARGET'S STATEMENT Page

103 We undertook the following analysis on the Atlas Model: analysed the Atlas Model to confirm its integrity and mathematical accuracy; appointed CSA Global as technical expert to review, and where required, provide changes to the technical assumptions underpinning the Atlas Model; conducted independent research on certain economic and other inputs such as commodity prices, exchange rates, inflation, low grade iron ore discounts and the discount rate applicable to the future cash flows of Atlas Iron; held discussions with Atlas Iron s management regarding the preparation of the forecasts in the Atlas Model and its assumptions; held discussions with CSA Global to confirm the reasonableness of Atlas Iron s forecast technical inputs; performed scenario analysis based on changes to assumptions relating to the discounts that Atlas Iron will incur on its ore sold over the respective lives of the Atlas Operating Projects; and performed a sensitivity analysis on the value of the Atlas Operating Projects as a result of flexing key assumptions and inputs. We have not undertaken a review of the cash flow forecasts in accordance with the Standard on Assurance Engagements ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information and do not express an opinion on the achievability of the forecast. However, nothing has come to our attention as a result of our procedures to suggest that the assumptions on which the Adjusted Atlas Model has been based have not been prepared on a reasonable basis. Appointment of a technical expert CSA Global was engaged to prepare a report providing a technical assessment of the assumptions underlying the Atlas Model. CSA Global s assessment involved the review and provision of opinion on the reasonableness of the assumptions adopted in the Atlas Model, including but not limited to: mining physicals (including volume mined, recovery and grade); processing assumptions (including products and recovery); operating costs (comprising mining, processing and administration costs); capital expenditure (development and sustaining capital required); rehabilitation; and other relevant assumptions. CSA Global s Independent Technical Assessment and Valuation Report is included in Appendix 5. Limitations Since forecasts relate to the future, they may be affected by unforeseen events and they depend, in part, on the effectiveness of management s actions in implementing the plans on which the forecasts are based. Accordingly, actual results may vary materially from the forecasts included in the Adjusted Atlas Model, as it is often the case that some events and circumstances frequently do not occur as expected, or are not anticipated, and those differences may be material. Atlas Iron Limited TARGET'S STATEMENT Page

104 Economic Assumptions Inflation Iron ore prices obtained from our research sources are quoted on a nominal basis. Therefore, we applied inflation to the Atlas Model in order to convert the cash flows to nominal terms in the Adjusted Atlas Model. We have adopted an annual inflation rate of 2.3% which is based on the average forecast inflation rate as sourced from Bloomberg, whilst also giving consideration to historical inflation rates in Australia. Our assessment of forecast inflation is supported by the fact it lies within the RBA s inflation target of 2% to 3%. Foreign Exchange The revenue cash flows presented in the Atlas Model are denominated in United States Dollars ( USD ). Given that the Offer is denominated in AUD, for the purpose of our fairness assessment, we have converted the cash flows in the Atlas Model from USD to AUD at the following forecast exchange rates: Exchange Rates CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY USD:AUD Source: Bloomberg and BDO analysis Pricing As detailed in our industry analysis in Section 9, Atlas Iron produces low grade iron ore which is subject to a discount to the benchmark price on which forecasts are typically prepared by industry analysts. As such, our assessment of forecast pricing is conducted in three parts. The first part is to form a view on the forecast benchmark iron ore price for 62% Fe over the forecast period. In forming our view, we have had regard to both historical iron ore prices from Bloomberg as well as consensus analyst views on forecast pricing, as published by Consensus Economics. Based on our analysis, we have adopted the following nominal forecast benchmark 62% Fe prices: CFR Iron Ore Prices China CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 Fines prices CFR (US$/t) Lumps prices CFR (US$/t) Source: Consensus Economics and BDO analysis The second part of our assessment of the forecast prices is to calculate an adjustment to the 62% Fe price to account for Atlas Iron producing ore with an average grade of approximately 57.5% ( Grade Discount ). The third part of our analysis is to form a view on the additional low grade discount (in addition to the standard grade adjustment calculation) that Atlas Iron incurs on its ore ( Additional Quality Discount ). The Additional Quality Discounts quoted in our report are on a FOB basis. There are a host of differing analyst views on the price outlook for low grade iron ore producers in Australia. As such, in forming a view we have considered the following: views presented by independent industry experts; views presented in broker and independent research reports; discussions with CSA Global on its views of future discounts; and discussions with Atlas Iron s management. 39 Atlas Iron Limited TARGET'S STATEMENT Page 103

105 Given the range of different views, the historical volatility of these discounts and the uncertainty on whether discounts will revert to historical averages, or continue at current levels, we have conducted a scenario analysis based on different discounts that may eventuate. Further detail on the scenarios considered and the impact on other operating parameters is set out below. The Adjusted Atlas Model also accounts for the lump premium achieved by the Company. We have adjusted the lump premium over the forecast period based on the difference between the average annual fines price and the average annual lump price, as published by Consensus Economics. However, the lump premium published by Consensus Economics does not factor in the lower grade of Atlas Iron s ore, therefore the Atlas Model assumes that after the Grade Discount, only between 50% and 60% of this premium is realised. Our selected lump premium is based on Atlas Iron s realised historical premiums that have typically ranged between 50% and 60%. We have selected 55%, being the midpoint of the observed historical range. CSA Global has confirmed the reasonableness of this assumption. Similarly, the Atlas Model also includes a low grade discount which accounts for the difference between the forecast 62% Fe price and the actual price received by Atlas Iron, with this discount calculated as 70% of the Additional Quality Discount received for the fines product. This is based on Atlas Iron s historical realised Additional Quality Discount for the lump product versus the fines product. CSA Global has confirmed the reasonableness of this assumption. Mining Physicals The Mount Webber Project is currently producing, with an expected remaining mine life of approximately four and a half years. The mining physicals for the Mount Webber Project shown below include the remaining stockpile ore that has already been delivered to the Mount Dove processing plant, which is expected to be completely processed by August The Corunna Downs Project is currently in the development phase, however, in the event that the discounts on low grade iron ore decline and the Corunna Downs Project becomes economically viable, management has forecast production to commence at the Corunna Downs Project in September We note that the Corunna Downs Project is only economically viable under the Low Discount Scenario and Medium Discount Scenario. Under the Current Discount Scenario, the Corunna Downs Project will not be developed and production will likely cease at the Mount Webber Project. The graphs below show the forecast ore to be mined and processed over the respective mine lives of the Atlas Operating Projects. The periods in the below charts are calendar years, therefore the 2018 year represents the seven months from 1 June 2018 to 31 December Atlas Iron Limited TARGET'S STATEMENT Page

106 Ore mined from the Atlas Operating Projects 14,000 12,000 10,000 8,000 kt 6,000 4,000 2, Mount Webber Project including ore processed at Mount Dove Corunna Downs Project Source: Adjusted Atlas Model and BDO analysis 14,000 Ore processed at the Atlas Operating Projects 12,000 10,000 8,000 kt 6,000 4,000 2, Mount Webber Project including ore processed at Mount Dove Corunna Downs Project Source: Adjusted Atlas Model and BDO analysis Atlas Iron Limited TARGET'S STATEMENT Page

107 Operating Costs The operating costs included in the Adjusted Atlas Model include mining, processing, haulage, port, administration and support costs related to the individual projects. In preparing the Adjusted Atlas Model, we have applied our inflation assumption of 2.3% per annum to the forecast operating costs. CSA Global has confirmed the reasonableness of the forecast operating cost assumptions having considered the costs incurred historically on the Mount Webber Project and by assessing the forecast per tonne operating costs in the context of their experience with mining projects in Australia. The forecast operating costs for the Atlas Operating Projects are illustrated in the charts below. 600 Operating costs for the Atlas Operating Projects A$m Mount Webber Project including ore processed at Mount Dove Corunna Downs Project Source: Adjusted Atlas Model and BDO analysis 25 Operating costs for the Mount Webber Project (including Mount Dove) on a per tonne basis 20 A$/t Mining costs ($/t mined) Processing costs ($/t processed) Haulage ($/t hauled) Source: Adjusted Atlas Model and BDO analysis Atlas Iron Limited TARGET'S STATEMENT Page

108 Operating costs for the Corunna Downs Project on a per tonne basis A$/t Mining costs ($/t mined) Processing costs ($/t processed) Haulage ($/t hauled) Source: Adjusted Atlas Model and BDO analysis We also consider net direct production costs (commonly referred to as C1 costs) on a per tonne shipped basis to be a relevant metric for Shareholders to consider in their evaluation of the Atlas Operating Projects. Net direct production costs, or C1 costs, represent the cash cost incurred at each processing stage from mining through to the ore being delivered to market. The chart below illustrates these costs over time for the Atlas Operating Projects. 60 C1 costs for the Atlas Operating Projects A$/t Mount Webber Project including ore processed at Mount Dove Corunna Downs Project Source: Adjusted Atlas Model and BDO analysis We note that the Corunna Downs Project is forecast to commence production in September 2019, with production progressively ramping up into As such, we have not presented the C1 costs for 2019, with Atlas Iron Limited TARGET'S STATEMENT Page

109 the above graph depicting the C1 costs for the Corunna Downs Project for the full calendar years from 2020 through until Capital Expenditure The capital expenditure requirements for the Mount Webber Project only relate to developing and sustaining capital costs which equate to a total of $1.2 million over the life of mine. The Adjusted Atlas Model also includes total rehabilitation costs of $26.3 million with $7.0 million forecast to be paid in January 2023 and a total of $12.5 million to be incurred over the 11 subsequent months to the end of The remaining rehabilitation costs are forecast to be paid monthly until December CSA Global has confirmed that the rehabilitation costs reflected in the Adjusted Atlas Model and the timing profile of the costs are reasonable. The forecast capital expenditure, including rehabilitation costs, required for the Corunna Downs Project is set out in the chart below. A$m Capital expenditure including rehabilitation costs at the Corunna Downs Project Source: Adjusted Atlas Model and BDO analysis The forecast capital expenditure required for the Corunna Downs Project primarily relates to development costs to establish the mine, with these costs comprising $54.4 million of the total $78.1 million of forecast capital expenditure, including rehabilitation costs. As discussed above, we have made the assumption that the Corunna Downs Project would be developed in the event that our Low Discount Scenario or Medium Discount Scenario eventuates (or a similar scenario in which the development of the Corunna Downs Project increases the NPV of cash flows on a post-financing and corporate cost basis). Therefore, the above capital costs for the Corunna Downs Project will only be incurred in the event that the discounts on Atlas Iron s low grade iron ore decrease to a level in the magnitude of the discounts forecast in our Low Discount Scenario and Medium Discount Scenario. Under our Current Discount Scenario, we have assumed that the Corunna Downs Project will not be developed therefore these capital costs will not be incurred. This is supported by our discussions with the Company s management. The above forecast capital expenditure for the Corunna Downs Project includes $20.5 million in rehabilitation costs, of which approximately $9.8 million are included in 2024 and 2025, with the Atlas Iron Limited TARGET'S STATEMENT Page

110 remaining costs forecast to be paid monthly until January CSA Global has confirmed that the rehabilitation costs reflected in the Atlas Model and the timing profile of the costs are reasonable. Royalties The Adjusted Atlas Model includes the following royalties: a 0.3% FOB sale royalty payable to Altura on the Mount Webber Project production in months when Platts 62% iron ore index price is greater than A$95. The royalty expires once Atlas Iron has extracted a total of approximately 28 Mt from the Mount Webber mine, which Atlas Iron expects to occur later this year. Based on the assumptions used in the Adjusted Atlas Model relating to forecast iron ore pricing, the Company is not expected or assumed to pay this royalty; payment to Haoma of $1.375 for each reserve tonne in excess of 24 million tonnes on M45/1197 at the Mount Webber Project, indexed at inflation. Based on the assumptions used in the Adjusted Atlas Model, the Company is not required to pay this royalty; payment of $0.13/tonne to Adelaide Prospecting for all iron ore sold at the Corunna Downs Project. This has been reflected in the Adjusted Atlas Model; a payment of $250,000 to Ochre Group Holdings on first production of ore from the Corunna Downs Project; a payment of $1.13/tonne of all iron ore sold in excess of 30Mt to Ochre Group Holdings. Based on the assumptions used in the Adjusted Atlas Model, the Company is not expected or assumed to pay this royalty; a state royalty of 7.5% of gross revenue generated by the Atlas Operating Projects, payable to the Australian Government pursuant to Mining Regulations 1981; and a native title royalty on gross revenue generated by the Atlas Operating Projects, which management advise is commercially sensitive, therefore we have not disclosed the details. We note that there are other contractual royalties which exist over Atlas Iron s undeveloped projects, however, we do not have reasonable grounds to include these in our DCF valuation. Where appropriate, CSA Global has considered these royalties in their assessment of the value of Atlas Iron s exploration assets. Taxation As at 31 May 2018, Atlas Iron has approximately $1.4 billion of carried forward tax losses. BDO Corporate Tax (WA) Pty Ltd has assisted us in assessing Atlas Iron s ability to utilise these tax losses as at 30 June 2017 and has concluded that the losses can be used against future profits. Therefore, based on the forecast cash flows included in the Adjusted Atlas Model, Atlas Iron has an effective tax rate of 0% over the forecast period. Given the nature of the continuity of ownership test, Atlas Iron s ability to utilise carried forward tax losses must be assessed at each reporting date, therefore there is a risk that this may change. However, given the tax advice obtained for the most recent tax period, we consider that we have reasonable grounds to assume this assumption will hold over the forecast period. Atlas Iron Limited TARGET'S STATEMENT Page

111 Debt cash flows The Adjusted Atlas Model includes debt cash flows, therefore our valuation of the Atlas Operating Projects includes the servicing of the Company s debt as well as repayment of its Term Loan B facility and reflects the cash flows to equity holders. Corporate costs We have applied our forecast inflation rate of 2.3% to the forecast corporate costs included in the Atlas Model to determine the corporate costs for the Adjusted Atlas Model. Our treatment of the corporate costs is detailed in our scenario analysis Discount rate In our assessment of an appropriate discount rate to apply to the Atlas Operating Projects, we consider the most appropriate discount rate to be Atlas Iron s cost of equity. This is because the Adjusted Atlas Model includes debt cash flows and therefore, the cash flows in the Adjusted Atlas Model represent cash flows to equity holders. We have selected a nominal after tax cost of equity in the range of 14% to 18% per annum to discount the cash flows of the Atlas Operating Projects to their present value. We have used a rounded discount rate of 16% in our base case. In selecting this range of discount rates, we have considered the following: the rate of return for comparable ASX listed iron ore producing companies; and the risk profile of Atlas Iron as compared to the comparable companies identified. A detailed consideration of how we arrived at our adopted discount rate range is shown in Appendix Scenario analysis As outlined above, given the historical volatility of the price differentials and the uncertainty around the quantum of future discounts, we consider it appropriate to value the Atlas Operating Projects under three alternative scenarios. Given that the chosen Additional Quality Discount assumption will affect the strategy of the Company in its decision on whether to develop the Corunna Downs Project and its decision on whether to continue mining at the Mount Webber Project, this will impact the valuations of the Company s mineral assets and other assets and liabilities. As such, we have assessed the value of an Atlas Iron share prior to the Offer, separately under each scenario. The results of our scenario analysis forms the basis of our valuation opinion. We note that, unless stated otherwise, the different assumptions on discounts as set out under our three scenarios refer to the Additional Quality Discounts. There will be an additional Grade Discount, however, the discount varies over the life of mine, based on the forecast 62% Fe benchmark price. Atlas Iron Limited TARGET'S STATEMENT Page

112 A summary of the different assumptions for each scenario is set out in the table below. Scenarios Current Discount Scenario Medium Discount Scenario Low Discount Scenario Assumed long term Additional Quality Discount 34% 20% 12% Valuation approach used for valuing the Atlas Operating Projects Resource valuation DCF DCF Treatment of Atlas Iron's debt Book value DCF DCF Treatment of corporate costs Reduced corporate Unadjusted corporate Unadjusted corporate costs (DCF) costs (DCF) costs (DCF) The three scenarios which we have considered for our valuation are detailed below: Current Discount Scenario The future discount over the life of mine is equal to the average discount that Atlas Iron realised over the three and six-month periods to May 2018, which was approximately 34% ( Current Discount Scenario ). We note that the average monthly discount realised over the twelve months prior to our valuation date was approximately 32%. Therefore, whilst we consider this scenario to be a possibility, we note that it represents a situation that the Company has not previously encountered over a sustained period. In the event that these assumptions materialise, based on current cost assumptions continuing over the forecast period, it would not be economically viable for the Company to continue mining at its Mount Webber Project. We note that management has had a track record of reducing costs to maintain margins in low iron ore price environments, both through re-negotiation with its contractors and with the Pilbara Ports Authority in relation to its port costs. However, we do not have reasonable grounds to reliably estimate any such cost savings that may be achieved in the future if the current level of Additional Quality Discounts continues. Therefore, under our Current Discount Scenario we have assumed that mining will cease at the Mount Webber Project. We note that this is a hypothetical scenario to illustrate the potential value to Shareholders in the event that the current Additional Quality Discounts continue and the Mount Webber Project is placed on care and maintenance. Management advises that placing the Mount Webber Project on care and maintenance is not an outcome that is currently being contemplated. Under the Current Discount Scenario, we have also assumed that the Corunna Downs Project will not be developed and have therefore relied on the resource valuation prepared by CSA Global in order to value the Corunna Downs Project. This is supported by our discussions with management, who consider it unlikely that the Corunna Downs Project will be developed in accordance with the proposed timing in the Atlas Model, if current discounts do not decline. Similarly, under the Current Discount Scenario, because it is not economically viable to continue mining at Mount Webber, we have assumed that Atlas Iron will cease its mining operations and as such we have relied upon CSA Global s valuation of the Mount Webber Project on a resource basis. CSA Global has assessed the residual resource value of the Mount Webber Project under the scenario that mining continues and under the assumption that production ceases. We have included the latter in our Sum-of- Parts valuation in our Current Discount Scenario. Atlas Iron Limited TARGET'S STATEMENT Page

113 Our Sum-of-Parts valuation under the Current Discount Scenario is set out below: Valuation- Current Discount Scenario Note Low A$'000s Preferred A$'000s High A$'000s Sum-of-Parts Value of the Mount Webber Project and the Corunna Downs Project (not operating) a 11,000 20,000 30,000 Value of other mineral assets b 32,670 67, ,600 Value of the Altura Royalty c 74,700 77,800 80,900 Value of the Pilgangoora Minegate Sale Agreement d 17,500 18,600 19,700 Value of other assets and liabilities e (31,887) (31,887) (31,887) Present value of corporate costs f (11,210) (9,810) (8,410) Total value of Atlas Iron prior to the Offer 92, , ,903 Number of shares outstanding ('000) g 9,303,843 9,303,843 9,303,843 Value per share ($) Source: BDO analysis Under the Current Discount Scenario, we have assessed the value of an Atlas Iron share using a Sum-of- Parts valuation to be between $0.010 and $0.021 with a preferred value of $ We note the following in relation to the above Sum-of-Parts valuation under our Current Discount Scenario: Note a) Value of the Mount Webber Project and the Corunna Downs Project We have instructed CSA Global to value the Mount Webber Project and the Corunna Downs Project on a resource basis under the assumption that current Additional Quality Discounts continue. As detailed above, under this scenario, both the Mount Webber Project and the Corunna Downs Project are not economically viable, therefore we do not consider it appropriate to value them on a discounted cash flow basis. We consider the approach taken by CSA Global to be appropriate and the results of their valuation under the Current Discount Scenario to be reasonable. CSA Global s valuation of the Mount Webber Project and the Corunna Downs Project on a resource basis, is set out below: Atlas Operating Projects Low $m Preferred $m Mount Webber Project (not operating) Corunna Downs Project (not operating) Value of the Mount Webber Project and the Corunna Downs Project (not operating) Source: Independent Technical Assessment and Valuation Report Note b) Value of Atlas Iron s other mineral assets High $m We have instructed CSA Global to independently value Atlas Iron s other mineral assets, with the valuation results summarised in the table below: Atlas Iron's Other Mineral Assets Commodity Low $m Preferred $m McPhee Creek Iron ore Ridley Magnetite Iron ore Davidson Creek Hub Iron ore High $m 48 Atlas Iron Limited TARGET'S STATEMENT Page 112

114 Atlas Iron's Other Mineral Assets Commodity Low $m Preferred $m Mount Dove groundholding Iron ore Miralga Creek Iron ore West Pilbara (Anthiby) Iron ore Mid West (Beebyn) Iron ore Western Creek Iron ore Hickman Iron ore Jimblebar Iron ore Warrawanda Iron ore Pardoo Iron ore Abydos Iron ore Cisco Lithium Pancho Lithium Copper Range Copper Walker Range Copper Gold potential of Pilbara tenements Gold Value of Atlas Iron's other mineral assets Source: Independent Technical Assessment and Valuation Report CSA Global has derived the above valuation results using a combination of methodologies including comparable market transactions, yardstick and holding cost approaches. We note that Atlas Iron holds other mining tenements that have not been presented above, however CSA Global has used its professional judgement in only valuing those tenements that are material to the overall value of Atlas Iron. Further information on each of the methodologies used to derive the above values can be found in CSA Global s report under Appendix 5 of our report. As we have assessed in Section 9, Atlas Iron s port access rights are valuable only to the extent that Atlas Iron is able to utilise the port capacity at Utah Point for its own use as Atlas Iron is restricted from assigning or selling its port access rights. PPA is also entitled to terminate Atlas Iron s rights on the basis of abandonment if Atlas Iron does not carry out in-loading or out-loading activities at the port for a period longer than 90 days. Therefore, under this valuation scenario, where the Atlas Operating Projects are assumed to be nonoperating, we also do not believe that Atlas Iron s port access rights should have any separate standalone value, other than the value ascribed to separable assets at the port which are included in our valuation of property, plant and equipment under other assets and liabilities. Note c) Value of the Altura Royalty On 6 April 2016, Atlas Iron entered a royalty deed with Altura, pursuant to which, Altura has agreed to pay a royalty equal to 5% of the gross revenue received by Altura, for the sale of lithium concentrates produced from its M45/1231 of the Pilgangoora Lithium Project. High $m Atlas Iron Limited TARGET'S STATEMENT Page

115 Future Cash Flows We have been provided a cash flow model for Altura s Pilgangoora Lithium Project, which was prepared by Atlas Iron based on Altura s mine plan. The cash flow model depicts estimated future cash flows payable to Atlas Iron by Altura under the Altura Royalty Agreement, from years 2018 to 2032 ( Altura Model ). The Altura Royalty is calculated on the basis of gross revenue received by Altura for the sale of lithium concentrates produced from the Pilgangoora Mining Lease tenement M45/1231. BDO has made certain adjustments to the Altura Model where it was considered appropriate to arrive at an adjusted model ( Adjusted Altura Model ). We have used the Adjusted Altura Model for our DCF valuation. In particular, we have adjusted the Altura Model to reflect any changes to technical assumptions as a result of CSA s review and any changes to the economic and other input assumptions from our research. In addition, we have also adjusted the Altura Model to present figures on a calendar year basis. The value of the Altura Royalty to Atlas Iron is estimated based on gross sales achieved over the period from 1 June 2018 to 1 July The main assumptions underlying the Adjusted Altura Model include: physical assumptions, including ore mined, grade, and concentrate production; and revenue assumptions, including spodumene prices. CSA Global has reviewed the inputs to the Altura Model and have concluded that the technical assumptions and inputs for the model are reasonable. Further detail on CSA s findings on the technical inputs to the Altura Model can be found in Appendix 5. Limitations Since forecasts relate to the future, they may be affected by unforeseen events and they depend, in part, on the effectiveness of management s actions in implementing the plans on which the forecasts are based. Accordingly, actual results may vary materially from the forecasts included in the Adjusted Altura Model, as it is often the case that some events and circumstances frequently do not occur as expected, or are not anticipated, and those differences may be material. Economic assumptions Spodumene pricing Atlas Iron has adopted the spodumene price of US$690 per wet metric tonne (Altura s Phase 2 DFS spodumene price assumption) over the life of the Altura Model. Based on independent market research, in addition to the price floor of US$550 per tonne and a cap of US$950 per tonne over the first three years of the agreement, we have adopted the following spodumene prices for the Adjusted Altura Model. The spodumene prices are forecasted in nominal terms, and are denominated in USD. Pricing CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 CY Spodumene concentrate (nominal USD) Source: Independent Market Research 50 Atlas Iron Limited TARGET'S STATEMENT Page 114

116 Foreign exchange rate The spodumene price is denominated in USD, and our valuation is in AUD. As such, we have adopted the following exchange rates in our valuation: Exchange Rates CY 2018 CY 2019 CY 2020 CY 2021 CT USD:AUD Source: Bloomberg Revenue assumptions Revenue in the Adjusted Atlas Model is derived from concentrate production and the assumed spodumene price. Under the agreement, Atlas Iron is entitled to a royalty equal to 5.0% of the value of all lithium concentrates as contemplated by the Adjusted Altura Model. Mining physicals Management of Atlas Iron advise that Altura s production profile is commercially sensitive, therefore we have not disclosed this in Our Report. CSA Global has confirmed the reasonableness of the physical mining and production plan that underpins the Adjusted Altura Model. Discount Rate We have selected a discount rate in the range of 11.7% to 13.9% (rounded) to discount the cash flows received by Atlas Iron under the Altura Royalty Agreement to their present value. We have used a rounded discount rate of 13.0% in our base case. In selecting this range of discount rates, we have considered the following: the rate of return for comparable ASX-listed companies with lithium and/or tantalite assets at exploration or production stage; and the risk profile of Altura s Pilgangoora Lithium-Tantalite Project as compared to other lithium and/or tantalite exploration and producing companies. A detailed consideration of how we arrived at our adopted discount rate is set out in Appendix 3. Sensitivity Analysis The estimated value of the Altura Royalty is derived under the DCF approach. Our valuation is highly sensitive to changes in the forecast of foreign exchange rates, spodumene pricing and discount rates. We have therefore included an analysis to consider the value of the Altura Royalty under various scenarios and in applying: a change of +/- 10% to the USD:AUD exchange rate; a change of +/- 10% to the spodumene price; and a discount rate in the range of 10% to 16%. The following sensitivities have been prepared to assist Shareholders in considering the potential effects to the value of the Altura Royalty if our base case assumptions change. Atlas Iron Limited TARGET'S STATEMENT Page

117 Flex Sensitivity Analysis Spodumene Price Exchange Rate (USD:AUD) (NPV $m) NPV$m -10.0% % % % % % % % % % % Source: BDO analysis Discount Rate Sensitivity Discount Rate (%) 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% NPV (A$m) Source: BDO analysis In considering the above sensitivities, Shareholders should note the following: the variables described above may have compounding or offsetting effects and are unlikely to move in isolation; the variables for which we have performed sensitivities are not the only variables which are subject to deviation from the forecast assumptions; and the sensitivities performed do not cover the full range of possible variances from the base case assumptions used (i.e. variances could be greater than the percentage increases or decreases set out in this analysis). Conclusion on value of the Altura Royalty Based on the assumptions and discount rate set out above, we consider the value of the Altura Royalty to Atlas Iron to be in the range of $74.7 million and $80.9 million, with a preferred value of $77.8 million. Note d) Value of the Pilgangoora Minegate Sale Agreement On 19 December 2017, Atlas Iron entered the Pilgangoora Minegate Sale Agreement with Pilbara Minerals Limited ( Pilbara Minerals ), pursuant to which, Atlas Iron agreed to purchase up to 1.5 million wet metric tonnes of run-of-mine lithia/tantalite ore mined from the Pilbara Minerals Pilgangoora Lithium-Tantalite Project. Under the Pilgangoora Minegate Agreement, Atlas Iron crushes the lithia/tantalite ore and sells the spodumene run-of-mine ore produced. Pilbara Minerals is entitled to a share in the profit that Atlas Iron achieves from the sale of the spodumene run-of-mine ore in addition to any profit Pilbara Minerals receives from the sale of product to Atlas Iron. The Pilgangoora Minegate Agreement ends on the earlier of the date on which 1.5 million wet metric tonnes of lithia/tantalite ore is sold, or 30 September Pilbara Minerals also has the option to extend Atlas Iron Limited TARGET'S STATEMENT Page

118 the term of the agreement to the earlier of the date on which 2.4 million wet metric tonnes of lithia/tantalite ore is sold, or 30 June Future Cash Flows A detailed cash flow model for the Pilgangoora Minegate Agremeent was prepared by management of Atlas Iron ( Pilbara Minerals Model ). The Pilbara Minerals Model estimates the future cash flows expected from the sale of the spodumene run-of-mine ore produced from the lithia/tantalite that Atlas Iron has agreed to purchase from Pilbara Minerals. We note that under the Pilgangoora Minegate Agreement, Atlas Iron is entitled to purchase up to 1.5 million wet metric tonnes of lithia/tantalite ore. However, the Pilbara Minerals Model only estimates that a total of approximately 1.14 million wet metric tonnes will be available for purchase by Atlas Iron. The Pilbara Minerals Model also assumes that Pilbara Minerals will not exercise its option to extend the term of the agreement. BDO has made certain adjustments to the Pilbara Minerals Model where it was considered appropriate to arrive at an adjusted model ( Adjusted Pilbara Minerals Model ). We have used the Adjusted Pilbara Minerals Model in our DCF valuation. In particular, we have adjusted the Pilbara Minerals Model to reflect any changes to technical assumptions as a result of CSA s review and any changes to the economic and other input assumptions from our research. We have adjusted the Pilbara Minerals Model to reflect cash flows in nominal terms. The value of the Pilgangoora Minegate Agreement to Atlas Iron is estimated based on the net cash generated over the period from 1 June 2018 to 31 May The main assumptions underlying the Pilbara Minerals Model include: physical assumptions, including ore purchased, ore hauled, ore processed, and ore shipped; revenue assumptions, including sale price, freight costs and exchange rates; cost assumptions, including haulage, crushing, ship-loading, administration/overhead, and inventory movements; and other relevant assumptions. CSA Global has reviewed the inputs to the Pilbara Minerals Model and have concluded that the technical assumptions and inputs for the model are reasonable. Limitations Since forecasts relate to the future, they may be affected by unforeseen events and they depend, in part, on the effectiveness of management s actions in implementing the plans on which the forecasts are based. Accordingly, actual results may vary materially from the forecasts included in the Adjusted Pilbara Minerals Model, as it is often the case that some events and circumstances frequently do not occur as expected, or are not anticipated, and those differences may be material. Atlas Iron Limited TARGET'S STATEMENT Page

119 Economic assumptions Inflation We note all cash flows contained in the Pilbara Minerals Model were calculated on a real basis. However, we have adjusted the Pilbara Minerals Model to reflect cash flows in nominal terms, and have also calculated a nominal discount rate. Therefore, we have considered the appropriateness of inflation adjustments in deriving the forecast nominal cash flows under the Pilgangoora Minegate Agreement as contemplated by the Pilbara Minerals Model. We have adopted an annual inflation rate of 2.3% which is based on the average forecast inflation rate as sourced from Bloomberg, whilst also giving consideration to historical inflation rates in Australia. Our assessment of forecast inflation is supported by the fact it lies within the RBA s inflation target of 2% to 3%. Foreign exchange rate Under the Pilgangoora Minegate Agreement, Atlas Iron must pay a fixed price for each wet metric tonne sold and purchased that is denominated in USD, amounts owed to Pilbara Minerals are denominated in USD, the base price received from Sinosteel Australia Pty Ltd ( Sinosteel ) under the offtake agreement per dry metric tonne is denominated in USD, and our valuation is in AUD. Therefore, we have converted the USD denominated amounts to AUD at the following forecast exchange rates. Exchange Rates Q Q CY 2019 USD:AUD Source: Bloomberg and BDO analysis Revenue assumptions Net cash generated under the Pilgangoora Minegate Agreement is calculated based on revenue received from Sinosteel under the offtake agreement, adjusted for freight, mine gate purchase and other associated costs. In addition to the above, Pilbara Minerals is entitled to a share in the profit that Atlas Iron achieves from the sale of the spodumene run-of-mine ore in addition to any profit Pilbara Minerals receives from the sale of product to Atlas Iron. We have not disclosed the details of the profit share for commercial reasons. As such, Pilbara Minerals share in the profit is also deducted in order to arrive at a net cash figure expected to be received by Atlas Iron under the agreement. Mining physicals A summary of the ore purchased from Pilbara Minerals and ore shipped to Sinosteel from June 2018 to May 2019 is summarised below. Atlas Iron Limited TARGET'S STATEMENT Page

120 Ore purchased and shipped kt Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Ore purchased Ore shipped Source: Adjusted Pilbara Minerals Model CSA Global has confirmed the reasonableness of the physical mining and production plan that underpins the Adjusted Pilbara Minerals Model. Discount Rate We have selected a discount rate in the range of 9.5% to 12.2% (rounded) to discount the cash flows received by Atlas Iron under the Pilgangoora Minegate Agreement to their present value. We have used a rounded discount rate of 11.0% in our base case. In selecting this range of discount rates, we have considered the following: the rate of return for comparable ASX-listed companies with lithium and/or tantalite assets at exploration or production stage; and the risk profile of Pilbara Minerals Pilgangoora Lithium-Tantalite Project as compared to other lithium and/or tantalite exploration and producing companies. A detailed consideration of how we arrived at our adopted discount rate is set out in Appendix 3. Sensitivity Analysis The estimated value of the Pilgangoora Minegate Agreement is derived under the DCF approach. Our valuation is highly sensitive to changes in the forecast of foreign exchange rates and the discount rate. We have therefore included an analysis to consider the value of the Pilgangoora Minegate Agreement under various scenarios and in applying: a change of +/- 10% to the USD:AUD exchange rate; and a discount rate in the range of 8% to 14%. The following sensitivities have been prepared to assist Shareholders in considering the potential effects to the value of the Pilgangoora Minegate Agreement if our base case assumptions change. Atlas Iron Limited TARGET'S STATEMENT Page

121 Flex Sensitivity Analysis Exchange Rate (USD:AUD) -10.0% NPV$m % % % % % % % % % % 15.0 Source: BDO analysis Discount Rate Sensitivity Discount Rate (%) 8% 9% 10% 11.0% 12.0% 13.0% 14.0% NPV (A$m) Source: BDO analysis In considering the above sensitivities, Shareholders should note the following: the variables described above may have compounding or offsetting effects and are unlikely to move in isolation; the variables for which we have performed sensitivities are not the only variables which are subject to deviation from the forecast assumptions; and the sensitivities performed do not cover the full range of possible variances from the base case assumptions used (i.e. variances could be greater than the percentage increases or decreases set out in this analysis). Conclusion on value of the Pilgangoora Minegate Agreement Based on the assumptions and discount rate set out above, we consider the value of a 100% interest in the Pilgangoora Minegate Agreement is between $19.4 million and $21.9 million, with a rounded midpoint value of $20.7 million. Atlas Iron s 90% interest in the Pilgangoora Minegate Agreement is therefore between $17.5 million and $19.7 million, with a midpoint value of $18.6 million. Note e) Other assets and liabilities Other assets and liabilities of Atlas Iron represent the assets and liabilities that have not been specifically addressed in our Sum-of-Parts valuation. From our discussions with Atlas Iron and analysis of these other assets and liabilities, outlined in the table below, we do not believe that there is a material difference between their book value and their fair value unless an adjustment has been noted below. Atlas Iron Limited TARGET'S STATEMENT Page

122 The table below represents a summary of the assets and liabilities identified: Other assets and liabilities CURRENT ASSETS Note Reviewed as at 31-Dec-17 A$'000s Adjusted value A$'000s Cash and cash equivalents 1 71,133 53,165 Trade and other receivables 2 47,151 15,578 Prepayments Inventories 3 20,371 12,871 Financial assets classified as held for trading TOTAL CURRENT ASSETS 139,696 82,655 NON-CURRENT ASSETS Other receivables 6,015 6,015 Property, plant and equipment 4 79,098 79,098 Intangibles Mine development costs 5 243,919 - Evaluation expenditure - reserve development 6 4,723 - Mining tenements 7 62,499 - TOTAL NON-CURRENT ASSETS 396,407 85,266 TOTAL ASSETS 536, ,921 CURRENT LIABILITIES Trade and other payables 8 59,260 41,631 Interest bearing loans and borrowings 2,796 2,796 Employee benefits 1,100 1,100 Provisions 6,540 6,540 Financial liabilities TOTAL CURRENT LIABILITIES 70,450 52,821 NON-CURRENT LIABILITIES Interest bearing loans and borrowings 9 100,019 82,663 Employee benefits 1,280 1,280 Provisions 10 63,044 63,044 TOTAL NON-CURRENT LIABILITIES 164, ,987 TOTAL LIABILITIES 234, ,808 NET ASSETS 301,310 (31,887) Source: Reviewed financial statements of Atlas Iron for the half year ended 31 December 2017, management accounts for the five months ended 31 May 2018 and BDO analysis We have not undertaken a review of Atlas Iron s unaudited accounts in accordance with Australian Auditing and Assurance Standard 2405 Review of Historical Financial Information and do not express an opinion on this financial information. However, nothing has come to our attention as a result of our procedures that would suggest the financial information within the management accounts has not been prepared on a reasonable basis. We note that on 17 May 2018, the Company announced that following adverse movements in ongoing discounts applied to its iron ore coupled with elevated sea freight and fuel prices, there is an increased Atlas Iron Limited TARGET'S STATEMENT Page

123 likelihood of an impairment of its mining assets in the magnitude of $75-$100 million. The above changes following 31 December 2017 are reflected in our valuation. We note the following in relation to the above valuation of Atlas Iron s other assets and liabilities under the Current Discount Scenario: 1) Cash and cash equivalents Management have provided us with the bank balance at 31 May 2018, which we have verified by obtaining bank statements to support this balance. Our adjustments to cash and cash equivalents is as follows: Cash and cash equivalents A$'000s Cash and cash equivalents at 31-Dec-17 71,133 Movements in cash over the five months to 31-May-18 (17,968) Adjusted cash and cash equivalents 53,165 Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis 2) Trade and other receivables The trade and other receivables balance at 31 December 2017 includes the Company s cash reserve account held by the Term Loan B agent. Subsequent to 31 December 2017, the reserve account was used to make a part repayment of the Term Loan B facility. We have reduced trade and other receivables to reflect the balance at 31 May 2018 per the Company s management accounts as set out below. Trade and other receivables A$'000s Trade and other receivables at 31-Dec-17 47,151 Movements over the five months ended 31-May-18 (31,573) Adjusted trade and other receivables 15,578 Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis The movement largely relates to the part repayment of the Term B loan facility of $20 million during the quarter which was transferred out of the reserve account (included in trade and other receivables). 3) Inventories Inventories are recorded at the lower of cost or net realisable value. Based on our discussions with management we consider it appropriate to impair the value of inventory by an amount of $7.5 million. This basis for the impairment is consistent with the factors included in the announcement made to the market regarding a potential impairment of the Company s mining assets on 17 May We note that any impairment of the Company s inventory would not alter our opinion. 4) Property, plant and equipment Under our Current Discount Scenario, we assume that production at the Mount Webber Project will cease and that the Corunna Downs Project will not be developed. CSA Global has assessed the value of Atlas Iron s mineral assets using a combination of methodologies including comparable market transactions, yardstick and holding cost approach. As such, the value of the Company s mining equipment is not included in the valuations performed by CSA Global. We do not consider the market value of the Atlas Iron Limited TARGET'S STATEMENT Page

124 Company s property, plant and equipment to materially differ from its book value and do not consider any realisation costs to be material. Management advises that property, plant and equipment has not moved materially since 31 December 2017, which is supported by the management accounts provided for the five months ended 31 May Therefore, we have relied on the book value of property, plant and equipment at 31 December 2017 which has been reviewed by the Company s auditor. 5) Mine development costs We have adjusted the mine development costs balance of $ million at 31 December 2017 to nil as these capitalised costs are reflected in the value of the Atlas Operating Projects and other mineral assets. 6) Evaluation expenditure - reserve development We have adjusted the capitalised exploration expenditure balance of $4.72 million at 31 December 2017 to nil as these costs are reflected in the value of the Atlas Operating Projects and other mineral assets. 7) Mining tenements We have adjusted the mining tenements balance of $62.50 million at 31 December 2017 to nil as these costs are reflected in the value of the Atlas Operating Projects and other mineral assets. 8) Trade and other payables As trade and other payables have not been included in the valuation of the Atlas Operating Projects and other mineral assets, we have retained the value of these inventories in the value of other assets and liabilities. We have therefore reduced trade and other payables to reflect the balance at 31 May 2018 per the Company s management accounts as set out below. Trade and other payables A$'000s Trade and other payables at 31-Dec-17 59,260 Movements over five months ended 31-May-18 (17,629) Adjusted trade and other payables 41,631 Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis 9) Interest loans and borrowings In terms of the treatment of Atlas Iron s debt, given that the Mount Webber Project and the Corunna Downs Project will not be yielding positive cash flows under our Current Discount Scenario, rather than make assumptions on how the Company will repay its debt obligations, we have included the debt at its book value at 31 May 2018 in our assessment of Atlas Iron s other assets and liabilities. We have adjusted the reviewed balance of non-current interest bearing loans and borrowings at 31 December 2017 to reflect the part repayment of the Company s Term Loan B facility. The net adjustment is set out below. Atlas Iron Limited TARGET'S STATEMENT Page

125 Interest bearing loans and liabilities A$'000s Interest bearing loans and borrowings at 31-Dec ,019 Movements over the five months ended 31-May-18 (17,356) Adjusted Interest bearing loans and borrowings 82,663 Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis We have verified the loan through obtaining a loan statement and reconciling movements against the monthly management accounts provided. We note that the current portion of borrowings have moved since 31 December 2017 however this is not material, therefore we have relied on the reviewed position at 31 December 2017 for our valuation. 10) Provisions As provisions have not been included in the valuation of the Atlas Operating Projects and other mineral assets, we have retained the value of these provisions in the value of other assets and liabilities. Note f) Present value of corporate costs Under the Current Discount Scenario, we have made the assumption that production will cease at the Mount Webber Project and that the Corunna Downs Project will not be developed, therefore under this scenario we would expect the corporate costs to be incurred by the Company to be significantly lower than those currently incurred. In order to estimate the corporate costs required to hold these mining projects we have considered the corporate costs incurred by ASX listed companies with similar operations to Atlas Iron (under the assumption that the Mount Webber Project is placed on care and maintenance). Our research indicates that corporate costs are likely to be in the magnitude of between $1.5 million and $2 million per annum, with a midpoint of $1.75 million forming the basis of our preferred value. We note that our valuation or opinion is not sensitive to changes in these corporate cost assumptions. We have inflated corporate costs at our forecast inflation rate of 2.3% as used in the Adjusted Atlas Model and discounted the corporate costs at Atlas Iron s cost of equity of 16%. We have discounted corporate costs at the cost of equity for consistency and comparability across all three scenarios. Based on these assumptions, we have assessed the present value of corporate costs to be in the range of between $8.41 million and $11.21 million, with a preferred of $9.81 million. Note g) Number of shares on issue As detailed in Section 5.6, the Company has a total of 339,364,291 unlisted options on issue. As at the date of our Report, 24,234,946 of these options have vested. The vested options have a nil exercise price, therefore, we have assumed that they will be exercised. Our adjustment to the number of shares (rounded to the nearest thousand) is set out below. Number of shares on issue 000s Number of shares on issue as at the date of our Report 9,279,608 Issue of shares on vested nil exercise price options 24,235 Adjusted number of shares on issue prior to the Offer 9,303,843 Source: Atlas Iron s share and option register and BDO analysis Atlas Iron Limited TARGET'S STATEMENT Page

126 Medium Discount Scenario We have also considered the value of Atlas Iron under the assumption that the Additional Quality Discount decreases gradually over the period from June 2018 to 20% for May 2019, from which point we assume that on average, the monthly discount remains at 20% ( Medium Discount Scenario ). On this basis, both the Mount Webber Project and the Corunna Downs Project yield a positive NPV on a project level, however, after accounting for corporate costs and debt repayment, the operations are not economically viable at the low end of our valuation range. Given that Atlas Iron is not a single project company, we consider it likely that corporate costs will continue in the event that the Corunna Downs Project is not developed. On this basis, developing the Corunna Downs Project helps to partly offset the Company s fixed costs. Therefore, given that the actual mining operations at the Corunna Downs Project are value accretive (despite the overall net present value of post-financing cash flows being negative at the low end of our valuation range), we have assumed that the Corunna Downs Project will be developed in the Medium Discount Scenario. Our Sum-of-Parts valuation under the Medium Discount Scenario is set out below: Valuation- Medium Discount Scenario Sum-of-Parts Note Low A$'000s Preferred A$'000s High A$'000s Value of Atlas Operating Projects a 124, , ,700 Present value of corporate costs and debt cash flows b (210,000) (201,900) (194,500) Value of other mineral assets c 37,270 74, ,600 Value of the Altura Royalty d 74,700 77,800 80,900 Value of the Pilgangoora Minegate Sale Agreement e 17,500 18,600 19,700 Value of other assets and liabilities f 43,638 43,638 43,638 Total value of Atlas Iron prior to the Offer 88, , ,038 Number of shares outstanding ('000) g 9,303,843 9,303,843 9,303,843 Value per share ($) Source: BDO analysis Under the Medium Discount Scenario, we have assessed the value of an Atlas Iron share using a Sum-of- Parts valuation to be between $0.009 and $0.024 with a preferred value of $ We note the following in relation to the above Sum-of-Parts valuation under our Medium Discount Scenario: Note a) Value of the Atlas Operating Projects Under the Medium Discount Scenario, both the Mount Webber Project and the Corunna Downs Project are economically viable on a project level (prior to debt cash flows and corporate costs). Therefore, we have valued these projects on a DCF basis using the inputs and assumptions as detailed in Section The Adjusted Atlas Model includes debt cash flows and corporate costs required to sustain operations over the forecast period, however we have shown the present value of the debt repayments and corporate cost obligations separately (refer Note b). Our valuation of the Atlas Operating Projects is highly sensitive to changes in the forecast of iron ore prices, iron ore discounts, operating expenditure, capital expenditure and foreign exchange rates. We 61 Atlas Iron Limited TARGET'S STATEMENT Page 125

127 have therefore included a sensitivity analysis to consider the value of the Atlas Operating Projects under various pricing scenarios and in applying: a change of +/- 8% to the iron ore price; a change of +/- 8% to iron ore discounts: a change of +/- 8% to operating expenditure; a change of +/- 8% to capital expenditure; a change of +/- 8% to the AUD/USD exchange rate; and a discount rate in the range of 14% to 18%. The following sensitivities have been prepared to assist Shareholders in considering the potential effects to the value of the Atlas Operating Projects if our base case assumptions change under the Medium Discount Scenario. Mount Webber Project Medium Discount Scenario Percentage change Sensitivity Analysis NPV NPV NPV NPV (A$m) (A$m) (A$m) (A$m) Benchmark Iron Ore Price (US$/t) Operating expenditure (AUD/tonne) Capital expenditure (AUD/tonne) Exchange rate (AUD/USD) -8% % % % % % % % % Source: Adjusted Atlas Model and BDO analysis Discount Rate Discount rate (%) 14% 15% 16% 17% 18% NPV (A$m) Source: Adjusted Atlas Model and BDO analysis 62 Atlas Iron Limited TARGET'S STATEMENT Page 126

128 Corunna Downs Project Medium Discount Scenario Percentage change Sensitivity Analysis NPV NPV NPV NPV (A$m) (A$m) (A$m) (A$m) Benchmark Iron Ore Price (US$/t) Operating expenditure (AUD/tonne) Capital expenditure (AUD/tonne) Exchange rate (AUD/USD) -8% (38.9) % (22.7) % (6.6) % % % % (3.6) 6% 74.5 (7.3) 23.1 (17.4) 8% 90.8 (18.4) 22.2 (30.5) Source: Adjusted Atlas Model and BDO analysis Discount Rate Discount rate (%) 14% 15% 16% 17% 18% NPV (A$m) Source: Adjusted Atlas Model and BDO analysis In considering the above sensitivities, Shareholders should note the following: the variables described above may have compounding or offsetting effects and are unlikely to move in isolation; the variables for which we have performed sensitivities are not the only variables which are subject to deviation from the forecast assumptions; and the sensitivities performed do not cover the full range of possible variances from the base case assumptions used (i.e. variances could be greater than the percentage increases or decreases set out in this analysis). We also note that we have presented the above sensitivities to highlight the sensitivity of the value of the Atlas Operating Projects to changes in pricing assumptions. If we were to use the above sensitivities to form the basis of our assessed value then the range would be so wide such that it would not provide meaningful information for Shareholders. With consideration for the above sensitivity analysis, our conclusion on the value of the Atlas Operating Projects, under the Medium Discount Scenario, is set out below: Atlas Operating Projects Low $m Preferred $m Mount Webber Project (operating) Corunna Downs Project (operating) Value of the Mount Webber Project and the Corunna Downs Project (operating - excluding debt and corporate costs) Source: Independent Technical Assessment and Valuation Report High $m Atlas Iron Limited TARGET'S STATEMENT Page 127

129 Note b) Present value of corporate costs and debt cash flows As outlined above, the Adjusted Atlas Model includes forecast corporate costs, debt repayments and the servicing of the Company s debt obligations. We have discounted these cash flows at our assessed cost of equity of 16% as the returns of the projects including the debt repayments and corporate costs represent a return to equity holders. We have assessed the present value of these cash flows to be between $194.5 million and $210.0 million, with a preferred value of $201.9 million. Note c) Value of other mineral assets We have instructed CSA Global to independently value Atlas Iron s other mineral assets, with the valuation results summarised below. Atlas Iron's Other Mineral Assets Commodity Low $m Preferred $m Mount Webber (residual resource) Iron ore Corunna Downs (residual resource) Iron ore McPhee Creek Iron ore Ridley Magnetite Iron ore Davidson Creek Hub Iron ore Mount Dove groundholding Iron ore Miralga Creek Iron ore West Pilbara (Anthiby) Iron ore Mid West (Beebyn) Iron ore Western Creek Iron ore Hickman Iron ore Jimblebar Iron ore Warrawanda Iron ore Pardoo Iron ore Abydos Iron ore Cisco Lithium Pancho Lithium Copper Range Copper Walker Range Copper Gold potential of Pilbara tenements Gold Value of Atlas Iron's other mineral assets Source: Independent Technical Assessment and Valuation Report We note that the value of the Mount Webber Project and the Corunna Downs Project residual resource represents the resource that is not included in the Adjusted Atlas Model. CSA Global has derived the above valuation results using a combination of methodologies including comparable market transactions, yardstick and holding cost approaches. We note that Atlas Iron holds other mining tenements that have not been presented above, however CSA Global has used its professional judgement in only valuing those tenements that are material to the overall value of Atlas Iron. Further information on each of the methodologies used to derive the above values can be found in CSA Global s report under Appendix 5 of our report. High $m Atlas Iron Limited TARGET'S STATEMENT Page

130 Note d) Value of the Altura Royalty We do not consider the value of the Altura Royalty to be affected by our discount scenarios, therefore we have relied upon our valuation as detailed under Note c) in our Current Discount Scenario. Note e) Value of the Pilgangoora Minegate Agreement We do not consider the value of the Pilgangoora Minegate Agreement to be affected by our discount scenarios, therefore we have relied upon our valuation as detailed under Note d) in our Current Discount Scenario. Note f) Other assets and liabilities Other assets and liabilities of Atlas Iron represent the assets and liabilities that have not been specifically addressed in our Sum-of-Parts valuation. From our discussions with Atlas Iron and analysis of these other assets and liabilities, outlined in the table below, we do not believe that there is a material difference between their book value and their fair value unless an adjustment has been noted below. The table below represents a summary of the assets and liabilities identified: Statement of Financial Position CURRENT ASSETS Note Reviewed as at 31-Dec-17 A$'000s Adjusted value A$'000s Cash and cash equivalents a 71,133 53,165 Trade and other receivables b 47,151 - Prepayments Inventories c 20,371 12,871 Financial assets classified as held for trading TOTAL CURRENT ASSETS 139,696 67,077 NON-CURRENT ASSETS Other receivables 6,015 6,015 Property, plant and equipment d 79,098 24,832 Intangibles Mine development costs e 243,919 - Evaluation expenditure - reserve development f 4,723 - Mining tenements g 62,499 - TOTAL NON-CURRENT ASSETS 396,407 31,000 TOTAL ASSETS 536,103 98,077 CURRENT LIABILITIES Trade and other payables h 59,260 - Interest bearing loans and borrowings i 2,796 - Employee benefits 1,100 1,100 Provisions j 6,540 6,540 Financial liabilities TOTAL CURRENT LIABILITIES 70,450 8,394 NON-CURRENT LIABILITIES Interest bearing loans and borrowings k 100,019 - Employee benefits 1,280 1,280 Atlas Iron Limited TARGET'S STATEMENT Page

131 Statement of Financial Position Note Reviewed as at 31-Dec-17 A$'000s Adjusted value A$'000s Provisions l 63,044 44,765 TOTAL NON-CURRENT LIABILITIES 164,343 46,045 TOTAL LIABILITIES 234,793 54,439 NET ASSETS 301,310 43,638 Source: Reviewed financial statements of Atlas Iron for the half year ended 31 December 2017, management accounts for the five months ended 31 May 2018 and BDO analysis We have not undertaken a review of Atlas Iron s unaudited accounts in accordance with Australian Auditing and Assurance Standard 2405 Review of Historical Financial Information and do not express an opinion on this financial information. However, nothing has come to our attention as a result of our procedures that would suggest the financial information within the management accounts has not been prepared on a reasonable basis. We note that on 17 May 2018, the Company announced that following adverse movements in ongoing discounts applied to its iron ore coupled with elevated sea freight and fuel prices, there is an increased likelihood of an impairment of its mining assets in the magnitude of $75-$100 million. The above changes following 31 December 2017 are reflected in our valuation. We have been advised that there has not been any other significant change in the net assets of Atlas Iron since 31 December 2017 and that the above assets and liabilities represent their fair market values apart from the adjustments detailed below. Where the above balances differ materially from the reviewed position at 31 December 2017 we have obtained supporting documentation to validate the adjusted values used, which provides reasonable grounds for reliance on the unaudited financial information. We note the following in relation to our valuation of Atlas Iron s other assets and liabilities. 1) Cash and cash equivalents Management have provided us with the bank balance at 31 May 2018, which we have verified by obtaining bank statements to support this bank balance. We have adjusted the cash position to reflect the actual cash position at 31 May Our adjustments to the cash position of Atlas Iron at 31 May 2018 is set out below. Cash and cash equivalents A$'000s Cash and cash equivalents at 31-Dec-17 71,133 Movements over five months ended 31-May-18 (17,968) Adjusted cash and cash equivalents 53,165 2) Trade and other receivables The trade and other receivables balance at 31 December 2017 includes the Company s cash reserve account held by the Term Loan B agent. Subsequent to 31 December 2017, the reserve account was used to make a part repayment of the Term Loan B facility. The Adjusted Atlas Model includes the opening balance of the Term Loan B facility at 1 June 2018 after the repayment, therefore we have decreased receivables to reflect this movement. Atlas Iron Limited TARGET'S STATEMENT Page

132 Additionally, the Adjusted Atlas Model includes an opening receivables balance of $15.58 million, therefore we have reduced trade and other receivables accordingly. The total adjustments made to trade and other receivables are set out below. Trade and other receivables A$'000s Trade and other receivables at 31-Dec-17 47,151 Movements over five months ended 31-May-18 (31,573) Trade and other receivables at 31-May-18 15,578 Model assumption adjustment (15,578) Adjusted trade and other receivables - Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis 3) Inventories Inventories are recorded at the lower of cost or net realisable value. Based on our discussions with management we consider it appropriate to impair the value of inventory by an amount of $7.5 million. This impairment is consistent with the announcement made to the market regarding a potential impairment of the Company s mining assets. We note that any impairment of the Company s inventory would not alter our opinion. 4) Property, plant and equipment We have adjusted the property, plant and equipment to remove the mining related property, plant and equipment as this is incorporated in the valuation of Atlas Iron s Operating Projects and other mineral assets. Property, plant and equipment A$'000s Property, plant and equipment at 31-Dec-17 79,098 Movements over five months ended 31-May-18 (1,391) Property, plant and equipment at 31-May-17 77,707 Elimination of mining related property, plant and equipment (52,875) Adjusted property, plant and equipment 24,832 Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis 5) Mine development costs We have adjusted the mine development costs balance of $ million at 31 December 2017 to nil as these capitalised costs are reflected in the value of the Atlas Operating Projects and other mineral assets. 6) Evaluation expenditure - reserve development We have adjusted the capitalised exploration expenditure balance of $4.7 million at 31 December 2017 to nil as these costs are reflected in the value of the Atlas Operating Projects and other mineral assets. 7) Mining tenements We have adjusted the mining tenements balance of $62.50 million at 31 December 2017 to nil as these costs are reflected in the value of the Atlas Operating Projects and other mineral assets. Atlas Iron Limited TARGET'S STATEMENT Page

133 8) Trade and other payables The Adjusted Atlas Model includes trade and other payables as an opening balance, therefore the payment of these payables are included in the forecast cash flows. As such, these payables are included in the value of the Atlas Operating Projects. We have adjusted trade and other payables accordingly. Trade and other payables A$'000s Trade and other payables at 31-Dec-17 59,260 Movements over five months ended 31-May-18 (17,629) Trade and other payables at 31-May-18 41,631 Model assumption adjustment (41,631) Adjusted trade and other payables - Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017, Atlas Iron s management accounts for the five months ended 31 May 2018 and BDO analysis 9) Current interest bearing loans and borrowings We have adjusted the current interest bearing loans and borrowings balance of $2.8 million to nil as this is included in the Adjusted Atlas Model. 10) Current provisions Management has provided a breakdown of rehabilitation provisions at 31 December 2017 and 31 May 2018 which we have used as the basis for any adjustments to provisions. The current provisions balance mainly relates to an onerous lease provision for office space as well as rehabilitation and demobilisation. We consider it appropriate to adjust provisions for those rehabilitation provisions relating to Mount Webber only as these rehabilitation cash flows are included in the Adjusted Atlas Model. We have made the adjustment for the Mount Webber rehabilitation provisions to the non-current portion of provisions as the model shows that rehabilitation is not expected to be paid within the next twelve months. Therefore, we have not adjusted the current provisions balance. Our adjustment to non-current provisions can be found in note 12 below. 11) Non-Current interest bearing loans and borrowings The non-current interest bearing loans and borrowings balance was subject to a material movement in the five months ended 31 May 2018 of $17.4 million. This movement was largely due to the $20 million Term B Loan repayment detailed in Note b. We have eliminated the entire non-current borrowings balance of $ million at 31 December 2017 as this is included in the Adjusted Atlas Model. 12) Non-current provisions We have adjusted the other assets and liabilities to remove the portion of the non-current provisions balance of $63.04 million at 31 December 2017 which relates to rehabilitation of the Mount Webber Project. The remaining balance of $44.77 million relates to rehabilitation of Atlas Iron s other projects which are not included in the Adjusted Atlas Model as well as an onerous lease provision. Therefore, we have included these in our valuation of other assets and liabilities. Atlas Iron Limited TARGET'S STATEMENT Page

134 Our adjustment to provisions is set out in the table below. Non-current provisions A$'000s Non-current provisions at 31-Dec-17 63,044 Rehabilitation provision relating to the Mount Webber Project (18,279) Adjusted non-current provisions 44,765 Source: Atlas Iron s reviewed financial statements for the half-year ended 31 December 2017 and BDO analysis Note g) Number of shares on issue As detailed in Section 5.6, the Company has a total of 339,364,291 unlisted options on issue. As at the date of our Report, 24,234,946 of these options have vested. The vested options have a nil exercise price, therefore, we have assumed that they will be exercised. Our adjustment to the number of shares (rounded to the nearest thousand) is set out below. Number of shares on issue 000s Number of shares on issue as at the date of our Report 9,279,608 Issue of shares on vested nil exercise price options 24,235 Adjusted number of shares on issue prior to the Offer 9,303,843 Source: Atlas Iron s share and option register and BDO analysis Low Discount Scenario We have also considered the value of Atlas Iron under the assumption that the Additional Quality Discount reverts to levels observed historically, which for Atlas Iron has been typically in the range of 0% to 20%. For the purposes of this scenario analysis we have assumed that the Additional Quality Discount decreases gradually over the period from June 2018 to 12% for May 2019, at which it remains, on average, until the end of the forecast period ( Low Discount Scenario ). We note that this is the view that management of Atlas Iron has taken which is supported by independent research conducted by industry experts. Our Sum-of-Parts valuation under the Low Discount Scenario is set out below. Valuation- Low Discount Scenario Note Low A$'000s Preferred A$'000s High A$'000s Sum-of-Parts Value of Atlas Operating Projects a 223, , ,200 Present value of corporate costs and debt cash flows b (196,700) (192,100) (187,300) Value of other mineral assets c 37,270 74, ,600 Value of the Altura Royalty d 74,700 77,800 80,900 Value of the Pilgangoora Minegate Sale Agreement e 17,500 18,600 19,700 Value of other assets and liabilities f 43,638 43,638 43,638 Total value of Atlas Iron prior to the Offer 199, , ,738 Number of shares outstanding ('000) g 9,303,843 9,303,843 9,303,843 Value per share ($) Source: BDO analysis Under the Low Discount Scenario, we have assessed the value of an Atlas Iron share using a Sum-of-Parts valuation to be between $0.021 and $0.038 with a preferred value of $ Atlas Iron Limited TARGET'S STATEMENT Page

135 We note the following in relation to the above Sum-of-Parts valuation under our Low Discount Scenario: Note a) Value of Atlas Iron s Operating Projects Under the Low Discount Scenario, both the Mount Webber Project and the Corunna Downs Project are economically viable. Therefore, we have valued these projects on a DCF basis using the inputs and assumptions as detailed in Section The Adjusted Atlas Model includes debt cash flows and corporate costs required to sustain operations over the forecast period, however we have shown the present value of the debt repayments and corporate cost obligations separately (refer Note b). Our valuation of the Atlas Operating Projects is highly sensitive to changes in the forecast of iron ore prices, iron ore discounts, operating expenditure, capital expenditure and foreign exchange rates. We have therefore included a sensitivity analysis to consider the value of the Atlas Operating Projects under various pricing scenarios and in applying: a change of +/- 8% to the iron ore price; a change of +/- 8% to iron ore discounts: a change of +/- 8% to operating expenditure; a change of +/- 8% to capital expenditure; a change of +/- 8% to the AUD/USD exchange rate; and a discount rate in the range of 14% to 18%. The following sensitivities have been prepared to assist Shareholders in considering the potential effects to the value of the Atlas Operating Projects if our base case assumptions change under the Low Discount Scenario. Mount Webber Project Low Discount Scenario Percentage change Sensitivity Analysis NPV NPV NPV NPV (A$m) (A$m) (A$m) (A$m) Benchmark Iron Ore Price (US$/t) Operating expenditure (AUD/tonne) Capital expenditure (AUD/tonne) Exchange rate (AUD/USD) -8% % % % % % % % % Source: Adjusted Atlas Model and BDO analysis 70 Atlas Iron Limited TARGET'S STATEMENT Page 134

136 Discount Rate Discount rate (%) 14% 15% 16% 17% 18% NPV (A$m) Source: Adjusted Atlas Model and BDO analysis Corunna Downs Project Low Discount Scenario Percentage change Sensitivity Analysis NPV NPV NPV NPV NPV (A$m) (A$m) (A$m) (A$m) (A$m) Benchmark Iron Ore Price (US$/t) Iron ore discount Operating expenditure (AUD/tonne) Capital expenditure (AUD/tonne) Exchange rate (AUD/USD) -8% % % % % % % % % Source: Adjusted Atlas Model and BDO analysis Discount Rate Discount rate (%) 14% 15% 16% 17% 18% NPV (A$m) Source: Adjusted Atlas Model and BDO analysis In considering the above sensitivities, Shareholders should note the following: the variables described above may have compounding or offsetting effects and are unlikely to move in isolation; the variables for which we have performed sensitivities are not the only variables which are subject to deviation from the forecast assumptions; and the sensitivities performed do not cover the full range of possible variances from the base case assumptions used (i.e. variances could be greater than the percentage increases or decreases set out in this analysis). We also note that we have presented the above sensitivities to highlight the sensitivity of the value of the Atlas Operating Projects to changes in pricing assumptions. If we were to use the above sensitivities to form the basis of our assessed value then the range would be so wide such that it would not provide meaningful information for Shareholders. 71 Atlas Iron Limited TARGET'S STATEMENT Page 135

137 With consideration for the above sensitivity analysis, our conclusion on the value of the Atlas Operating Projects, under the Low Discount Scenario, is set out below: Atlas Operating Projects Low $m Preferred $m Mount Webber Project (operating) Corunna Downs Project (operating) Value of the Mount Webber Project and the Corunna Downs Project (operating - excluding debt and corporate costs) Source: Independent Technical Assessment and Valuation Report Note b) Present value of corporate costs and debt cash flows High $m As outlined above, the Adjusted Atlas Model includes forecast corporate costs, debt repayments and the servicing of the Company s debt obligations. We have discounted these cash flows at our assessed cost of equity of 16% as the returns of the projects including the debt repayments and corporate costs represent a return to equity holders. We have assessed the present value of these cash flows to be between $187.3 million and $196.7 million, with a preferred value of $192.1 million. We note that the present value of debt and corporate costs are lower under the Low Discount Scenario as the increased cash flow allows the Company to increase the amount that is paid via a cash sweep over the life of mine, hence reducing the burden of interest. Also, the Low Discount Scenario allows the Company to retain more cash therefore increasing the interest income earned over the forecast period. Note c) Value of other mineral assets We have instructed CSA Global to independently value Atlas Iron s other mineral assets, with the valuation results summarised below: Atlas Iron's Other Mineral Assets Commodity Low $m Preferred $m Mount Webber (residual resource) Iron ore Corunna Downs (residual resource) Iron ore McPhee Creek Iron ore Ridley Magnetite Iron ore Davidson Creek Hub Iron ore Mount Dove groundholding Iron ore Miralga Creek Iron ore West Pilbara (Anthiby) Iron ore Mid West (Beebyn) Iron ore Western Creek Iron ore Hickman Iron ore Jimblebar Iron ore Warrawanda Iron ore Pardoo Iron ore Abydos Iron ore Cisco Lithium Pancho Lithium High $m 72 Atlas Iron Limited TARGET'S STATEMENT Page 136

138 Atlas Iron's Other Mineral Assets Commodity Low $m Preferred $m Copper Range Copper Walker Range Copper Gold potential of Pilbara tenements Gold Value of Atlas Iron's other mineral assets Source: Independent Technical Assessment and Valuation Report We note that the value of the Mount Webber Project and the Corunna Downs Project residual resource represents the resource that is not included in the Adjusted Atlas Model. CSA Global has derived the above valuation results using a combination of methodologies including comparable market transactions, yardstick and holding cost approaches. We note that Atlas Iron holds other mining tenements that have not been presented above, however CSA Global has used its professional judgement in only valuing those tenements that they consider to be material to the overall value of Atlas Iron. Further information on each of the methodologies used to derive the above values can be found in CSA Global s report under Appendix 5 of our report. Note d) Value of the Altura Royalty We do not consider the value of the Altura Royalty to be affected by our discount scenarios, therefore we have relied upon our valuation as detailed under Note c) in our Current Discount Scenario. Note e) Value of the Pilgangoora Minegate Agreement We do not consider the value of the Pilgangoora Minegate Agreement to be affected by our discount scenarios, therefore we have relied upon our valuation as detailed under Note d) in our Current Discount Scenario. Note f) Other assets and liabilities We note that our valuation of other assets and liabilities does not differ between the Medium Discount Scenario and the Low Discount Scenario, therefore we have relied upon our valuation as detailed in note f in our Medium Discount Scenario. Note g) Number of shares on issue As detailed in Section 5.6, the Company has a total of 339,364,291 unlisted options on issue. As at the date of our Report, 24,234,946 of these options have vested. The vested options have a nil exercise price, therefore, we have assumed that they will be exercised. Our adjustment to the number of shares (rounded to the nearest thousand) is set out below. Number of shares on issue 000s Number of shares on issue as at the date of our Report 9,279,608 Issue of shares on vested nil exercise price options 24,235 Adjusted number of shares on issue prior to the Offer 9,303,843 Source: Atlas Iron s share and option register and BDO analysis High $m Atlas Iron Limited TARGET'S STATEMENT Page

139 Conclusion on the value of Atlas Iron prior to the Offer We have based our assessment of the value of an Atlas Iron share prior to the Offer on the above scenario analysis. Our Sum-of-Parts valuation of an Atlas Iron share prior to the Offer is set out in the table below: Valuation of Atlas Iron prior to the Offer Sum-of-Parts Low A$'000s High A$'000s Value of Atlas Operating Projects 20, ,400 Present value of corporate costs and debt cash flows (9,810)* (192,100) Value of other mineral assets 67,050 74,550 Value of the Altura Royalty 74,700 80,900 Value of the Pilgangoora Minegate Sale Agreement 17,500 19,700 Value of other assets and liabilities (31,887) 43,638 Total value of Atlas Iron prior to the Offer 137, ,088 Number of shares outstanding ('000) 9,303,843 9,303,843 Value per share ($) *This amount relates to the present value of corporate costs only, with the Company s debt included in other assets and liabilities as detailed under our Current Discount Scenario Source: BDO analysis The selection of each range for the components of the Sum-of-Parts valuation is based on our view of the most appropriate scenario. We note that the scenarios not adopted are possible outcomes but we consider them to be less probable. We have assessed the value of an Atlas Iron share using a Sum-of-Parts valuation to be between $0.015 and $0.030 with a rounded midpoint value of $ The basis for each of our adopted values are detailed in the table below. Sum-of-Parts Low High Value of Atlas Iron's Operating Projects Current Discount Scenario (Preferred value) Low Discount Scenario (Midpoint value) Present value of corporate costs and debt cash flows Current Discount Scenario (Midpoint value) Low Discount Scenario (Midpoint value) Value of other mineral assets Current Discount Scenario Low Discount Scenario (Midpoint value) (Midpoint value) Value of the Altura Royalty Low value (Section Note c) High value (Section Note c) Value of the Pilgangoora Minegate Agreement Low value (Section Note d) High value (Section Note d) Value of other assets and liabilities Current Discount Scenario (Section Note e) Low Discount Scenario (Section Note f) Atlas Iron Limited TARGET'S STATEMENT Page

140 10.2 Quoted Market Prices for Atlas Iron Securities The quoted market value of a company s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company. RG suggests that when considering the value of a company s shares for the purposes of a control transaction, the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages may include the following: control over decision making and strategic direction; access to underlying cash flows; control over dividend policies; and access to potential tax losses. RG states that the expert can then consider an acquirer s practical level of control when considering reasonableness. Reasonableness has been considered in Section 14. Therefore, our calculation of the quoted market price of an Atlas Iron share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control. Minority interest value Our analysis of the quoted market price of an Atlas Iron share is based on the pricing prior to the announcement of the MinRes Scheme. This is because we consider the value of an Atlas Iron share following the announcement of the MinRes Scheme to include the effects of any change in value as a result of the announcement, depending on whether market participants had confidence that the transaction would proceed. In addition, we also consider that the share price of Atlas Iron has been inflated by the level of speculation surrounding a potential takeover bid from FMG or Hancock during this period subsequent to the announcement of the MinRes Scheme. Further, the Company s share price subsequent to the announcement of the MinRes Scheme and the announcement of substantial shareholder notices represents the value of Atlas Iron under the control of MinRes and not necessarily the value of Atlas Iron on a standalone basis. The share price analysis prior to and following both the MinRes Scheme and the announcement of the Offer can be found in Section Information on the MinRes Scheme was announced to the market on 9 April However, Atlas Iron announced that it would be entering into a trading halt on 5 April Therefore, the following chart provides a summary of the share price movement over the 12 months to 4 April 2018 which was the last trading day prior to the trading halt. Atlas Iron Limited TARGET'S STATEMENT Page

141 Atlas Iron share price and trading volume history Share Price ($) Volume (millions) Volume Closing share price Source: Bloomberg The daily closing price for Atlas Iron shares traded on the ASX from 4 April 2017 to 4 April 2018 has ranged from a low of $0.012 on 26 June 2017 to a high of $0.040 on 2 January At the beginning of the assessed period, the Atlas Iron share price plunged by 48.3% from $0.029 on 4 April 2017 to a close of $0.015 on 18 April The rapid decline was largely attributable to the steep decline of iron ore prices over the period, with prices falling below US$70 per tonne for the first time in five months. Movements in the Atlas Iron share price are correlated to movements in the iron ore price. Following this, the Atlas Iron share price began to recover, reaching a close of $0.023 on 7 August From mid-august 2017 to November 2017, the Atlas Iron share price fell back to trade within a band from $0.016 to $0.021 per share, before entering a rally and increasing 111% from $0.019 on 15 December 2017 to $0.040 on 2 January The increase in the share price occurred on the back of a series of announcements, such as the agreement entered into with Pilbara Minerals for the purchase of lithium DSO, as well as macroeconomic factors including the release of positive economic data out of China. In the months leading up to the announcement of the MinRes Scheme, the share price subsequently retreated to significantly lower levels, closing at $0.019 on 4 April It was also in the month of March 2018 that 62% Fe iron ore prices fell from US$75.95/t to US$61.49/t, demonstrating Atlas Iron s exposure to 62% Fe headline prices. The high levels of volatility exhibited leading up to the announcement appears to be attributed to lower-than-expected sales volumes and ore production, increases in cash costs, and as a result of ongoing pricing discounts being applied to Atlas Iron s low grade iron ore. The highest single day of trading during the assessed period was on 3 January 2018, where 817,924,460 shares were traded. Atlas Iron Limited TARGET'S STATEMENT Page

142 During this period a number of announcements were made to the market. The key announcements are set out below: Date Announcement Closing Share Price Following Announcement Closing Share Price Three Days After Announcement $ (movement) $ (movement) 12/03/2018 Atlas to export manganese as part of diversification plan % % 2/03/2018 Atlas to export Pilgangoora lithium DSO to Sinosteel % % 29/01/2018 December 2017 Quarterly Activities Report % % 29/01/2018 Pilbara exploration update % % 29/01/2018 Atlas repays A$20m in debt % % 20/12/2017 Atlas strikes lithium DSO agreement with Pilbara Minerals % % 20/10/2017 September 2017 Quarterly Activities Report % % 29/08/2017 Mineral Resources and Ore Reserves at 30 June % % 21/07/2017 June 2017 Quarterly Activities Report % % 13/07/2017 KZR: Dolgunna Region Focus of New Copper Exploration Program % % 21/06/2017 Atlas increases low capex production & defers Corunna Downs % % 18/04/2017 March 2017 Quarterly Activities Report % % Source: Bloomberg and BDO analysis On 12 March 2018, the Company announced that it had finalised an agreement with Horseshoe pursuant to which up to 100,000 tonnes of product would be mined and crushed on a campaign basis by Horseshoe, then loaded onto road trains for transport from the Murchison mine site. The announcement further detailed that subject to finalising port approvals and offtake agreements, Atlas Iron will then purchase the manganese as it reaches the north Pilbara. On the date of the announcement, Atlas Iron s share price remained unchanged. However, over the subsequent three trading days the share price decreased by 4.0% to close at $ On 2 March 2018, Atlas Iron announced that it had signed an agreement with Sinosteel for the export of lithium DSO sourced from Pilbara Minerals Pilgangoora Lithium-Tantalite Project. Under the terms of the agreement, the Company will sell up to 1.5 million tonnes of lithium DSO to Sinosteel over a 15-month period on a fixed price basis, and Sinosteel will advance funds to Atlas Iron in order to cover repayments due to Pilbara Minerals for mine development costs associated with lithium DSO. On the date of the announcement, Atlas Iron s share price remained unchanged at $ However, over the subsequent three trading days the share price increased by 4.2% to close at $ On 29 January 2018, the Company announced that a first pass drilling program at Miralga Creek had intersected disseminated and semi-massive sulphides that may include copper mineralisation. On the date of the announcement Atlas Iron s share price decreased by 16.1% to $ However, over the subsequent three trading days the share price remained unchanged. It is important to note that multiple announcements were made on this date that may have impacted the share price. On 29 January 2018, the following announcements were made by the Company: 77 Atlas Iron Limited TARGET'S STATEMENT Page 141

143 the Company released its Quarterly Activities Report for the December 2017 quarter. The report summarised Atlas Iron s performance over the quarter, including disclosure on lower headline price and significant ongoing discounts for low grade product received; the Company provided an update on its recent Pilbara exploration activities, which detailed that in line with its diversification strategy, Atlas Iron continued to progress its 100% owned Pancho and Copper Range projects. In addition, the Company also provided details on its first pass drilling program over an undercover geophysical target near Miralga Creek; and the Company announced that it had taken an additional step in the re-positioning of its business, by repaying a further $20 million of its debt. In addition, the announcement stated that Atlas Iron s lenders had also agreed to ease loan covenants, including reducing the minimum cash balance requirement at the conclusion of each month from $35 million to $15 million. On 20 December 2017, Atlas Iron announced that it had signed an agreement with Pilbara Minerals to purchase from one to 1.5 million tonnes of lithium DSO from Pilbara Minerals over a 15-month period. Pursuant to the agreement, Atlas Iron will crush the ore at its Mt Dove operation, transport it and load it onto a ship in preparation for export using its facilities at Utah Point. In addition, the announcement also detailed that Atlas Iron was focussed on finalising export sales arrangements, which would likely incorporate funding for prepayments to Pilbara Minerals. On the date of the announcement, the market responded positively with the share price increasing by 10.0% to close at $ The share price continued to increase by 13.6% over the subsequent three trading days, closing at $ On 20 October 2017, Atlas Iron released its Quarterly Activities Report for the September 2017 quarter. The report summarised Atlas Iron s performance over the quarter, including the conversion of its crushing plant at Mt Dove to a lump and fines circuit to increase its proportion of lump product to benefit from higher margins from lumps as well as the repayment in full of the $22 million royalty relief package granted to the Company by the State Government in May On 29 August 2017, the Company advised on its Mineral Resources and Ore Reserves as at 30 June On the date of the announcement, the share price increased by 11.1% to close at $ The share price continued to increase by 5.0% over the subsequent three trading days, closing at $ On 21 July 2017, the Company released its Quarterly Activities Report for the June 2017 quarter. The report provided an update on the status of Atlas Iron s projects, specifically the product discounts for low grade products which continued to increase from the March 2017 quarter, therefore adversely affecting Atlas Iron s net realised price. On the date of the announcement, Atlas Iron s share price remained unchanged at $0.018 and over the subsequent three trading days. On 13 July 2017, Kalamazoo Resources Limited ( Kalamazoo ) announced that it had commenced exploration at its Cork Tree Project in WA s Doolgunna region. Kalamazoo entered into a farm-in and JV agreement with Atlas Iron over two Cork Tree tenements in March 2013, and has completed the Stage 1 earn-in for 51%. On the date of the announcement, the share price remained unchanged at $ However, over the subsequent three trading days increased by 12.5% to close at $ On 21 June 2017, the Company announced that the annual production rate at the Mount Webber Project will increase from 7mtpa to 9mtpa (wet metric tonnes) with the incremental production being processed at the Company s recommissioned Mt Dove site. The Company also noted that operations at the Corunna Downs Project had been deferred due to prevailing market conditions and lengthy approval processes. On Atlas Iron Limited TARGET'S STATEMENT Page

144 the date of the announcement, Atlas Iron s share price remained unchanged at $ However, over the subsequent three trading days the share price decreased by 7.7% to close at $ On 18 April 2017, the Company released its Quarterly Activities Report for the March 2017 quarter. The report highlighted cash on hand of $108 million and reduced Term Loan B facility debt to a balance of $112 million. On the date of the release, the share price decreased by 16.7% to close at $ However, over the subsequent three trading days the share price increased by 20.0% to close at $ To provide further analysis of the market prices for an Atlas Iron share, we have considered the weighted average market price for 10, 30, 60 and 90 day periods to 4 April Share Price per unit 04-Apr Days 30 Days 60 Days 90 Days Closing price $0.019 Volume weighted average price (VWAP) $0.023 $0.024 $0.029 $0.029 Source: Bloomberg, BDO analysis The above weighted average prices are prior to the date of the announcement of the MinRes Scheme, to avoid the influence of any increase in price of Atlas Iron shares that has occurred since the MinRes Scheme was announced. An analysis of the volume of trading in Atlas Iron shares for the twelve months to 4 April 2018 is set out below: Trading days Share price Share price Cumulative volume As a % of low high traded Issued capital 1 Day $0.019 $ ,318, % 10 Days $0.019 $ ,812, % 30 Days $0.019 $ ,656,916, % 60 Days $0.019 $ ,120,758, % 90 Days $0.017 $ ,982,638, % 180 Days $0.016 $ ,767,718, % 12 months $0.012 $ ,524,305, % Source: Bloomberg, BDO analysis This table indicates that Atlas Iron s shares display a high level of liquidity, with % of the Company s current issued capital being traded in the 90-day period prior to the announcement of the MinRes Scheme. RG states that for the quoted market price methodology to be an appropriate methodology there needs to be a liquid and active market in the shares and allowing for the fact that the quoted price may not reflect their value should 100% of the securities not be available for sale. We consider the following characteristics to be representative of a liquid and active market: regular trading in a company s securities; approximately 1% of a company s securities are traded on a weekly basis; the spread of a company s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and there are no significant but unexplained movements in share price. A company s shares should meet all of the above criteria to be considered liquid and active, however, failure of a company s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant. Atlas Iron Limited TARGET'S STATEMENT Page

145 In the case of Atlas Iron, we consider there to be a liquid and active market for the Company s shares as a result of % of the Company s current issued capital being traded over the 90-day period prior to the announcement of the MinRes Scheme. Furthermore, the Atlas Iron shares have been regularly and consistently traded over the review period, and we do not consider there to have been any significant unexplained price movements and fluctuations in trade volumes during the period based on our analysis. Our assessment is that a range of values for Atlas Iron s shares based on market pricing, after disregarding post announcement pricing, is between $0.021 and $0.027 or a midpoint value of $ Control Premium The quoted market price per share reflects the value to minority interest shareholders. In order to value an Atlas Iron share on a control basis, we have added a control premium that is based on our analysis set out below. We have reviewed control premiums on completed transactions, paid by acquirers of both general mining companies and all ASX-listed companies. In assessing the appropriate sample of transactions from which to determine an appropriate control premium, we have excluded transactions where an acquirer obtained a controlling interest (20% and above) at a discount (i.e. less than a 0% premium). We have summarised our findings below. General mining companies Number of Average deal value Average control premium Year transactions (A$m) (%) Source: Bloomberg, BDO analysis All ASX listed companies Number of Average deal value Average control premium Year transactions (A$m) (%) Atlas Iron Limited TARGET'S STATEMENT Page

146 Number of Average deal value Average control premium Year transactions (A$m) (%) Source: Bloomberg, BDO analysis The mean and median of the entire data sets comprising control transactions from 2008 onwards for general mining companies and all ASX listed companies, respectively, is set out below. General mining companies All ASX listed companies Entire data set metrics Deal value (AU$m) Control premium (%) Deal value (AU$m) Control premium (%) Mean Median Source: Bloomberg In arriving at an appropriate control premium to apply we note that observed control premiums can vary due to the: nature and magnitude of non-operating assets; nature and magnitude of discretionary expenses; perceived quality of existing management; nature and magnitude of business opportunities not currently being exploited; ability to integrate the acquiree into the acquirer s business; level of pre-announcement speculation of the transaction; and level of liquidity in the trade of the acquiree s securities. When performing our control premium analysis, we considered completed transactions where the acquirer held a controlling interest, defined at 20% or above, pre transaction or proceeded to hold a controlling interest post transaction in the target company. The table above indicates that the long term average control premium paid by acquirers of general mining companies and all ASX listed companies is approximately 50.5% and 45.2%, respectively. However, in assessing the transactions included in the table, we noted transactions that appear to be extreme outliers. These outliers included 16 general mining transactions and 34 ASX listed company transactions in total, for which the announced premium was in excess of 100%. We have removed these transactions because we consider it likely that the acquirer in these transactions would be paying for special value and/or synergies in excess of the standard premium for control. Whereas, the purpose of this analysis is to assess the premium that is likely to be paid for control, not specific strategic value to the acquirer. We note that it appears that Hancock is paying for special value in excess of the standard control premium. Pursuant to RG 111, we are unable to consider this special value and are not valuing Atlas Iron under the control of a particular acquirer. In a population where there are extreme outliers, the median often represents a superior measure of central tendency compared to the mean. We note that the median announced control premium over the last ten years was approximately 39.7% for general mining companies and 36% for all ASX listed companies. Based on the above analysis, we consider an appropriate premium for control to be applied is between 30% and 40%, with a midpoint of 35%. Atlas Iron Limited TARGET'S STATEMENT Page

147 Quoted market price including control premium Applying a control premium to Atlas Iron s quoted market share price results in the following quoted market price value including a premium for control: Low Midpoint High $ $ $ Quoted market price value Control premium 30% 35% 40% Quoted market price valuation including a premium for control Source: BDO analysis Therefore, our valuation of an Atlas Iron share based on the quoted market price method and including a premium for control is between $0.027 and $0.038, with a midpoint value of $ Assessment of the value of Atlas Iron The results of the valuations performed are summarised in the table below: Low $ Midpoint $ High $ Sum-of-Parts method (Section 10.1) QMP method (Section 10.2) Source: BDO analysis Our QMP valuation overlaps with our Sum-of-Parts valuation, but provides a higher value range overall. Although Atlas Iron shares demonstrate a sufficient level of liquidity for the QMP valuation to be considered appropriate, we consider that the market may not have fully reflected the Company s financial position in the recent period leading up to the announcement of the MinRes Scheme. This conclusion is based on Atlas Iron s recent financial update announced on 17 May 2018 where it provided revised cost guidance and advised of the likelihood of making a non-cash impairment to the carrying value of its producing assets at 30 June Our QMP valuation does not take into account the revised cost guidance and the likelihood of a non-cash impairment as it is based on an analysis of Atlas Iron s share price prior to 9 April Other factors that may explain the difference between our Sum-of-Parts valuation and QMP valuation are: the QMP value reflects investors perception of the future prospects of Atlas Iron s iron ore projects and may have taken into account more positive sentiment on the future commodity prices and future realised prices; and investors may have made different assumptions on Atlas Iron s iron ore projects, including exchange rates, discount rates, inflation rates and discounts on low grade iron ore that may affect their valuation of the Mount Webber Project and the Corunna Downs Project in particular. Therefore, we consider that our Sum-of-Parts value to be the most significant basis to value an Atlas Iron share prior to the MinRes Scheme. Based on our analysis, we consider the value of an Atlas Iron share prior to the MinRes Scheme, and on a controlling basis, to be between $0.015 and $0.030 with a rounded midpoint value of $ Atlas Iron Limited TARGET'S STATEMENT Page

148 11. Valuation of the Offer consideration Under the Offer, Shareholders will receive $0.042 cash for every Atlas Iron share they hold. 12. Is the Offer fair? A comparison of the value of an Atlas Iron share prior to the Offer, on a control basis, and the Offer consideration per share is set out below: Ref Low $ Preferred $ High $ Value of an Atlas Iron share prior to the Offer (control) Value of the Offer Consideration We note from the table above that the Offer consideration is greater than our assessed value of an Atlas Iron share. Therefore, we consider that the Offer is fair. 13. Is the Offer reasonable? 13.1 Advantages of accepting the Offer If the Offer is accepted, in our opinion, the potential advantages to Shareholders include the following: The Offer is fair As set out in Section 12, the Offer is fair. RG 111 states that an offer is reasonable if it is fair The Offer provides Shareholders with an opportunity to realise their investment with certainty The Offer provides Shareholders with an opportunity to realise their investment with certainty. Further, given that the Offer consideration is cash, it provides Shareholders with certainty regarding the value of the consideration being offered The Offer is at a premium to the Company s last traded price prior to both the announcement of the MinRes Scheme and the Offer As detailed in Section 10.2, we consider the most appropriate date on which to assess the quoted market price of an Atlas share to be immediately prior to the announcement of the MinRes Scheme. Our assessed value of a MinRes share prior (on a controlling interest basis) to the announcement of the MinRes Scheme was $0.027 to $0.038 with a midpoint value of $ Therefore, the Offer is at a premium of between 10.5% and 55.6% of the pre-minres Scheme value of an Atlas Iron share (on a control basis). Based on our assessed midpoint QMP value the Offer consideration is at a rounded 31.3% premium. Atlas Iron Limited TARGET'S STATEMENT Page

149 Further, for completeness, we have also assessed the Offer consideration in light of the share price immediately prior to the announcement of the Offer. We have conducted this assessment on the basis that Atlas Iron recommended the MinRes Scheme, therefore in the absence of the Offer, the MinRes Scheme would likely still remain in place, or an alternative transaction that values Atlas Iron at or above the implied value from the MinRes Scheme may materialise. The Offer consideration is at a 16.7% premium to the closing share price on 15 June 2018, being the last trading day prior to the Offer The Offer is not subject to a minimum acceptance condition Under the terms of the Offer there is no minimum acceptance condition. Therefore, Shareholders are free to accept the Offer regardless of whether other Shareholders decide to accept the Offer. This provides Shareholders with certainty of a cash return on their investment, should they choose to accept the Offer Disadvantages of accepting the Offer If the Offer is accepted, in our opinion, the potential disadvantages to Shareholders include the following: Shareholders may perceive to be losing the opportunity for the Atlas Iron share price to increase if and when market conditions improve The Company s share price prior to the announcement of the MinRes Scheme has been affected by the uncertainty around the outlook for low quality iron ore producers and the quality discounts received on their product. As a result of this uncertainty and the recent increase in the discounts on low quality ore, if market conditions improve and the trend reverses, the value of Atlas Iron is likely to increase. If Shareholders accept the Offer, they forego the opportunity to participate in the upside of Atlas Iron s operations if market conditions do improve Shareholders forego the opportunity to receive a competing bid, should one emerge If Shareholders accept the Offer, they forego the opportunity to receive a competing bid. As detailed under Section , we are not aware of any superior bid that may emerge. However, if Shareholders accept the Offer, Shareholders may not be able to participate in the superior offer, should one emerge Advantages of rejecting the Offer If the Offer is rejected, in our opinion, the potential advantages to Shareholders include the following: Shareholders retain their exposure to the potential upside of Atlas Iron s operations if and when market conditions improve In the event that market conditions improve and the realised price at which Atlas Iron can sell its ore increases, the value of Atlas Iron is likely to increase. If Shareholders reject the Offer, they retain their exposure to the opportunity to participate in this potential upside if market conditions improve. We note that if Redstone obtains control following the Offer, it is likely to seek to delist the Company. As such, the opportunity for Shareholders to participate in the upside may only be in the form of dividends, which will be paid at the discretion of Hancock. We note that Atlas Iron has not paid dividends to its Shareholders since Atlas Iron Limited TARGET'S STATEMENT Page

150 13.4 Disadvantages of rejecting the Offer If the Offer is rejected, in our opinion, the potential disadvantages to Shareholders include the following: Shareholders who reject the Offer could become minority shareholders in a company in which Hancock would have a controlling interest As there is no minimum acceptance condition under the terms of the Offer, Shareholders will be able to accept the Offer for their respective shareholding in Atlas Iron regardless of the decision by other Shareholders. Consequently, Shareholders who reject the Offer may potentially be left holding a minority interest shareholding in a Company that Redstone has a controlling interest in. The implications of the various levels of control that Redstone may obtain as a result of the Offer are outlined below. We note that as at the date of our report, Redstone already holds a combined physical and economic interest of approximately 19.96% of the issued capital in Atlas Iron and therefore has the ability to requisition general meetings of the Company and prevent a compulsory acquisition. Controlling Interest Company Influence >5% ability to requisition a general meeting of the Company >10% ability to prevent a compulsory acquisition >25% ability to block special resolutions >50% ability to block and pass general resolutions >75% ability to pass special resolutions >90% ability to initiate a compulsory takeover In the event that Redstone increases its holding to between 50% and less than 90% of the issued capital of Atlas Iron, its intentions which we consider to be most significant in the context of Shareholders decision on whether to accept the Offer are set out below: If it is entitled to do so, it was indicated that it intends to procure that Atlas Iron is removed from the official list of ASX. In the event that Redstone and its related bodies corporate own or control at least 75% of the Company s shares and there are fewer than 150 holders with holdings to the value of at least $500 (excluding Redstone and its related bodies corporate) then it is unlikely that Redstone would require shareholder approval to delist the Company; and Redstone intends to appoint a majority of Redstone nominees to the Atlas Board. Therefore, in the event that Redstone is successful in delisting the Company, if Shareholders reject the Offer, there is a chance that they could be left holding shares in an unlisted company. This would make it difficult for Shareholders to realise their investment, and if they were able to realise their investment it may be at a discount to reflect the lack of marketability of their shares. In the event that Redstone s (and its related bodies corporate) hold less than 50% of the Company s issued capital following the close of the Offer, its intentions are: To seek representation on the Board of Atlas Iron so that it has representation broadly in line with its voting power; and Atlas Iron Limited TARGET'S STATEMENT Page

151 It intends on being actively involved as a shareholder by influencing the strategic direction of business. As such, the presence of a large controlling shareholder with opposing views than the current Atlas Board may cause a divide in the Board, which may lead to a lag in decision making and could cause additional corporate costs to be incurred If Redstone compulsorily acquires, Shareholders will still receive $0.042 per share, but will experience a delay in receiving consideration for their shares If following the close of the Offer, Redstone (and its related bodies corporate) holds 90% or more of the Company s issued capital then its intention is to compulsorily acquire the outstanding shares. If this occurs, then Shareholders will still receive $0.042 for its shares but will experience a delay in receiving consideration for their shares. If Shareholders accept the Offer, Redstone has committed to paying for Shareholders shares within seven days of receiving an effective acceptance Other considerations Alternative Proposal We are unaware of any alternative proposal that might offer the Shareholders of Atlas Iron a premium over the value resulting from the Offer. We consider the Offer to be a superior proposal for Shareholders compared to the MinRes Scheme which was previously announced on 9 April Mineral Resources were provided with the opportunity to make a counter proposal to the Offer, however they declined and the MinRes Scheme was subsequently terminated. We also note that as announced by FMG on 7 and 11 June 2018, NCZ Investments, a wholly owned subsidiary of FMG, purchased a 15% stake in Atlas Iron and a further approximate 4.9% economic interest using a cash settled swap, giving FMG (through NCZ Investments) a combined physical and economic interest of 19.9%. FMG also announced on 7 June 2018, that it did not intend to support the MinRes Scheme on its then current terms but reserved the right to do so. No competing bid has since emerged from NCZ Investments and there is nothing to suggest that a superior bid to the Offer would emerge from NCZ Investments or another party Post-announcement pricing We have analysed movements in Atlas Iron s share price since the Offer was announced. A graph of Atlas Iron s share price leading up to and following the announcement is set out below. For a longer historical period, please refer to Section 10.2 of Our Report to review Atlas Iron s 12-month pre-announcement share price history. Atlas Iron Limited TARGET'S STATEMENT Page

152 0.050 Atlas Iron share price and trading volume history Announcement of the Offer 1,400 Share Price ($) Announcement of the MinRes Scheme 1,200 1, Volume (millions) Volume Closing share price Source: Bloomberg The closing price of an Atlas Iron share from 2 January 2018 to 6 July 2018 ranged from a low of $0.019 on 6 April 2018 to a high of $0.045 on 20 June We note that during this period, Atlas Iron announced the MinRes Scheme. On the date the MinRes Scheme was announced the share price closed at $0.027, up from a closing price of $0.019, on the previous trading day. Following the announcement of the MinRes Scheme, the share price of Atlas Iron increased significantly, before declining to $0.028 on 7 June The Offer was announced on 18 June On the last trading day prior to the announcement of the Offer, the Atlas Iron share price was $ On the day following the announcement of the Offer, 257,706,320 shares were traded representing approximately 3% of the Company s current issued share capital. Following the announcement of the Offer, Atlas Iron s share price increased from a volume weighted average of $0.034 over the 30 days prior to the announcement of the Offer to close at $0.043 on 6 July We also note that the share price of Atlas Iron increased significantly immediately following the announcement of the Offer and has remained at that level since, suggesting that the announcement of the Offer was well received by the market. We note that the existence of another substantial shareholder may also have influenced market pricing with speculation that a competing bid may emerge. Should no such bid emerge, the Company s share price may decline Atlas Iron may need to recapitalise the Company We note that without a change in the strategic direction or change in the current market conditions, Atlas Iron may require additional financial resources to support current operations. This may be in the form of a recapitalisation of the Company in the short-term. Cash will be needed by Atlas Iron to reduce debt or provide working capital. Management of Atlas Iron has identified various possibilities of sources of funds which include equity capital raising and/or the sale of certain assets. However, there is no guarantee that any of these recapitalisation / fund raising options will be successful. We note that any equity raising will likely be dilutive to Shareholders. Atlas Iron Limited TARGET'S STATEMENT Page

153 Likelihood of the Company ending up in financial distress We note that the Company s auditor outlined the existence of material uncertainty relating to going concern in Atlas Iron s Annual Reports for the years ended 30 June 2016 and 30 June 2017 as well as the Half-Year Report for the period ended 31 December On 17 May 2018, Atlas Iron provided revised cost guidance and advised the market that it is likely to make a non-cash impairment to the carrying value of its producing assets at 30 June Also, on 8 June 2018, Atlas announced that S&P had downgraded the credit rating of Atlas Iron from B- to CCC and that it had been placed S&P s and Moody s watch lists. On 15 June 2018, Moody downgraded the Company s secured credit rating from B3 to Caa2. Atlas Iron has experienced significant price discounts for its low grade iron ore. If the discounts reduce, the financial performance of Atlas Iron would improve. However, if these discounts are sustained in the medium to long term, the uncertainty relating to Atlas Iron s going concern will increase and there is a likelihood that the Company may end up in financial distress unless the Company takes necessary action such as raising further equity and/or selling assets Change of control event We note that pursuant to the terms of the Term Loan B facility, a charge of control event is considered an event of default, giving the lenders the right to accelerate repayment of the debt. As advised in the Supplementary Bidder s Statement dated 26 June 2018, Redstone confirms that should Redstone s voting power in Atlas Iron exceed 50%, it will make an offer to provide financing on similar terms to that of the Term Loan B facility, or will offer to step-in to the Term Loan B facility (by way of acquiring that debt from the lenders under the Term Loan B facility). Redstone has indicated that any funding support it may provide would be considered on a case by case basis. Atlas Iron and Redstone have not agreed to the terms for the provision of any funding to Atlas Iron, nor has Atlas Iron, Redstone and the lenders under the Term Loan B facility agreed to the terms of any acquisition of the debt by Redstone. We also note that Redstone may offer financing terms that Atlas Iron may not be able to readily accept, i.e. they may need to seek shareholder approval in order to enter into a financing agreement with Redstone. In the event lenders under the Term Loan B facility demand repayment and funding is not available sufficiently promptly (either from Redstone or otherwise) and Atlas Iron is unable to immediately repay the Term Loan B Facility, Atlas will become insolvent. Further information on a change of control event can be found in the Target s Statement Tax consequences In the event that Hancock obtain a significant shareholding in Atlas Iron and/or seek to change the Company s operations, this may cast doubt over the Company s ability to utilise the c. $1.4 billion of carry forward tax losses going forward Conclusion on reasonableness Based on the above, we consider the advantages of accepting the Offer in conjunction with the disadvantages of rejecting the Offer outweigh the advantages of rejecting the Offer and disadvantages of accepting the Offer. Therefore, we consider the Offer to be reasonable for Shareholders. Atlas Iron Limited TARGET'S STATEMENT Page

154 14. Conclusion We have considered the terms of the Offer as outlined in the body of this report and have concluded that the Offer is fair and reasonable to the Shareholders of Atlas Iron. 15. Sources of information This report has been based on the following information: Bidder s Statement, Supplementary Bidder s Statement and Replacement Bidder s Statement; Draft Target s Statement on or about the date of this report; Altura Royalty Agreement between Atlas Iron and Altura Exploration Pty Ltd dated 6 April 2016; Option to Purchase Mining Rights Over Part Exploration Licence 45/2363 between Atlas Iron, Shaw River Resources Limited and Altura Exploration Pty Ltd dated 27 April 2011; Utah Point Multi-Users Agreement in respect of Stockyard 2 dated 25 June 2014; Pilgangoora Minegate Sale Agreement between Atlas Iron and Pilbara Minerals Limited dated 19 December 2017; Amended and Restated Syndicated Facility Agreement between Atlas Iron and a syndicate of banks dated 6 May 2016; Project models of Atlas Iron s Mount Webber Project, Corunna Downs Project and McPhee Creek Project; Audited financial statements of Atlas Iron for the years ended 30 June 2016 and 30 June 2017; Reviewed financial statements of Atlas Iron for the half-year ended 31 December 2017; Management accounts of Atlas Iron for the five-month period ended 31 May 2018; Independent Technical Assessment and Valuation Report of Atlas Iron s mineral assets dated 28 May 2018 performed by CSA Global; Share registry information of Atlas Iron; RBA s Monetary Policy Decision dated 1 May 2018 and 3 July 2018; World Bank; African Economic Outlook 2018; Bloomberg; Consensus Economics; S&P Capital IQ; IBIS World; Energy and Metals Consensus Forecast for June 2018; U.S. Geological Survey; United States Bureau of Economic Analysis; Research and brokers reports; and Discussions with Directors and Management of Atlas Iron. Atlas Iron Limited TARGET'S STATEMENT Page

155 16. Independence BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $85,000 (excluding GST and reimbursement of out of pocket expenses). The fee is not contingent on the conclusion, content or future use of this Report. Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report. BDO Corporate Finance (WA) Pty Ltd has been indemnified by Atlas Iron Limited in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by Atlas Iron Limited, including the non-provision of material information, in relation to the preparation of this report. Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to Atlas Iron Limited and Redstone Corporation Pty Ltd and any of their respective associates with reference to ASIC Regulatory Guide 112 Independence of Experts. In BDO Corporate Finance (WA) Pty Ltd s opinion it is independent of Atlas Iron Limited and Redstone Corporation Pty Ltd and their respective associates. BDO Corporate Finance (WA) Pty Ltd was previously engaged to prepare an Independent Expert s Report in relation to the scheme of arrangement with Mineral Resources which was announced on 9 April In order to safeguard against any potential or perceived self-review threat, we have rotated the engagement and review partners and staff involved in the preparation of this report in addition to critically analysing work previously completed. A draft of this report was provided to Atlas Iron and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review. BDO is the brand name for the BDO International network and for each of the BDO Member firms. BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN to represent it in BDO International). 17. Qualifications BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions. BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act. The persons specifically involved in preparing and reviewing this report were Peter Toll and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff. Peter Toll is a Fellow of Chartered Accountants Australia & New Zealand and a Senior Associate of the Financial Services Institute of Australia (FINSIA) and has a Graduate Diploma of Applied Finance and Investment from FINSIA. He has over 20 years experience working in the audit and corporate finance Atlas Iron Limited TARGET'S STATEMENT Page

156 fields with BDO and its predecessor firms. Peter has experience advising companies ranging in size from ASX 100 to large family operations on identifying and executing transactions. He has considerable public market corporate transactions experience, including listing companies on various exchanges and the preparation of independent expert s reports and investigating accountant s reports. Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam s career spans over 20 years in the Audit and Assurance and Corporate Finance areas. Adam is a CA BV Specialist and has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors. Ashton Lombardo is a member of the Australian Institute of Chartered Accountants. Ashton has over seven years of experience in corporate finance and has helped in the preparation of numerous independent expert s reports and valuations. Ashton has a Bachelor of Economics and a Bachelor of Commerce from the University of Western Australia and has completed a Graduate Diploma of Applied Corporate Governance with the Governance Institute of Australia. 18. Disclaimers and consents This report has been prepared at the request of Atlas Iron for inclusion in the Target s Statement which will be sent to all Atlas Iron Shareholders. Atlas Iron engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the cash offer of $0.042 per share from Redstone for for all of the ordinary shares in Atlas Iron in which Redstone does not have a relevant interest. BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Target s Statement. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd. BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Target s Statement other than this report and references to this report in the Target s Statement. We have no reason to believe that any of the information or explanations supplied to us are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence in relation to the Offer. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process. The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time. The forecasts provided to BDO Corporate Finance (WA) Pty Ltd by Atlas Iron Limited and its advisers are based upon assumptions about events and circumstances that have not yet occurred. Accordingly, BDO Corporate Finance (WA) Pty Ltd cannot provide any assurance that the forecasts will be representative of results that will actually be achieved. With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Offer, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of Atlas Iron Limited, or any other party. Atlas Iron Limited TARGET'S STATEMENT Page

157 BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for mineral assets held by CSA Global Pty Ltd. The valuer engaged for the mineral asset valuation, CSA Global Pty Ltd, possess the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and assumptions made in arriving at their valuation is appropriate for this report. We have received consent from the valuer for the use of their valuation report in the preparation of this report and to append a copy of their report to this report. The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete. The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd is required to provide a supplementary report if we become aware of a significant change affecting the information in this report arising between the date of this report and prior to the closing of the Offer period. Yours faithfully BDO CORPORATE FINANCE (WA) PTY LTD Peter Toll Director Adam Myers Director Atlas Iron Limited TARGET'S STATEMENT Page

158 Appendix 1 Glossary of Terms Reference the Act Additional Quality Discount Adjusted Altura Model Adjusted Atlas Model Adjusted Pilbara Minerals Model Altura Altura Model Altura Royalty Agreement Definition The Corporations Act 2001 Cth The additional low grade discount (in addition to the standard grade adjustment calculation) that Atlas Iron receives on its ore The BDO adjusted Altura Model The BDO adjusted Atlas Model The BDO adjusted Pilbara Minerals Model Altura Mining Limited The cash flow model for Altura s Pilgangoora Lithium Project, which estimates the future cash flows payable under the Altura Royalty and is based on a 12-year life of mine Royalty agreement between Atlas Iron and Altura Exploration Pty Ltd dated 6 April 2016 for a royalty equal to 5% of the value of all lithium concentrates produced from M45/1231 APES 225 Accounting Professional & Ethical Standards Board professional standard APES 225 Valuation Services ASIC ASX Atlas Advanced Projects Atlas Iron Atlas Exploration Assets Atlas Model Australian Securities and Investments Commission Australian Securities Exchange Resources of advanced projects such as the McPhee Creek Project and the Miralga Creek Project that we do not yet have reasonable grounds to include in our DCF Valuation Atlas Iron Limited Other exploration assets of Atlas Iron that are still early stage assets and incapable of generating earnings or future cash flows The financial model provided by Atlas Iron which includes the cash flows of the Mount Webber Project and the Corunna Downs Project Atlas Iron Limited TARGET'S STATEMENT Page

159 Reference Atlas Operating Projects AUD or A$ BBIG BCI BDO BHP Brockman CAPM CFR the Company Copper Range Project Corporations Act Corunna Downs Project CSA Global Current Discount Scenario Davidson Creek Project DCF DCF Valuation DFS DSO EBIT Definition Mount Webber Project (an operating mine) and the Corunna Downs Project (with a DFS that has been completed) for which we have undertaken the DCF Valuation Australian Dollars BBIG Group Pty Ltd BCI Minerals Limited BDO Corporate Finance (WA) Pty Ltd BHP Billiton Limited Brockman Mining Limited The capital asset pricing model Cost and freight Atlas Iron Limited The Copper Range Copper Project located 50km east of Newman The Corporations Act 2001 Cth Corunna Downs iron ore project, wholly owned by Atlas Iron, located in the North Pilbara region approximately 237 kilometres by road southeast from Port Hedland and approximately 33 kilometres from Marble Bar CSA Global Pty Ltd The Additional Quality Discount of 34% which is based on the average monthly realised discount for the three months ended 31 March 2018 Atlas Iron s wholly owned Davidson Creek iron ore project, located in the southeast Pilbara region Discounted Future Cash Flows Our valuation methodology using the DCF approach Definitive feasibility study Direct shipping ore Earnings before interest and tax Atlas Iron Limited TARGET'S STATEMENT Page

160 Reference EBITDA Emu Creek Project ESOP Fe First Au FME FMG FOB FOS FSG FY20XX Galaxy GDP Grade Discount Great Sandy Hancock Hope Downs Horseshoe Independent Technical Assessment and Valuation Report JORC Code JV Definition Earnings before interest, tax, depreciation and amortisation The Emu Creek Copper Gold Project, located near Nullagine in Western Australia, is a joint venture between Atlas Iron and PHA Unlisted employee share option plan Iron First Au Limited Future Maintainable Earnings Fortescue Metals Group Ltd Free on board Financial Ombudsman Service Financial Services Guide Financial year Galaxy Resources Limited Gross Domestic Product The discount to the 62% Fe price to reflect a grade of approximately 57.5% on Atlas Iron s ore Great Sandy Pty Ltd Hancock Prospecting Pty Ltd The Hope Downs Iron Ore Project, is a 50/50 joint venture between Rio Tinto and Hancock Prospecting. Horseshoe Manganese Pty Ltd Independent technical assessment and valuation report prepared by CSA Global dated 28 May 2018 The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition) Joint Venture Atlas Iron Limited TARGET'S STATEMENT Page

161 Reference JV Agreement Kalamazoo LIBOR Lithium DSO Low Discount Scenario MACA Matching Rights Clause McPhee Creek Project Medium Discount Scenario Mineral Rights MinRes MinRes Scheme Miralga Creek Project Moody s Mount Webber Project mtpa Definition A binding joint venture agreement between Atlas Iron and PLS for the Cisco Lithium- Tantalum Project Kalamazoo Resources Limited London Interbank Offer Rate Lithium Direct Shipping Ore The Additional Quality Discount of 12% which is based on the assumption that the Additional Quality Discount reverts to levels observed historically, which for Atlas Iron, has typically been in the range of 0% to 20% MACA Limited Under the Scheme Implementation Deed between Atlas Iron and MineRes, following the receipt of a competing proposal for Atlas Iron, MinRes would have three business days to amend the terms of the transaction or increase the consideration offered under the transaction McPhee Creek iron ore project, wholly owned by Atlas Iron, located in the North Pilbara region approximately 270 kilometres southeast of Port Hedland and approximately 65 kilometers east of the Corunna Downs Project The Additional Quality Discount of 20% which is based on the assumption that the Additional Quality Discount will decrease gradually over the period from April 2018 to 20% for May 2019, from which point it is assumed the monthly discount will remain at 20% The lithium, tantalum and tin mineral rights subject to the Cisco Project Mineral Resources Limited The planned Scheme of Arrangement between Atlas Iron Limited and Mineral Resources Limited, which was announced on 9 April 2018, and subsequently terminated on 21 June 2018 Miralga Creek iron ore project, wholly owned by Atlas Iron, located in the North Pilbara region approximately 35 kilometres from the Abydos Iron Ore Project Moody s Investor Services Mount Webber iron ore project, wholly owned by Atlas Iron, located in the North Pilbara region approximately 230 kilometres south-southeast of Port Hedland Million tonnes per annum Atlas Iron Limited TARGET'S STATEMENT Page

162 Reference NAV NCZ Investments Neometals NWI NYSE The Offer Orocobre Pancho Project The Panel PFS Pilbara Minerals Model Pilbara Minerals or PLS Pilgangoora Lithium Project Pilgangoora Lithium- Tantalite Project Pilgangoora Minegate Agreement PPA QMP RBA RC Redstone Definition Net Asset Value NCZ Investments Pty Ltd Neometals Limited North West Infrastructure New York Stock Exchange The cash bid of $0.042 per Atlas Iron share, made by Redstone Corporation Pty Ltd Orocobre Limited Atlas Iron s Pancho lithium project, located in the Pilbara the Takeovers Panel Pre-feasibility study The cash flow model for the Pilgangoora Minegate Agreement, which estimates the expected future cash flows from the sale of the spodumene run-of-mine ore produced from the lithia/tantalite that Atlas Iron has agreed to purchase from Pilbara Minerals. Pilbara Minerals Limited Pilgangoora lithium project, wholly owned by Altura, located in the North Pilbara region approximately 123 kilometres south of Port Hedland Pilgangoora lithium-tantalite project, wholly owned by Pilbara Minerals, located in the North Pilbara region approximately 120 kilometres south of Port Hedland Contract with Pilbara Minerals or PLS for the purchase of lithium direct shipping ore from the Pilgangoora Project at mine gate and for the provision of services of crushing, haulage, ship loading and ocean freight of between one million tonnes and 1.5 million tonnes of ore Pilbara Port Authority Quoted market price Reserve Bank of Australia Reverse circulation Redstone Corporation Pty Ltd Atlas Iron Limited TARGET'S STATEMENT Page

163 Reference Regulations Our Report Definition Corporations Act Regulations 2001 (Cth) This Independent Expert s Report prepared by BDO RG 111 Content of expert reports (March 2011) RG 112 Independence of experts (March 2011) Ridley Magnetite Project Rio Tinto ROIC Ridley magnetite iron ore project, wholly owned by Atlas Iron, located in the North Pilbara region approximately 75 kilometres east of Port Hedland Rio Tinto Limited Return on invested capital Roy Hill Roy Hill is an integrated mine railway and port project, located approximately 340 kilometers south east of Port Hedland S&P Shareholders Sinosteel SQM Sum-of-Parts Term Loan B Facility USA USD USGS Utah Point Valmin Code Valuation Engagement Standard and Poor s Rating Services The non-associated shareholders of Atlas Iron Sinosteel Australia Pty Ltd Sociedad Quimica y Minera de Chile S.A. A combination of different methodologies used together to determine an overall value where separate assets and liabilities are valued using different methodologies Term Loan B facility under a restated Syndicated Facility Agreement dated 6 May 2016 as amended from time to time United States of America United States Dollar United States Geological Survey The WA Government-owned Utah Point bulk handling facility in Port Hedland, which is a single berth, single ship loader multi-user facility Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (2015 Edition) An Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party Atlas Iron Limited TARGET'S STATEMENT Page

164 Reference Definition would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time. VWAP WA WACC Walker Project Warrawanda Project Western Creek Project Volume Weighted Average Price Western Australia Weighted Average Cost of Capital Atlas Iron s Walker copper project, located adjacent to the Abydos Mine Atlas Iron s, wholly owned Warrawanda iron ore project, located in the southeast Pilbara region Atlas Iron s, wholly owned Western Creek iron ore project, located in the southeast Pilbara region Copyright 2018 BDO Corporate Finance (WA) Pty Ltd All rights reserved. No part of this publication may be reproduced, published, distributed, displayed, copied or stored for public or private use in any information retrieval system, or transmitted in any form by any mechanical, photographic or electronic process, including electronically or digitally on the Internet or World Wide Web, or over any network, or local area network, without written permission of the author. No part of this publication may be modified, changed or exploited in any way used for derivative work or offered for sale without the express written permission of the author. For permission requests, write to BDO Corporate Finance (WA) Pty Ltd, at the address below: The Directors BDO Corporate Finance (WA) Pty Ltd 38 Station Street SUBIACO, WA 6008 Australia Atlas Iron Limited TARGET'S STATEMENT Page

165 Appendix 2 Valuation Methodologies Methodologies commonly used for valuing assets and businesses are as follows: 1 Net asset value ( NAV ) Asset based methods estimate the market value of an entity s securities based on the realisable value of its identifiable net assets. Asset based methods include: Orderly realisation of assets method Liquidation of assets method Net assets on a going concern method The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner. The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs. Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity s valuation. Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas. These asset based methods ignore the possibility that the entity s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when an entity is not making an adequate return on its assets, a significant proportion of the entity s assets are liquid or for asset holding companies. 2 Quoted Market Price Basis ( QMP ) A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a liquid and active market in that security. Atlas Iron Limited TARGET'S STATEMENT Page

166 3 Capitalisation of future maintainable earnings ( FME ) This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data. The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives. The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax ( EBIT ) or earnings before interest, tax, depreciation and amortisation ( EBITDA ). The capitalisation rate or earnings multiple is adjusted to reflect which base is being used for FME. 4 Discounted future cash flows ( DCF ) The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks. Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate. A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate. DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows. 5 Market Based Assessment The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation. Atlas Iron Limited TARGET'S STATEMENT Page

167 Appendix 3 Discount rates Determining the correct discount rate, or cost of capital, for a business requires the identification and consideration of a number of factors that affect the returns and risks of a business, as well as the application of widely accepted methodologies for determining the returns of a business. The discount rate applied to the forecast cash flows from a business represents the financial return that will be required before an investor would be prepared to acquire (or invest in) the business. The capital asset pricing model ( CAPM ) is commonly used in determining the market rates of return for equity type investments and project evaluations. In determining a business weighted average cost of capital ( WACC ), the CAPM results are combined with the cost of debt funding. WACC represents the return required on the business, whilst CAPM provides the required return on an equity investment. In our assessment of the appropriate discount rate for Atlas Iron, we consider the most appropriate discount rate to use is the cost of equity. This is because the Adjusted Atlas Model includes financing cash flows. As such, the cash flows contemplated by the Adjusted Atlas Model are reflective of the cash flows to equity holders. In valuing the Pilgangoora Minegate Agreement and the Altura Royalty, we consider the most appropriate discount rate to apply to the respective projects cash flows is the WACC, being the return required on the business. This is because we are assessing Pilbara Minerals Pilgangoora Lithium-Tantalite Project and Altura s Pilgangoora Lithium Project on a project level from which the Pilgangoora Minegate Agreement cash flows and Altura Royalty cash flows are based on, respectively. Cost of Equity and Capital Asset Pricing Model CAPM is based on the theory that a rational investor would price an investment so that the expected return is equal to the risk free rate of return plus an appropriate premium for risk. CAPM assumes that there is a positive relationship between risk and return, that is, investors are risk averse and demand a higher return for accepting a higher level of risk. CAPM calculates the cost of equity and is calculated as follows: CAPM K e = R f + β x (R m R f) Where: K e R f R m R m R f β = expected equity investment return or cost of equity in nominal terms = risk free rate of return = expected market return = market risk premium = equity beta The individual components of CAPM are discussed below. Atlas Iron Limited TARGET'S STATEMENT Page

168 Risk Free Rate (R f) The risk free rate is normally approximated by reference to a long term government bond with a maturity equivalent to the timeframe over which the returns from the assets are expected to be received. We have considered current and implied forward yields for the 10-year Australian Government Bond yield. Based on our analysis, we have adopted a long term estimate of the 10-year Australian Government Bond yield of 3.0% for Atlas Iron and the Altura Royalty. The Adjusted Pilgangoora Model considers cash flows extended until 31 May As such, we have considered the current yield to maturity on the two-year Australian Government Bond rate of 2.0% at 6 July 2018 when valuing the Pilgangoora Minegate Agreement. Market Risk Premium (R m R f) The market risk premium represents the additional return that investors expect from an investment in a well-diversified portfolio of assets. It is common to use a historical risk premium, as expectations are not observable in practice. In order to determine an appropriate market risk premium in Australia, we analysed historical data. Our sample of data included the daily historical market risk premiums in Australia over the last ten years, from July 2008 to July The market risk premium is derived on the basis of capital weighted average return of all members of the S&P 200 Index minus the risk free rate, which is dependent on the 10-year Australian Government Bond rate. 1,600 Australian Market Risk Premiums (observed over last ten years) No. of observed market risk premiums 1,400 1,200 1, <6% 6%-8% 8%-10% 10%-12% 12%-14% >14% Market risk premium range Source: Bloomberg and BDO analysis Atlas Iron Limited TARGET'S STATEMENT Page

169 The graph above illustrates the frequency of observations of the Australian market risk premium over the past ten years. The graph indicates that a high proportion of the sample data for Australian market risk premiums lie in the range of 6% to 8%. This is supported by the long term historical average market risk premium of between 6% and 8%, which is commonly used in practice. For the purpose of our report we have adopted a market risk premium of between 6% and 8% for Atlas Iron, the Pilgangoora Minegate Agreement and the Altura Royalty. Equity Beta Beta is a measure of the expected correlation of an investment s return over and above the risk free rate, relative to the return over and above the risk free rate of the market as a whole; a beta greater than one implies that an investment s return will outperform the market s average return in a bullish market and underperform the market s average return in a bearish market. On the other hand, a beta less than one implies that the business will underperform the market s average return in a bullish market and outperform the market s average return in a bearish market. Equity betas are normally estimated using either an historical beta or an adjusted beta. The historical beta is obtained from the linear regression of a stock s historical data and is based on the observed relationship between the security s return and the returns on an index. An adjusted beta is calculated based on the assumption that the relative risk of the past will continue into the future, and is hence derived from historical data. It is then modified by the assumption that a stock will move towards the market over time, taking into consideration the industry risk factors, which make the operating risk of the company greater or less risky than comparable listed companies. It is important to note that it is not possible to compare the equity betas of different companies without having regard to their gearing levels. It is generally accepted that a more valid analysis of betas can be achieved by ungearing the equity beta to derive an asset beta (β a) by applying the following formula: β a = β / (1+(D/E x (1-t)) Selected Beta (β) Atlas Iron In order to assess the appropriate equity beta for Atlas Iron, we have had regard to the equity beta of Atlas Iron as well as ASX-listed companies predominantly involved in the production of iron ore. We consider it appropriate to include Atlas Iron in our data set, as our analysis in Section 10.2 indicates the existence of a liquid and active market for Atlas Iron shares due to % of the Company s current issued capital being traded in the 90-day period prior to the announcement of the MinRes Scheme. The betas below have been assessed over a three-year weekly period over the S&P All Ordinaries Index, from 4 April 2015 to 4 April 2018, being the date prior to the announcement of the MinRes Scheme. We have not considered data subsequent to the announcement for Atlas Iron as this would distort the historical betas. For consistency and comparison purposes we have also assessed the betas of the comparable companies at 4 April Atlas Iron Limited TARGET'S STATEMENT Page

170 Company Market Capitalisation 4-Apr-18 (A$m) Geared Beta (β) Gross Debt/Equity (%) Ungeared Beta (βa) Atlas Iron Limited % BCI Minerals Limited % Grange Resources Limited % Mount Gibson Iron Limited % Fortescue Metals Group Limited 13, % BHP Billiton Limited 145, % Rio Tinto Limited 116, % Source: Bloomberg and BDO analysis Mean 39, % Median % Descriptions of the comparable companies are provided in Appendix 4. In selecting an appropriate beta for Atlas Iron, we have considered the similarities and differences between Atlas Iron and the companies set out above. The comparable similarities and differences noted are: the assets held by the companies listed above have carrying risk profiles depending on the maturity of the assets and stages and location of production; companies such as BHP and Rio Tinto operate on a significantly larger scale compared to that of Atlas Iron, and have a diverse portfolio of assets. Specifically, BHP has a portfolio of copper assets, iron ore assets, coal assets and a nickel business and Rio Tinto s major products are aluminium, copper, diamonds, gold, industrial minerals as well as iron ore, thermal and metallurgical coal and uranium. This is in comparison to Atlas Iron, which is largely focussed on iron ore production. In addition, BHP and Rio Tinto s market capitalisations were $145.2 billion and $116.5 billion, respectively, compared to Atlas Iron s $176 million, on 4 April 2018; Atlas Iron and FMG have both experienced significant price discounts for their low-grade iron ore in the past. As such, the observed betas of Atlas Iron and FMG are both likely to reflect the systematic risk factors associated with the iron ore mining industry, specifically those associated with pricing discounts applied to their iron ore product. This is in addition to BCI Minerals Limited, which owns the 58% Fe Iron Valley Project; and despite the similarities between Atlas Iron and FMG with respect to pricing discounts, FMG operates on a larger scale to Atlas Iron and also has significantly lower costs per metric tonne of iron ore compared to Atlas Iron. This is evidenced by FMG s position in the market as a low cost supplier of iron ore into China, and its size and ability to engage in sustainable cost reduction through structural improvements, productivity and efficiencies, and innovation and technologies. In selecting an appropriate ungeared beta for Atlas Iron, we have considered the ungeared betas of the companies listed above, Atlas Iron s ungeared beta, and the factors listed above. Specifically, as mentioned above, both BHP and Rio Tinto have geographically diverse operations, and operate on a significantly larger scale to that of Atlas Iron. We therefore consider it appropriate to remove both companies from our final data set. R² Atlas Iron Limited TARGET'S STATEMENT Page

171 A summary of our final data set is summarised below. Company Geared Beta (β) Gross Debt/Equity (%) Ungeared Beta (βa) Atlas Iron Limited % 1.53 BCI Minerals Limited % 1.83 Grange Resources Limited % 0.87 Mount Gibson Iron Limited % 0.90 Fortescue Metals Group Limited % 1.14 Mean % 1.25 Median % 1.14 Source: Bloomberg and BDO analysis As set out above, the average ungeared beta based on our data set is This includes Atlas Iron, which has an ungeared beta of Based on our analysis, we consider an appropriate beta for Atlas Iron to be in the range of 1.45 to We have then regeared the ungeared beta based on the debt to equity structure of Atlas Iron at 31 May 2018 as set out below. Based on this, we consider an appropriate regeared beta to apply to Atlas Iron to be between 1.77 and Pilgangoora Minegate Agreement In order to assess the appropriate equity beta for Pilbara Minerals Pilgangoora Lithium-Tantalite Project, we have had regard to companies with business operations similar to that of the Pilgangoora Lithium- Tantalite Project. Specifically, we have considered companies with operations predominantly focussed on the exploration, development and production of lithium and tantalum. We consider it appropriate to include Pilbara Minerals in our data set, as Pilbara Minerals is solely focussed on the development of the Pilgangoora Lithium-Tantalite Project, with an announcement on 21 June 2018 stating that the first concentrate at the Pilgangoora Lithium-Tantalite Project had been successfully produced. The geared betas below have been calculated against the S&P All Ordinaries Index using daily data over a two-year period. Market capitalisation 6-Jul-18 Geared Beta Gross Debt/Equity Ungeared Beta ($m) (β) (%) (βa) R² Pilbara Minerals Limited 1, % Altura Mining Limited % Galaxy Resources Limited 1, % Orocobre Limited 1, % Neometals Limited % Sociedad Quimica y Minera 12, % Albemarle Corporation 10, % FMC Corporation 12, % Source: Bloomberg and BDO analysis Mean 5, % Median 1, % Atlas Iron Limited TARGET'S STATEMENT Page

172 Descriptions of the companies with similar operations to the Pilgangoora Lithium-Tantalite Project are set out in Appendix 4. In selecting an appropriate beta for the Pilgangoora Lithium-Tantalite Project, we have considered the similarities and differences between the companies set out above. Specifically, we note that there are a limited number of companies with lithium and/or tantalum assets that have progressed to production stage listed on the ASX, with many at exploration or near production stage. Therefore, we have expanded our search to include the New York Stock Exchange ( NYSE ). We have also included a number of companies listed on the ASX with lithium-focussed operations, that are at development or nearing production. The other comparable similarities and differences noted are: three out of four of the largest global lithium producers, being Albemarle Corporation, FMC Lithium Corporation and SQM are listed on the NYSE. However, we note these companies operate on a significantly larger scale compared to Pilbara Minerals, and therefore, operations are not directly comparable to the Pilgangoora Lithium-Tantalite Project. As such, we consider it appropriate to exclude these companies from our final data set; Altura Mining Limited is currently focussed on progressing its 100%-owned Pilgangoora Lithium Project to development stage. In January 2018, a 25kg sample of spodumene from its project was converted to lithium carbonate, with first production targeted in Altura is solely focussed on development of the Pilgangoora Lithium Project. Altura s Pilgangoora Lithium Project is located in close proximity to the Pilgangoora Lithium-Tantalite Project. As such, we consider Altura to have operations highly comparable to the operations of the Pilgangoora Lithium-Tantalite Project; Galaxy Resources Limited ( Galaxy ) and Orocobre Limited ( Orocobre ) are both lithium producers. Specifically, Galaxy engages in the sale of spodumene concentrate from its Mt Cattlin Project in WA, with Orocobre has lithium operations focussed in Argentina ad produces lithium chemicals. As such, we consider it appropriate to include Galaxy and Orocobre in our final data set; and Neometals Limited ( Neometals ) is focussed on the exploration and development of its lithium, titanium, vanadium and other base mineral properties. Neometals has interests in a number of projects and technologies, however is primarily focussed on development of Mt Marion, of which it owns a 13.8% interest (Mineral Resources; 43.1%, Ganfeng Lithium Co., Ltd; 43.1%). Therefore, we consider it appropriate to include Neometals in our final data set. As we are contemplating the sale of spodumene through a series of cash flows, we are assuming the Pilgangoora Lithium-Tantalite Project will be brought into production. Due to the limited number of lithium-producers listed on the ASX, we have included companies with lithium and/or tantalum assets that are nearing production. Atlas Iron Limited TARGET'S STATEMENT Page

173 A summary of our final data set is summarised below. Company Geared Beta Gross Debt/Equity Ungeared Beta (β) (%) (βa) Pilbara Minerals Limited % 1.09 Altura Mining Limited % 0.72 Galaxy Resources Limited % 1.66 Orocobre Limited % 1.26 Neometals Limited % 0.94 Mean % 1.13 Median % 1.09 Source: Bloomberg and BDO analysis Having regard to all the above analysis, we consider an appropriate ungeared beta to apply to the Pilgangoora Lithium-Tantalite Project is between 1.00 and We have regeared this beta to reflect Pilbara Minerals financials at 31 December Consequently, we consider an appropriate geared beta for the Pilgangoora Lithium-Tantalite Project to be between 1.32 and Altura Royalty In order to assess the appropriate equity beta for Altura s Pilgangoora Lithium Project, we have had regard to companies with business operations similar to that of Altura s Pilgangoora Lithium Project. Specifically, we have considered companies with operations predominantly focussed on the exploration, development and production of lithium. We consider it appropriate to include Altura in our data set, as Altura is solely focussed on the development of its Pilgangoora Lithium Project. On 22 May 2018, Altura announced that it had completed the first stage of commissioning for its Pilgangoora Lithium Project. The geared betas for our final data set below have been calculated against the S&P All Ordinaries Index using daily data over a two-year period. We have adopted the same selected comparable companies for Altura as Pilbara Minerals, due to the comparability between both companies in terms of stage of current operations and commodity exposure. A summary of our final data set is summarised below. Company Geared Beta Gross Debt/Equity Ungeared Beta (β) (%) (βa) Altura Mining Limited % 0.72 Pilbara Minerals Limited % 1.09 Galaxy Resources Limited % 1.66 Orocobre Limited % 1.26 Neometals Limited % 0.94 Mean % 1.13 Median % 1.09 Source: Bloomberg and BDO analysis Having regard to all the above analysis, we consider an appropriate ungeared beta to apply to Altura s Pilgangoora Lithium Project is between 1.00 and We have regeared this beta to reflect Altura s financials at 31 December Consequently, we consider an appropriate geared beta for the Altura Pilgangoora Lithium Project to be between 1.87 and Atlas Iron Limited TARGET'S STATEMENT Page

174 Gearing Before a discount rate can be determined, the proportion of funding provided by debt and equity (i.e. gearing ratio) must be determined. The gearing ratio adopted should represent the level of debt that the asset can reasonably sustain (i.e. the higher the expected volatility of cash flows, the lower the debt levels that can be supported). The optimum level of gearing will differentiate between assets and will include: the variability in earnings streams; working capital requirements; the level of investment in tangible assets; and the nature and risk profile of tangible assets. Atlas Iron We have regeared the beta for Atlas Iron having regard to the Company s interest bearing liabilities and total equity at 31 May As at 31 May 2018, Atlas Iron s total current and non-current interest-bearing liabilities totalled approximately US$84.4 million, and total equity totalled US$269.7 million. We have therefore assumed a debt to equity ratio of approximately 31% in our assessment of an appropriate discount rate for Atlas Iron. Pilgangoora Minegate Agreement We have regeared the beta for the Pilgangoora Lithium-Tantalite Project to reflect the debt to equity ratio of approximately 46%, which is based on Pilbara Minerals interest bearing liabilities and total equity at 31 December Altura Royalty We have regeared the beta for the Altura s Pilgangoora Lithium Project to reflect the debt to equity ratio% of approximately 125%, which is based on Altura s interest bearing liabilities and total equity at 31 December Cost of Equity Atlas Iron We have assessed the cost of equity in our assessment of Atlas Iron prior to implementation of the MinRes Scheme to be in the range of 14% to 18% with our preferred value being a rounded midpoint of 16%. Input Value adopted Low High Risk free rate of return 3.00% 3.00% Equity market risk premium 6.00% 8.00% Beta (regeared) Cost of Equity (rounded) 14% 18% Source: Bloomberg and BDO analysis Atlas Iron Limited TARGET'S STATEMENT Page

175 Pilgangoora Minegate Agreement We have assessed the cost of equity in our assessment of the Pilgangoora Minegate Agreement to be in the range of 10% to 14% with our preferred value being a rounded midpoint of 12%. Input Value adopted Low High Risk free rate of return 2.00% 2.00% Equity market risk premium 6.00% 8.00% Beta (regeared) Cost of Equity (rounded) 10% 14% Source: Bloomberg, BDO analysis Altura Royalty We have assessed the cost of equity in our assessment of the Altura Royalty to be in the range of 14% to 19% with our preferred value being a rounded midpoint of 17%. Input Value adopted Low High Risk free rate of return 3.00% 3.00% Equity market risk premium 6.00% 8.00% Beta (regeared) Cost of Equity (rounded) 14% 19% Source: Bloomberg, BDO analysis Weighted Average Cost of Capital The WACC represents the market return required on the total assets of the undertaking by debt and equity providers. WACC is used to assess the appropriate commercial rate of return on the capital invested in the business, acknowledging that normally funds invested consist of a mixture of debt and equity funds. Accordingly, the discount rate should reflect the proportionate levels of debt and equity relative to the level of security and risk attributable to the investment. In calculating WACC there are a number of different formulae which are based on the definition of cash flows (i.e., pre-tax or post-tax), the treatment of the tax benefit arising through the deductibility of interest expenses (included in either the cash flow or discount rate), and the manner and extent to which they adjust for the effects of dividend imputation. The commonly used WACC formula is the post-tax WACC, without adjustment for dividend imputation, which is detailed in the below table: WACC = E K e + D K d (1 t) WACC E+D D+E Where: K e = expected return or discount rate on equity K d = interest rate on debt (pre-tax) T = corporate tax rate E = market value of equity D = market value of debt (1- t) = tax adjustment Atlas Iron Limited TARGET'S STATEMENT Page

176 Cost of Debt The relevant cost of debt for the Pilgangoora Minegate Agreement and Altura Royalty are that of Pilbara Minerals and Altura, respectively, as at 31 December These are summarised in the table below: Cost of Debt Pilgangoora Minegate Agreement 12% Altura Royalty 14% Calculation of WACC Using the inputs above, we have calculated the WACC for the Pilgangoora Minegate Agreement, and the Altura Royalty as set out below. Pilgangoora Minegate Agreement Input Value Adopted Low High Cost of Equity (Ke) 10% 14% Cost of Debt (Kd) (1-t) 8.40% 8.40% Proportion of Equity (E/(E+D) 68% 68% Proportion of Debt (D/(E+D) 32% 32% WACC 9.5% 12.2% Source: BDO analysis The WACC is therefore in the range of 9.5% to 12.2%, with a rounded midpoint value of 11%. Altura Royalty Input Value Adopted Low High Cost of Equity (Ke) 14% 19% Cost of Debt (Kd) (1-t) 9.80% 9.80% Proportion of Equity (E/(E+D) 44% 44% Proportion of Debt (D/(E+D) 56% 56% WACC 11.7% 13.9% Source: BDO analysis The WACC is therefore in the range of 11.7% to 13.9%, with a rounded midpoint value of 13%. Atlas Iron Limited TARGET'S STATEMENT Page

177 Appendix 4 Comparable company descriptions Company name BCI Minerals Limited Grange Resources Limited Mount Gibson Iron Limited Fortescue Metals Group Limited BHP Billiton Limited Company description BCI Minerals Limited, a resources company, engages in the exploration and development of mineral deposits. It explores for iron ore, salt, potash, gold, and base metals. Its principal projects include Buckland iron ore project located in the West Pilbara region of Western Australia; and Mardie salt project located on the West Pilbara coast in the centre of Australia's salt production region. The company was formerly known as BC Iron Limited and changed its name to BCI Minerals Limited in December The company was founded in 2006 and is based in Perth, Australia. Grange Resources Limited engages in the integrated iron ore mining and pellet production business in the northwest region of Tasmania. The company is involved in the mining, processing, and sale of iron ore; and exploration, evaluation, and development of mineral resources at the Southdown Magnetite and related Pellet plant projects. It owns interests in the Savage River magnetite iron ore mine located to the southwest of the city of Burnie. The company is based in Burnie, Australia. Mount Gibson Iron Limited, together with its subsidiaries, engages in the mining, exploration, crushing, development, transportation, and sale of hematite iron ore deposits in Australia. The company primarily operates the Koolan Island hematite mine situated in the Kimberley coast of Western Australia; and the Extension Hill hematite project located in the Mount Gibson range in the midwest region of Western Australia. Mount Gibson Iron Limited was founded in 1996 and is based in West Perth, Australia. Fortescue Metals Group Limited engages in the exploration, development, production, processing, and sale of iron ore in Australia, China, and internationally. It owns and operates the Chichester Hub that consists of the Cloudbreak and Christmas Creek mines located in the Chichester Ranges; and the Solomon Hub comprising the Firetail and Kings Valley mines located in the Hamersley Ranges of Pilbara, Western Australia. The company was founded in 2003 and is based in East Perth, Australia. BHP Billiton Limited discovers, acquires, develops, and markets natural resources worldwide. It operates through four segments: Petroleum, Copper, Iron Ore, and Coal. The company explores for copper, silver, lead, zinc, molybdenum, uranium, gold, and iron ores, as well as metallurgical coal, thermal energy coal, and oil and gas properties. It also engages in the mining, smelting, and refining of nickel; the provision of freight, finance, administrative, trading, marketing, and support services; and potash development activities. The company was formerly known as BHP Limited and changed its name to BHP Billiton Limited in July BHP Billiton Limited was founded in 1851 and is headquartered in Melbourne, Australia. BHP Billiton Limited is a subsidiary of BHP Billiton Group. Atlas Iron Limited TARGET'S STATEMENT Page

178 Company name Rio Tinto Limited Neometals Limited Galaxy Resources Limited Orocobre Limited Pilbara Minerals Limited Altura Mining Limited Company description Rio Tinto Limited engages in finding, mining, and processing mineral resources primarily in Australia and North America. It offers aluminium, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, thermal and metallurgical coal, uranium, silver, molybdenum, sulphuric acid, rhenium, lead carbonate, selenium, ductile iron, steel billets, metal powders, and zircon. The company also operates in Asia, Europe, Africa, and South America. Rio Tinto Limited was incorporated in 1959 and is headquartered in Melbourne, Australia. Neometals Ltd explores and evaluates mineral properties in Australia. It operates through three segments: Lithium, Titanium, and Other. The company explores for lithium, titanium, and vanadium. Its principal assets include the Mt Marion Lithium and Barrambie Titanium projects located in Western Australia. It also provides various processes to extract valuable metals for a range of base, light, and precious metal oxides, as well as for sulphides, intermediates, and waste feeds. The company was formerly known as Reed Resources Ltd. and changed its name to Neometals Ltd in December Neometals Ltd is based in West Perth, Australia. Galaxy Resources Limited engages in the production of lithium concentrate, and exploration of minerals in Australia, Canada, and Argentina. The company holds interests in the Sal de Vida brine project in Argentina; the Mt Cattlin spodumene mine in Western Australia; and the James Bay spodumene project in Quebec, Canada. Galaxy Resources Limited is based in Applecross, Australia. Orocobre Limited explores for and develops lithium and potash deposits in Argentina. Its flagship project is the Salar de Olaroz lithium project located in north-west province of Jujuy. The company also produces boron minerals and refined chemicals. Orocobre Limited is based in Milton, Australia. Pilbara Minerals Limited engages in the exploration, evaluation, and development of mineral resources in Australia. It focuses on the development of Pilgangoora Lithium-Tantalum Project located in the Pilbara region of Western Australia. Pilbara Minerals Limited has a strategic relationship with POSCO Cements. The company is headquartered in West Perth, Australia. Altura Mining Limited engages in the exploration and development of mineral properties in Australia, Indonesia, and internationally. The company operates through Coal Mining, Lithium Mining, Exploration Services, and Mineral Exploration segments. It primarily supplies lithium raw materials. The company focuses on the development of its 100% owned Pilgangoora Lithium project located in the Pilbara region of Western Australia. It also provides drilling services to mining and exploration companies. The company is based in Perth, Australia. Atlas Iron Limited TARGET'S STATEMENT Page

179 Appendix 5 Independent Valuation Report Atlas Iron Limited TARGET'S STATEMENT Page

180 Independent Technical Specialist s Report Technical Assessment, Review of inputs to DCF models, and Valuation of Mineral Assets of Atlas Iron Limited CSA Global Report Nº July Atlas Iron Limited TARGET'S STATEMENT Page 179

181 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Report prepared for Client Name BDO Corporate Finance (WA) Pty Ltd Project Name/Job Code AGOITV02 Contact Name Peter Toll Contact Title Director Office Address 38 Station Street, Subiaco, WA 6008 Report issued by CSA Global Office Division CSA Global Pty Ltd Level 2, 3 Ord Street West Perth, WA 6005 AUSTRALIA PO Box 141, West Perth WA 6872 AUSTRALIA T F E csaausatcsaglobal.com Corporate Report information File name R ITAVR for BDO on Atlas Iron Mineral Assets (AGOITV02).docx Last edited 13/07/ :33:00 Report Status Final Authorised by CSA Global Authorisation Copyright 2018 Jeff Elliott BSc., MAIG, FAusIMM, MAICD, AFAIM Signature: CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 180 I

182 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Executive Summary On 18 th June 2018, Redstone Corporation Pty Ltd ( Redstone ), a wholly owned subsidiary of Hancock Prospecting Pty Ltd ( Hancock ), made an offer for the shares in Atlas Iron Ltd ( Atlas ). Redstone offered A$0.042 per share for all of the ordinary shares in Atlas in which Redstone did not already have a relevant interest. BDO Corporate Finance (WA) Pty Limited (BDO) has been engaged by the Independent Directors of the Company to prepare an Independent Expert s Report ( the IER ) for inclusion with a Target s Statement advising whether in their opinion the takeover offer is fair and reasonable to the Company s shareholders. The Atlas Directors also retained CSA Global Pty Ltd (CSA Global) to prepare an independent opinion on the technical inputs into the Discounted Cash Flow (DCF) models and to undertake a Market Valuation of Atlas s Mineral Assets in Western Australia not included in the DCF models, under instruction from BDO. The DCF valuations were conducted by BDO and informed by CSA Global s review of and commentary on the suitability of the inputs to the DCF models. The scope of the Report, as advised by BDO to CSA Global comprises: Providing an independent opinion on the technical inputs underpinning the financial model for each of the Mount Webber and Corunna Downs projects. A valuation of Atlas s other mineral assets, including the following: o Value of resources not included in the Mount Webber and Corunna Downs models o Material iron assets in the Southeast Pilbara region o The McPhee Creek Project o The Ridley magnetite project o Lithium tenements at Cisco and Pancho o Copper projects at Copper Range and Walker o Gold potential of Atlas s tenure portfolio o The technical inputs for the Pilgangoora direct shipping ore (DSO) spodumene interest o The technical inputs for the Altura Lithium royalty from M45/1231. For each of the operations and development projects reviewed, CSA Global has provided cases including capital and operating cost projections, with DCF models, to BDO. CSA Global concluded that the production cases have a reasonable basis. Atlas currently operates one mine, Mount Webber, in the northern Pilbara, and holds a portfolio of tenements covering a range of identified iron ore Mineral Resources, comprising pre-development projects and less advanced projects, as well as lithium, copper and potentially gold targets. The mining operations considered in this review include the Mount Webber operations and Corunna Downs feasibility study. McPhee Creek is the subject of a completed feasibility study, with mine planning and infrastructure requirements engineered in detail, but the development project has not been committed to as the current iron ore prices do not deliver sufficient cash flows to encourage the development of this project. McPhee Creek has therefore been valued on a resource basis. Considering the high exploration maturity of the Atlas projects, CSA Global considers the potential for additional mineralisation at any of the projects to be moderate to low. Some upside potential has been identified at Corunna Downs which may result in additional resources. Atlas tenement portfolio also covers projects for lithium, copper and gold. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 181 II

183 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The Cisco and Pancho Projects in the Wodgina area cover mapped LCT-type pegmatites hosting spodumene. These pegmatites have yet to be defined or fully explored. The projects could potentially hold lithium pegmatites deposits such as those being mined nearby at Pilgangoora and Wodgina. The focus of the Copper Range and Walker Projects is copper hosted by VMS style mineralisation. Exploration in both areas have identified evidence of mineralisation but much work remains to define resources. Atlas s large tenement portfolio in the Pilbara covers substantial areas of stratigraphy currently being targeted by other companies for gold mineralisation. A substantial area of Atlas Pilbara tenement package covers greenstones with substantial structures interpreted to transect the rock packages. Numerous small gold mineral occurrences are known. A high-level mineral systems review of the tenure identified a number of key criteria for gold deposit formation including suitable structural architecture, evidence of sources and reservoirs for gold and potential trap sites for gold mineralisation. Gold nuggets have been found by numerous parties recently, and also over a long period dating back to the 19 th century, in conglomerates near the Mount Roe Basalt. New theories about the significance and origin of this gold have been proposed, and significant interest in tenements covering the key stratigraphic locations was notable in late The Atlas tenements cover, or are adjacent to, key stratigraphic units associated with the conglomerate gold model. For the purposes of preparing this report, CSA Global has visited the operating sites and projects under development, reviewed material technical reports and management information, and held discussions with management staff both on site and in the Perth offices of Atlas. CSA Global has not visited the exploration projects located away from the operations and projects under development as they are not considered to be material to the overall value of Atlas, and CSA Global concluded it was sufficiently familiar with the project areas that a site visit was not required. CSA Global has not audited the information provided to it but has satisfisfied itself that all the information has been prepared in accordance with proper industry standards and is based on data that CSA Global considers to be of acceptable quality and reliability. Where CSA Global has not been so satisfied, CSA Global has included comment in this report and made modifications to the estimates and forecasts provided by CSA Global to BDO. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 182 III

184 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Valuation Summary CSA Global understand that under BDO s Current Discount Scenario, they have assumed that production at Mount Webber will cease and that Corunna Downs will not be developed. Therefore, BDO has instructed CSA Global to value Mount Webber and Corunna Downs, as well as McPhee Creek, on a resource basis. CSA Global s opinion on the value of the iron ore Mineral Resources of Atlas as at 1 July 2018 is provided in Table 1, assuming that production at Mount Webber will cease and that Corunna Downs is not developed. In the event that Mount Webber and Corunna Downs are mined, CSA Global s opinion on the value of the material iron ore resources not included in the current mine plans, as at 1 July 2018, is provided in Table 2. Table 1: Value of Mineral Assets as at 1 July 2018 Project Low (A$M) High (A$M) Preferred (A$M) Mount Webber Mineral Resources Corunna Downs Mineral Resources McPhee Creek Minerals Resources Ridley Mineral Resources Davidson Creek Hub Mineral Resources Mount Dove ground holding Miralga Creek Mineral Resources West Pilbara (Anthiby) Project Mid West (Beebyn) Project Western Creek Project Hickman Project Jimblebar Project Warrawanda Project Pardoo Project Abydos project Cisco Lithium Project Pancho Lithium Project Copper Range Copper Walker Copper Project Gold potential of the Atlas Pilbara tenements* TOTAL The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur. Note: the Mt Webber & Corunna Downs Mineral asset valuations above are for the full resource base including any residual resources outside the mine plan the value of these residual resources are shown below in Table 2 Table 2: Value of remaining iron ore Mineral Resources outside the current mine plans as at 1 July 2018 Project Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs TOTAL The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur. There is significant range in the values derived for the Company s projects. CSA Global has considered these ranges and concludes that it provides a reasonable representation of possible valuation outcomes for the projects, given the uncertainties inherent in valuing exploration projects. It is stressed that the valuation is an opinion as to likely values, not absolute values, which can only be tested by going to the market. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 183 IV

185 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Contents Report prepared for...i Report issued by...i Report information...i Authorised by...i EXECUTIVE SUMMARY... II Valuation Summary... IV CONTENTS... V 1 2 INTRODUCTION Context, Scope and Terms of Reference Compliance with the VALMIN and JORC Codes Principal Sources of Information Authors of the Report Qualifications, Experience and Competence Prior Association and Independence Declarations Results are Estimates and Subject to Change... 5 IRON PROJECTS Location and Access Ownership and Tenure Agreements and Royalties Geology Mount Webber Corunna Downs McPhee Creek Davidson Creek Miralga Creek Ridley and Pardoo Avalon Point/Abydos East Newman Projects West Newman Projects West Pilbara (Anthiby Well) Mid West (Beebyn) Exploration Summary Mount Webber Corunna Downs McPhee Creek Davidson Creek Miralga Creek Ridley and Pardoo Avalon Point/Abydos East Newman Projects West and North Newman Projects West Pilbara (Anthiby Well) Mid West (Beebyn) Exploration Potential Mount Webber CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 184 V

186 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Corunna Downs McPhee Creek Davidson Creek Miralga Creek Ridley and Pardoo Avalon Point/Abydos East Newman Projects West and North Newman Projects West Pilbara (Anthiby Well) Mid West (Beebyn) Iron Mineral Resources Mount Webber Mineral Resource Estimate Corunna Downs Mineral Resource estimate McPhee Creek Project Mineral Resource Estimate Miralga Creek Project Davidson Creek Hub Project Mineral Resource Estimate Western Creek Project Hickman Project Jimblebar Project West Pilbara Project Warrawanda Project Pardoo Project Abydos Project Mid West Project Ridley Project Mining Site Visit Mining Approach Mine Design Mine Equipment Mine Schedule Waste Mining and Disposal Processing Mount Dove Crushing Operations Ore Blending Haulage Capital Cost Estimates Operating Cost Estimates Corunna Downs Feasibility Study Key physical and financial parameters OTHER PROJECTS Ownership and Tenure Lithium Mount Francisco Project Pancho Project Pilgangoora DSO Spodumene Altura Royalty Copper Copper Range Project Walker Project Gold Potential of Pilbara Portfolio...97 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 185 VI

187 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Balance of Tenement Portfolio...98 VALUATION OF MINERAL ASSETS NOT FORMING PART OF THE DCF MODELS Iron Ore Projects Commodities Market Previous Valuations Valuation Approach Project-Specific Value Drivers Comparative Transactions Valuation Yardstick Order of Magnitude Check Appraised Value (Tenement Holding Costs) Valuation Opinion for Iron Ore Projects Other Projects Summary of valuations REFERENCES GLOSSARY ABBREVIATIONS AND UNITS OF MEASUREMENT APPENDIX 1: VALUATION APPROACHES APPENDIX 2: SUMMARY TENEMENT SCHEDULE APPENDIX 3: COMPARATIVE TRANSACTIONS APPENDIX 4: DETAILED YARDSTICK VALUATION APPENDIX 5: GEOSCIENTIFIC FACTOR METHOD DATA FOR OTHER PROJECTS Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Location of Atlas projects and infrastructure in the Pilbara region of WA... 6 Mount Webber geology and deposit locations... 9 Corunna Downs regional geology Corunna Downs geology and deposit locations McPhee Creek deposit location plan Main Range general geology Crescent Moon cross section Schematic cross sections through Main Range Davidson Creek Project location plan Davidson Creek regional geology plan Robertson Range sectional interpretation Miralga Creek project location plan Sandtrax geology Miralga Creek section Stratigraphic model for Grants Cross section of Sandtrax Miralga Creek West cross section Pardoo Project tenement location plan Regional geology of Avalon Point Mineralised envelope at Avalon Point Source: Johnston, Structure and stratigraphy of Avalon Point Source: Johnston, East Newman Project Location Plan Source: Atlas, McCamey s North geological map West Newman Projects location plan Geology of Anthiby Well CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 186 VII

188 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Figure 40: Figure 41: Figure 42: Figure 43: Figure 44: Figure 45: Figure 46: Figure 47: Figure 48: Section through the Anthiby Well CID (from Louw, 2009) Location of Beebyn deposit Beebyn Geology Mount Webber processing plant Road-train loading Grade bands from April 2018 to August Source: Atlas, Grade bands from August 2018 for LOM. Source: Atlas, Typical quad road-train Corunna Downs location Location of Corunna Downs Mineral Resources Location of the Cisco and Pancho Projects Simplified Geological Map of the Cisico and Pancho Projects, Pancho pegmatite targets Copper Range Project location and simplified geology Source: Atlas, Copper Range Project geology and exploration targets Copper Range RCP drilling in December Walker Prospect location Iron ore price history Iron ore pricing Jan15 Feb18, and Fe grade discount Continuing discount for low-grade iron ore Comparative grade and quality of the Atlas projects Location of Atlas projects Source: Atlas, Location of Atlas Pilbara projects Source: Atlas, Tables Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Table 26: Table 27: Table 28: Table 29: Table 30: Value of Mineral Assets as at 1 July IV Value of remaining iron ore Mineral Resources outside the current mine plans as at 1 July IV Drilling completed at Corunna Downs Pardoo drill summary Atlas DSO hæmatite Mineral Resource estimate by project, 31 March Atlas magnetite Mineral Resource estimate, 31 March Mount Webber Mineral Resource estimate, 31 March Mount Webber drillhole database Corunna Downs Mineral Resource estimate, 31 March Corunna Downs drillhole database Corunna Downs sample search neighbourhoods (grade estimation) McPhee Creek Mineral Resource estimate, 31 March Miralga Creek Mineral Resource estimate, 31 March Davidson Creek Hub Project Mineral Resource estimate, 31 March Davidson Creek Hub Project Mineral Resource estimate, 31 March Western Creek Project Mineral Resource estimate, >50% Fe, 31 March Hickman Project Mineral Resource estimate, >50% Fe, 31 March Jimblebar Project Mineral Resource estimate, >50% Fe, 31 March West Pilbara Project Mineral Resource estimate, >50% Fe, 31 March Warrawanda Project Mineral Resource estimate, >53% Fe, 31 March Pardoo Project Mineral Resource estimate, >53% Fe, 31 March Abydos Project Mineral Resource estimate, >50% Fe, 31 March Mid West Project Mineral Resource estimate, >50% Fe, 31 March Ridley Mineral Resource estimate (DTR and head grades), 31 March Ridley Mineral Resource estimate (concentrate grades), 31 March Mount Webber mining and processing LOM schedule (including process at Mount Dove) Mount Webber operating cost estimate (real 2018) Corunna Downs Corporate Model Corunna Downs operating cost estimate (2018 real) Product specifications for Platts Indices CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 187 VIII

189 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 31: Table 32: Table 33: Table 34: Table 35: Table 36: Table 37: Table 38: Table 39: Table 40: Table 41: Table 42: Table 43: Table 44: Table 45: Table 46: Table 47: Table 48: Table 49: Table 50: Table 51: Table 52: Table 53: Table 54: Table 55: Table 56: Table 57: Table 58: Table 59: Table 60: Table 61: Table 62: Table 63: Table 64: Table 65: Table 66: SNL commodity consensus pricing, 62% Fe BDO Iron ore price forecasts (nominal) Previous transactions involving the Atlas mineral assets Valuation basis and methods employed Project-specific discount/premium factors Summary of analysis of WA DSO iron ore Comparative Transactions Undiscounted valuation of DSO iron ore resources considering Comparative Transactions Discounted Valuation of DSO iron ore resources considering Comparative Transactions Undiscounted valuation of resources outside of the Webber & Corunna financial model Discounted Valuation of resources outside of Webber & Corunna financial models Summary of analysis of WA magnetite iron ore Comparative Transactions Undiscounted Valuation of Ridley magnetite project using Comparative Transactions Discounted Valuation of Ridley magnetite project using Comparative Transactions Summary of Yardstick order of magnitude crosscheck Yardstick Valuation of resources outside the Mount Webber and Corunna Downs financial models Valuation of Atlas projects considering Appraised Value Value of Atlas iron ore Mineral Resources Value of remaining iron ore Mineral Resources post current mine plan completion Summary valuations of key other projects, as at 1 July Value ofmineral Assets as at 1 July Value of remaining iron ore Mineral Resources outside the current mine plans as at 1 July Prospectivity Enhancement Multiplier (PEM) factors Geoscience Factor ranking Valuation approaches for different types of mineral properties (VALMIN, 2015) Company Codes used in tenement schedule Comparative WA DSO iron ore transactions Comparative WA DSO iron ore transactions analysed Comparative Australian magnetite iron ore transactions Comparative Australian magnetite iron ore transactions analysed Comparative Australian copper exploration asset transactions analysed Comparative Western Australian lithium exploration asset transactions analysed Comparative transactions of exploration ground prospective for gold in Australia Yardstick crosscheck on total Resources Yardstick crosscheck for remaining Resources outside of current mine plans Weightings for Key Copper and Lithium Projects BAC for WA, April CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 188 IX

190 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 1 Introduction 1.1 Context, Scope and Terms of Reference Atlas Iron Limited (Atlas) is a Perth-based mining company that is listed on the Australian Securities Exchange (ASX). Atlas s key assets are the Mount Webber, Corunna Downs and McPhee Creek iron ore projects in Western Australia (WA). On 18 June 2018, Redstone Corporation Pty Ltd ( Redstone ), a wholly owned subsidiary of Hancock Prospecting Pty Ltd ( Hancock ), made an offer for the shares in Atlas. Redstone offered A$0.042 per share for all of the ordinary shares in Atlas in which Redstone did not already have a relevant interest. BDO Corporate Finance (WA) Pty Limited (BDO) has been engaged by the Independent Directors of the Company to prepare an Independent Expert s Report ( the IER ) for inclusion with a Target s Statement advising whether in their opinion the takeover offer is fair and reasonable to the Company s shareholders. CSA Global Pty Ltd (CSA Global) was in turn commissioned by BDO to prepare an independent opinion on the technical inputs into the Discounted Cash Flow (DCF) models and undertake a Market Valuation of Atlas s Mineral Assets in WA not included in the DCF models ( CSA Global Report or the Report ) in accordance with the requirements of the VALMIN Code The DCF valuations were to be conducted by BDO, informed by CSA Global s review of and commentary on the suitability of the inputs to the DCF models. BDO will rely on, and the BDO Report will refer to, the CSA Global valuation opinion, and a copy of the CSA Global Report will be appended to the BDO Report. The BDO Report will provide an opinion to Atlas s shareholders, and as such it will be a public document. CSA Global will provide its consent to the use of the Report in the form and context in which it will be published. The Report is a Technical Assessment and Valuation subject to the VALMIN Code. The Report contains a technical appraisal of Atlas s Mineral Assets in WA, including geological and mining aspects. A valuation of the assets outside of the current mine plans was also completed. CSA Global used a range of valuation methodologies to reach a conclusion on the value of the assets. The scope of the Report, as advised by BDO to CSA Global, comprises: Providing an independent opinion on the technical inputs underpinning the financial model which includes the following for each of the Mount Webber and Corunna Downs projects: o The level of resources and reserves o Mining physicals (including tonnes of ore mined, quality, waste material and mine life) o Processing assumptions and costs o Production profiles o Operating expenditure o Capital expenditure o Any other relevant technical assumptions not specified above. A valuation of Atlas s other mineral assets, including the following: o Value of resources not included in the Mount Webber and Corunna Downs models o Material iron ore assets in the Southeast Pilbara region o The McPhee Creek Project o The Ridley magnetite project 1 Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (The VALMIN Code) 2015 Edition. Prepared by the VALMIN Committee, a joint committee of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 189 1

191 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets o Lithium tenements at Cisco and Pancho o Copper projects at Copper Range and Walker o Gold potential of Atlas s tenure portfolio o The technical inputs for the Pilgangoora direct shipping ore (DSO) spodumene interest o The technical inputs for the Altura Lithium royalty from M45/ Compliance with the VALMIN and JORC Codes The Report has been prepared in accordance with the VALMIN Code, which is binding upon Members of the Australian Institute of Geoscientists (AIG) and the Australasian Institute of Mining and Metallurgy (AusIMM), the JORC Code2 and the rules and guidelines issued by such bodies as the ASIC and ASX that pertain to Independent Experts Reports. The authors have taken due note of the rules and guidelines issued by such bodies as ASIC and ASX, including ASIC Regulatory Guide 111 Content of Expert Reports, and ASIC Regulatory Guide 112 Independence of Experts. 1.3 Principal Sources of Information The Report has been based on information available up to and including 3rd July The information was provided to CSA Global by Atlas, or has been sourced from the public domain, and includes both published and unpublished technical reports prepared by consultants, and other data relevant to Atlas s projects. The authors have endeavoured, by making all reasonable enquiries within the timeframe available, to confirm the authenticity and completeness of the technical data upon which the Report is based. Mr Karl Van Olden of CSA Global undertook a site visit to the Mount Webber and Mount Dove operations on 4 May 2018, as detailed in Section of this Report. CSA Global personnel have not undertaken a site visit to Atlas s non-operating assets, as there are no current operations to observe, and no additional information material to its assessment would be gained from a site visit. CSA Global Principal Consultants Mark Pudovskis and Ilmar Tehnas have both worked at the Yarrie/Shay Gap/Nimingarra/ operations for BHP and are both very familiar with the Cleaverville Formation and its mineralisation style, which does not vary greatly throughout the Pilbara. They have also visited BHP s Ord-Ridley deposits near Goldsworthy, adjacent to Atlas Ridley deposit which has similar geology (Cleaverville Formation). They have both also worked extensively for over 10 years in the Newman area for BHP and are familiar with the mineralisation styles exhibited by the Marra Mamba Iron Formation, particularly at South Jimblebar and the areas west of Newman. These mineralisation styles do not change in adjacent deposits. The desktop data that they have examined indicates that the mineralisation on the Atlas tenements is similar to that in the nearby BHP tenements which can be considered to be analogous deposits. Tenement information on the Western Australian Mineral Assets was provided by McMahon Mining Title Services (MMTS); details are provided in Section 2.2. CSA Global relies on the independent opinion of MMTS dated 30 June 2018, with regards to the validity, ownership and good standing of Atlas s tenements. CSA Global makes no other assessment or assertion as to the legal title of the tenements and is not qualified to do so. 2 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code) 2012 Edition. Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC). CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 190 2

192 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 1.4 Authors of the Report Qualifications, Experience and Competence The Report has been prepared by CSA Global, a privately-owned consulting company that has been operating for over 30 years; with its headquarters in Perth, WA. CSA Global provides multidisciplinary services to a broad spectrum of clients across the global mining industry. Services are provided across all stages of the mining cycle from project generation, to exploration, resource estimation, project evaluation, development studies, operations assistance, and corporate advice, such as valuations and independent technical documentation. The information in this Report that relates to Technical Assessment of Mineral Assets reflects information compiled and conclusions derived by Mr Ilmar Tehnas and Mr Mark Pudovskis, who are both Members of the Australasian Institute of Mining and Metallurgy. Mark and Ilmar are not related parties or employees of Atlas. Ilmar and Mark have sufficient experience relevant to the Technical Assessment of the Mineral Assets under consideration and to the activity which they are undertaking to qualify as a Practitioner as defined in the 2015 edition of the Australasian Code for the Public Reporting of Technical Assessments and Valuations of Mineral Assets. Mark and Ilmar consent to the inclusion in the Report of the matters based on their information in the form and context in which it appears. CSA Global Principal Geologist Ilmar Tehnas (BAppSc (Geology), MAusIMM) is a highly experienced iron ore specialist, widely acknowledged as an authority on the iron ores of the Pilbara with over 35 years experience. In his career with BHP Billiton Iron Ore and its predecessor companies his focus was on the acquisition and evaluation of a world-class iron ore tenement portfolio in the Pilbara of Western Australia. In that time he acquired expert level knowledge of Australian, and global, iron ore geology, with roles in exploration, evaluation, resource estimation, mine geology, business development, technical services, as well as auditing and training. CSA Global Principal Geologist Mark Pudovskis (BSc (Geology), MSEG, MAusIMM) is a geologist with over 20 years multi-commodity (Fe, K, Mn, Al, U, Cu, Pb, Zn, Ag, Au), global experience across a variety of geological terranes, with specialist expertise in exploration and evaluation of iron ore, manganese and potash deposits. In his role as BHP Billiton s Global Iron Ore Commodity Specialist he worked on over 100 iron deposits with significant experience in West Africa and Latin America. He also led BHPB s manganese exploration efforts in Australian (East Arnhem Land) and Gabon, as well as potash projects in Canada (Saskatchewan) and Gabon. The valuation of Mineral Resources and Exploration Properties was completed by CSA Global Principal Consultant, Mr Trivindren Naidoo, MSc (Exploration Geology), Grad.Cert (Mineral Economics), FGSSA and MAusIMM. Trivindren is a consulting geologist with over 19 years experience in the minerals industry, including 13 years as a consultant. He has an extensive background in mineral exploration, and specialises in due diligence reviews, project evaluations and valuations, as well as code-compliant reporting. Trivindren s knowledge is broad-based, and he has wide-ranging experience in the field of mineral exploration and resource development, having managed or consulted on various projects ranging from first-pass grassroots exploration to brownfields exploration and evaluation. Trivindren has the relevant qualifications, experience, competence, and independence to be considered a Specialist under the definitions provided in the VALMIN Code and a Competent Person as defined in the JORC Code. The valuation of Mineral Resources and Exploration Properties was peer reviewed by CSA Global Principal Consultant, Mr Sam Ulrich, BSc (Hons) Geology, GDipAppFinInv, MAusIMM, MAIG, FFin. Sam has 20 years experience in gold, copper and uranium mineral exploration, resource development and more recently in consulting undertaking independent valuation and geological reporting. Sam is a VALMIN specialist having undertaken valuations for Independent Experts Reports, stamp duty assessments, due diligence, and asset impairments in numerous commodities for projects worldwide, he specialises in the valuation of non-producing mineral assets. He has also undertaken Independent Geological Reports (IGR) for IPO s. Sam has the relevant qualifications, experience, competence, and independence to be considered a Specialist under the definitions provided in the VALMIN Code and a Competent Person as defined in the JORC Code. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 191 3

193 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The information in this Report that relates to the Technical Assessment of Mineral Resources was completed by CSA Global Principal Consultant, Ms Maria O Connor, MAIG, MAusIMM. Maria is an experienced resource geologist with skills in resource estimation, feasibility studies, project evaluations, resources auditing, due diligence studies, exploration geology, grade control, technical reporting and provision of training. Key areas of focus include geostatistical modelling, creating and maintaining geological and resource models, sensitivity analyses, quality assurance/quality control (QAQC) and coordinating transfer of skills emphasising a high degree of collaboration and up-skilling with clients. Maria has the relevant qualifications, experience, competence and independence to be considered a Competent Person relevant to the style of mineralisation and type of deposit described in the Report, as defined in the JORC Code. Technical aspects of this Report concerning mining matters have been prepared by CSA Global Principal Engineer, Mr Karl Van Olden, FAusIMM, MAICD. Karl is a mining engineer with 25 years experience in planning, development and operation of a diverse range of open pit and underground resource assets across Africa and Australia. Karl s broad expertise includes mining engineering, business process development, business and mine planning, Ore Reserves, financial analysis and project management. His experience has been gained from operating assets, driving technical excellence within major gold producing companies and global consulting roles, providing a deep understanding of the key drivers for success in the resource industry. Karl has the relevant qualifications, experience, competence and independence to be considered an Expert under the definitions provided in the VALMIN Code and a Competent Person as defined in the JORC Code. Technical aspects of this Report concerning mining matters have been peer reviewed by CSA Global Principal Engineer, Mr Kent Bannister, BEng (Mining) ARMIT, FAusIMM (CP). Kent has over 40 years experience in iron ore, base metals, gold, uranium, manganese, mineral sands and nickel projects worldwide. Kent has held various managerial positions from General Manager to Company Director. Kent has provided consulting services since 1988 and has undertaken, lead or managed over 500 mineral project studies, evaluation and due diligence studies for Australian and international companies. The reviewer of the Report is CSA Global Managing Director, Principal Consultant, Mr Jeff Elliott, BSc (Geology), FAusIMM, MAIG, MAICD, AFAIM. Jeff has over 23 years experience in the mining industry during which time he has developed broad capabilities in project evaluation, exploration, resource development and mining for a wide variety of commodities in diverse geological settings and locations. He has significant technical experience in exploration, project assessment, technical valuations, independent reporting and corporate advice. He also has strong financial, business management, communication, and strategy development and implementation skills. Jeff has the relevant qualifications, experience, competence and independence to be considered an Expert under the definitions provided in the VALMIN Code and a Competent Person as defined in the JORC Code. 1.5 Prior Association and Independence The authors of this Report have no prior association with Atlas in regard to the Mineral Assets, with the exception of Ridley. CSA Global was involved in the initial drill out of the Ridley deposit prior to The Competent Person for the Ridley Mineral Resource estimate is Mr Malcolm Titley, who was a full-time employee of CSA Global when the Mineral Resource estimate was prepared. CSA Global s current review of the Ridley Mineral Resource was undertaken by current personnel who have not been previously involved in the project. CSA Global notes that a draft technical specialists report was prepared in May 2018 but not finalised by CSA Global for BDO in relation a scheme of arrangement between Atlas Iron and Mineral Resources; this draft material was used in the preparation of this Report. CSA Global used new internal peer reviewers, who had no previous involvement with the draft report for the scheme booklet, to check and review the current document. Based on our internal checks, neither CSA Global, nor the authors of this Report, have or have had previously, any material interest in Atlas or the mineral properties in which Atlas has an interest. CSA Global s relationship with Atlas is solely one of professional association between client and independent consultant. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 192 4

194 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets CSA Global is an independent geological consultancy. This Report is prepared in return for professional fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this Report. The fee for the preparation of this Report is approximately A$38,000, the cost of the draft material prepared in relation to the Atlas-MinRes scheme booklet was A$133,000. No member or employee of CSA Global is, or is intended to be, a director, officer or other direct employee of Atlas. No member or employee of CSA Global has, or has had, any material shareholding in Atlas. There is no formal agreement between CSA Global and Atlas to CSA Global conducting further work for Atlas. 1.6 Declarations The statements and opinions contained in this Report are given in good faith and in the belief that they are not false or misleading. The Report has been compiled based on information available up to and including the date of the Report. The statements and opinions are based on the reference date of 3 July 2018 and could alter over time depending on exploration results, mineral prices and other relevant market factors. The opinions expressed in the Report have been based on the information supplied to CSA Global by Atlas. The opinions in the Report are provided in response to a specific request from Atlas to do so. CSA Global has exercised all due care in reviewing the supplied information. Whilst CSA Global has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. CSA Global does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them. Opinions presented in the Report apply to the site conditions and features, as they existed at the time of CSA Global s investigations, and those reasonably foreseeable. These opinions do not necessarily apply to conditions and features that may arise after the date of the Report, about which CSA Global had no prior knowledge nor had the opportunity to evaluate. CSA Global s valuations are based on information provided by Atlas and public domain information. This information has been supplemented by making all reasonable enquiries, to confirm the authenticity and completeness of the technical data. No audit of any financial data has been conducted. The valuations discussed in the Report have been prepared at a valuation date of 1 July It is stressed that the values are opinions as to likely values, not absolute values, which can only be tested by going to the market Results are Estimates and Subject to Change The interpretations and conclusions reached in this Report are based on current scientific understanding and the best evidence available to the authors at the time of writing. It is the nature of all scientific conclusions that they are founded on an assessment of probabilities and, however high these probabilities might be, they make no claim for absolute certainty. The ability of any person to achieve forward-looking production and economic targets is dependent on numerous factors that are beyond CSA Global s control and that CSA Global cannot anticipate. These factors include, but are not limited to, site-specific mining and geological conditions, management and personnel capabilities, availability of funding to properly operate and capitalise the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation and new industry developments. Any of these factors may substantially alter the performance of any mining operation. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 193 5

195 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 2 Iron Projects Atlas currently operates one mine, Mount Webber, in the northern Pilbara, and holds a portfolio of tenements covering a range of identified iron Mineral Resources, comprising pre-development projects and less advanced projects, as well as lithium, copper and potentially gold targets. CSA Global understands that BDO will value the current and planned operations of the Mount Webber and Corunna Downs projects using DCF models. The technical assessments documented in this Report have been conducted to support the valuation of these mineral assets, as well as the mineral assets outside of the current mine plans. The focus has been in assessing risks to the value of the projects, as well as identifying the potential for upside value. The valuation of these assets is on the basis of current market value, i.e. what a willing buyer, acting without compulsion, would pay for these assets now. 2.1 Location and Access The location of Atlas s projects in the Pilbara region of WA is shown in Figure 1. Figure 1: Location of Atlas projects and infrastructure in the Pilbara region of WA Source: Atlas CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 194 6

196 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 2.2 Ownership and Tenure CSA Global relies on the independent opinion of MMTS, as stated in their letter to Atlas entitled Atlas Iron Limited Tenure Review and dated 10 May 2018, and subsequently updated by to note that apart from a small number on non material surrnders the tenement portfolio remains the same as the 10/5/18 review (see Appendix 2), with regards to the validity, ownership and good standing of the Atlas tenure for material projects. MMTS confirms that the tenements are current and are in good standing, with the exception of E45/2517-I which is in fair standing. 3. CSA Global makes no other assessment or assertion as to the legal title of the tenements and is not qualified to do so. A summary tenement schedule, as provided by Atlas, is presented in Appendix 2 of this Report Agreements and Royalties Royalties Payable Atlas has standard obligations to pay royalties under Native Title agreements and the Mining Act. In relation to the Mount Webber mine: Atlas must pay a 0.3% FOB sale royalty to Altura Mining (Altura) on Mount Webber production in months when the Platts 62% iron ore index price is greater than A$95.4 The royalty expires once Atlas has extracted 28 Mt from the Mount Webber mine in aggregate (expected to occur later this year). In the unlikely event that Atlas significantly increases its reserve on M45/1197 at Mount Webber, Atlas will need to make a payment to Haoma of A$1.375 (indexed for inflation) for each reserve tonne in excess of 24 Mt (applicable reserve on this tenement is currently 21 Mt, inclusive of mining to date).5 In relation to the Corunna Downs Project: Atlas must pay Gondwana A$250,000 on first production from Corunna Downs. If Atlas extracts over 30 Mt of iron ore, Atlas must pay a royalty to Gondwana of A$1.13/t for all iron ore sold in excess of 30 Mt, CSA Global understands that this royalty has been assigned to Ochre Group Holdings Ltd. Atlas owes a royalty of A$0.13/t for all iron ore sold to Adelaide Prospecting. Certain other contractual royalties exist over Atlas s undeveloped projects, but these are not currently considered material, as they would only become relevant if a decision was made to develop the relevant projects. Royalties Receivable Atlas owns a 5% gross sales royalty over M45/1231, which covers the majority of Altura s Pilgangoora Project. Atlas holds royalties over Forge/BBI s Balla Balla Project as follows 4% gross sales for iron in magnetite capped at 5.5Mt of contained Fe, then 1% gross sales for iron in magnetite capped at 36Mt of contained Fe 4% gross sales for TiO2 in ilmenite capped at 200,000t of contained TiO2, then 1% gross sales for TiO2 in ilmenite capped at 1.2Mt of contained TiO2. BBI Group are currently focussing on developing a railroad and port. There appear to be no near-term plans to develop the Balla Balla Project. CSA Global did not have access to any information regarding the financial and technical viability of the project. Given the lack of information, and lack of clarity over the project timing, CSA Global has concluded that there is no reasonable basis to form any valuation conclusions about the Balla Balla royalties. 3 Fair standing is due to the minimum statutory expenditure requirement not yet being met, but it is deemed unlikely to risk the licence See ASX release dated 24 December 2014, which refers to a 1% royalty on Altura s notional 30% share of production. 5 See ASX release dated 26 March 2012, which refers to a payment of A$5.50/t for Haoma s notional 25% share. 4 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 195 7

197 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas holds certain other royalties over third party tenements arising from historical divestments, but these are not considered material in the context of the current value of the company. 2.3 Geology Mount Webber Deposit Geology The Mount Webber Project consists of three deposits (see Figure 2): Gibson/Daltons one deposit split on a tenement boundary; Fender located to the southwest on the same banded iron formation (BIF) unit as Gibson/Daltons; and Ibanez located slightly to the west of Gibson on a parallel BIF outcrop. The Project is located within the Archaean age Granite greenstone terrane of the Pilbara Craton, with the deposits occurring within the Gorge Creek and Sulphur Springs Groups of the Pilbara Supergroup (Slomp, 2017). Complex folding and faulting have resulted from the deposits being located between two large granitoid complexes the Shaw Granitoid Complex to the east and the Yule Granitoid Complex to the west (Hermawan, 2013). The deposits are hosted within the Pincunah Banded Iron Member (Hickman, 2013) of the Kangaroo Caves Formation. The Pincunah Banded Iron Member comprises red-black BIF, chert, tuff, siltstone and shale and is unconformably underlain by the Warrawoona Group mafic and ultramafic lithologies. The BIF and chert of the Pincunah Banded Iron Member form steep-sided ridges with flat-topped summits. The Pincunah Banded Iron Member has been informally divided into Upper and Lower BIF units separated by a thin chert unit. A geological map of the Mount Webber project area by Crossing (2008) (Figure 2) that was included in the resource report (Hermawan, 2013) does not differentiate these separate units, nor does it show the location of surface mineralisation. One dolerite intrusive has been identified in the Fender deposit that cuts the entire sequence, but this has had no apparent effect on the mineralisation. Mineralisation The mineralisation has been recorded as predominantly gœthite with minor hæmatite (Hermawan, 2013). The mineralisation occurs as lenses of varying sizes ranging from 10 m to 15 m wide to several hundred metres wide and over a kilometre long and occurs in both the Upper and Lower BIF units, although the majority is within the Upper BIF unit. The mineralisation in the Lower BIF unit is thought to be poddy and laterally inconsistent, and consequently of lower prospectivity. The mineralisation has a hard-cap that varies from 10 m to 30 m in depth. It is believed by Atlas that the mineralisation was formed by supergene processes only. This is borne out by the grade and distribution of the bulk of the mineralisation. However, a brief review of the chemistry of Gibson/Daltons revealed the presence of mineralisation that may have a different origin. For example, MWGC0625 contained an interval from 20 m to 60 m grading 63.3% Fe, 0.086% P and 6.15% loss on ignition (LOI). Individual samples had higher grades the interval m contained 65.64% Fe, 0.07% P and 3.95% LOI, indicating this sample had major hæmatite. This was repeated in numerous other holes. Whether this can be separated as a mineable unit could not be determined by this review. The grades are not high enough to definitively suggest a metamorphic origin for some of this material (likely to be martite-gœthite); however, this cannot be totally rejected either. The overall iron grade for the Gibson/Daltons resource (all categories) has been quoted as 57.9% Fe, 0.09% P and 8.3% LOI. The majority of the holes were between 40 m and 80 m deep, with several extending below 100 m. The deepest hole recorded was 120 m. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 196 8

198 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets A review of the Ibanez database revealed shallower holes, the majority ranging between 30 m and 60 m deep with several deeper than 100 m. The bulk of the mineralisation was goethitic, with minimal hæmatite. A few holes intersected higher grades, e.g. MWRC0933 which averaged 63.3% Fe, 0.094% P and 5.79% LOI for the 36 m intersection between 22 m and 58 m. This is most likely a martite-gœthite rather than having a metamorphic origin. Daltons Ibanez Gibson Fender Figure 2: Mount Webber geology and deposit locations (after Crossing 2008) CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page 197 9

199 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Structure The mineralisation occurs in synclinal fold closures where the BIF is thickened by intraformational folding, with the synclines corresponding to the topographic highs and the valleys to eroded antiformal hinges. Tight folding at Gibson/Daltons is believed to reflect a second folding phase which refolded the hinge of the syncline back on itself (Hermawan, 2013). Ibanez contains the largest of the synclinal keels and the geological mapping indicates a steeply dipping stratigraphy; however, the interpretation by Atlas indicates this is not consistent with depth (Hermawan, 2015). This is also the case for the other deposits and indicates that surface dips can be misleading Corunna Downs Deposit Geology The Corunna Downs Project comprises five separate deposits: Split Rock, Shark Gully, Glen Herring, Razorback and Runway, within M45/1257. The project area is located within the Kelly and Coongan greenstone belts of the East Pilbara Craton, between the Shaw and Corunna Downs granitoid complexes (Figure 2). The deposits are located in the Cleaverville Formation of the Gorge Creek Group (Figure 3). The Cleaverville Formation hosted high-grade (+60% Fe) deposits at Goldsworthy, Shay Gap, Yarrie and Nimingarra that were mined as early as 1966 but are now closed. The Cleaverville Formation comprises metamorphosed BIF and cherty BIF together with some interbedded siltstone and chert units and outcrops as a northeast trending plateau extending for some 20 km (Hermawan, 2016). To the north, the Cleaverville Formation and Warrawoona Group are unconformably overlain by the Mount Roe Basalt (the basal unit of the Fortescue Group) and sandstones with beds of conglomerate of Croydon Group, Lalla Rookh Sandstone (Figure 4). Mineralisation The majority of the mineralisation at Corunna Downs is gœthitic near surface and has probably been formed by supergene processes. This is reflected in the chemistry, which indicates that an overall grade of between 55% Fe and 57% Fe is dominant in the area. The deposits have a hard-cap (hydrated zone) dominated by vitreous gœthite extending to approximately 30 m in some places. There are some indications that a higher grade, metamorphic mineralisation (hypogene or hydrothermal) may be present. At the Runway deposit, zones of hydrothermal breccia have been identified within the BIF, which may indicate that hypogene alteration of the protolith has occurred. An examination of the chemistry of the deposits indicates that this has not resulted in major post-mineralisation alteration of gœthitic mineralisation to hæmatite (as has occurred elsewhere). Zones of hæmatitic mineralisation were identified at Split Rock (e.g. CDRC0061, grading 61.1% Fe, 0.130% P and 5.6% LOI from 14 m to 48 m) and Glen Herring (e.g. CDRC0366, grading 62.7% Fe, 0.078% P and 7.8% LOI from 64 m to 104 m). However, these zones were rare, and apart from a few isolated grades above 60% Fe, most were lower grade. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

200 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 3: Corunna Downs regional geology Source: Warner and Hermawan, 2016 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

201 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 200 Figure 4: Corunna Downs geology and deposit locations (after Hermawan, 2016)

202 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Structure The structure of the Corunna Downs deposits is complex, with four deformation phases recognised (Hermawan, 2016). These are termed D1 to D4, respectively: D1: North to north-northeast trending, tight steeply plunging folds associated with bedding plane parallel shear zones. This is the dominant deformation structure across Corunna Downs. D2: Sub-vertical tight southeast-trending Z folds. D3: Reactivation of a series of northeast-southwest trending faults which offset the earlier Warrawoona Group volcanics and Euro Basalt of the Kelly Group. Believed to relate to the mineralisation. D4: Major north-south faulting that offset the D3 structures. One of these offsets the mineralisation at Runway and a second fault offsets the Cleaverville Formation in the north, separating the Glen Herring deposit from the rest of the deposits McPhee Creek Deposit Geology The McPhee Creek Project comprises three deposits (Figure 5): Crescent Moon; Main Range; and Main Range West. All three deposits are located on M45/1243. The tenement was granted for 21 years and expires on 27 April 2035 after conversion from E46/733. Crescent Moon Crescent Moon is a shallow channel iron deposit (CID) overlying sandstones, siltstones and shales of the Archaean age Corboy Formation of the Gorge Creek Group. The CID has an average thickness of approximately 18 m and is consequently entirely hard-capped, as reflected in the elevated SiO2 and Al2O3 grades (7.1% SiO2 and 6.27% Al2O3). The CID has not been stratigraphically subdivided; the resource model has two domains pisolite and shale basement and is based entirely on grade (Lo, 2013). Main Range The Main Range deposit is hosted by the Cleaverville Formation of the Archaean age Gorge Creek Group within the Sandy Creek Syncline. In the core of the Sandy Creek Syncline, the Cleaverville Formation conformably overlies the Farrel Quartzite. The Cleaverville Formation comprises BIF, chert and siltstone. To the southeast, the Cleaverville Formation is faulted against lithologies of the underlying Warrawoona Group, principally carbonaceous shales, siltstones, quartzite and volcanics. To the west, the BIF sequence is bounded by chert and shale. Figure 6 shows the general geology of the Main Range deposit (Goldsworthy et al., 2011). Main Range West The deposit is also known as McPhee Creek West and is in a similar geological setting to Main Range. It consists of a series of Cleaverville Formation BIF, chert and shale in a northwest-southeast trending syncline, offset from the Main Range by a north-south trending fault (Figure 5). Both Lower and Upper BIF units of the Cleaverville Formation have been identified (Hermawan, 2013). CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

203 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 202 Figure 5: McPhee Creek deposit location plan

204 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 6: Main Range general geology Source: Goldsworthy et al., 2011 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

205 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mineralisation Crescent Moon The mineralisation is described as goethitic CID (Lo, 2013) which is confirmed by the high LOI of >10% (Table 12). A cross section of the deposit (from Sweeny, 2013) is shown in Figure 7. The resource is low grade (Table 12) and would not likely be a saleable as a stand-alone product in It would need to be either beneficiated or blended with higher grade/low impurity product. However, experience elsewhere throughout the Pilbara has indicated that the upgrading of CID through beneficiation is not effective. Typically, the alumina in the form of clays is bound either within or surrounding the ochrous gœthite and gœthite composition of the CID. The alumina is not present as distinct shale bands as seen within the Brockman Iron Formation martite-gœthite style ores which are able to be upgraded by simple crushing screening and washing processes. Figure 7: Crescent Moon cross section (after Sweeney, 2013) Main Range The mineralisation is dominated by gœthite, with minor hæmatite (as martite). Petrographic examination of core samples (Teale, 2011) indicated that the mineralisation is entirely supergene with a substantial hard-cap dominated by goethitic void filling. There was no sign of any metamorphic alteration or late stage hydrothermal hæmatite. The resource (Measured, Indicated, Inferred) as shown in Table 12 confirms the goethitic nature of the mineralisation (elevated LOI). Mineralisation was recorded in both the Lower BIF and the Upper BIF units of the Cleaverville Formation. Main Range West Main Range West is similar to Main Range, in that the mineralisation is gœthite dominated. It occurs in three separate zones termed the southern, central and northern zone. The northern zone is entirely hard-cap, whereas the southern and central zones have been interpreted to contain both hard-cap and primary mineralisation. Mineralisation occurs in both the Lower BIF and Upper BIF units of the Cleaverville Formation. Table 12 outlines the resource of Main Range West. The LOI analyses confirm the goethitic nature of the mineralisation and a review of the database showed that no mineralisation over 60% Fe was present. The origin of the mineralisation is likely to be supergene. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

206 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Structure Crescent Moon The deposit is a small, flat lying channel bound mesa approximately 1.6 km long, 140 m wide and with an average depth of 18 m. Main Range The Sandy Creek Syncline dominates the structure of the Main Range deposit (Figure 8). It extends over a strike of approximately 7.3 km and varies from 60 m to 1,000 m wide. It is truncated to the northeast by a fault system. The deposit has been interpreted to be overprinted by extensive late stage brittle faulting (Lo, 2013). Figure 8: Schematic cross sections through Main Range (after Lo, 2013) CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

207 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Main Range West The structure of Main Range West has been described as a syncline plunging at approximately 40 to the northeast and southwest (Hermawan, 2013), similar to Main Range. It is separated from Main Range by a northtrending fault Davidson Creek The Davidson Creek hub (Jigalong Project) comprises four deposits (Figure 9): Davidson Creek; Miji Miji; Robertson Range (also known as King Brown); and Mirrin Mirrin. They have all been interpreted as Marra Mamba Iron Formation stratigraphy of the Hamersley Basin forming a west to east to southwest trending arc. Deposit Geology As asserted by Stewart (2015), The Jigalong Project lies along the eastern margin of the Sylvania Inlier (Figure 9) on the Robertson SF : geological map sheet. The granite-greenstone basement rocks of the Sylvania Inlier are unconformably overlain by stratigraphy of the Hamersley Basin. The Hamersley Basin is a late Archaean to early Proterozoic depositional basin covering most of the southern portion of the Pilbara Craton. The basal stratigraphic unit is the mafic-volcanic dominated Fortescue Group. The Hamersley Group conformably overlies the Fortescue Group and is largely comprised of BIF, shale, chert and dolomite. Unconformably overlying the Hamersley Basin stratigraphy is the Bangemall Basin. In the Jigalong Project area, the main units exposed are those belonging to the Manganese Subgroup (Figure 10), including: Stag Arrow Formation (MNs) represents shallow marine shelf sediments comprising conglomerate, sandstone, siltstone and shale with minor dolomite and banded chert. Jigalong Formation (MNj) is interpreted as a turbidite sequence deposited in a transgressive marine environment. Balfour Formation (MNb) sediments were deposited in a shallow marine environment, remote from sources of terrestrial material. Iron-rich minerals (including magnetite) are noted in the coarser beds of the formation. The four deposits are summarised as follows. Robertson Range has been interpreted as a Marra Mamba Iron Formation dipping to the southeast under cover (Figure 11). Further, the southeast dipping sectional interpretation by Atlas (Stewart, 2015) suggests a West Angela Member overlying a Mount Newman Member (Marra Mamba Iron Formation) is not well supported by any geophysics nor does the deepening thickness (approximately >150 m depth to the east) of the West Angela Member appear sound. Over the Miji Miji deposit, Crowther describes The Mount Newman Member is observed as a cherty BIF with finely laminated beds of hæmatite. It is highly weathered and contains large amount of clay material near the base of cover and proximal to faulting. The maximum thickness of the unit inferred from drill results is 120 m. The contact between Macleod and Mount Newman has been interpreted as an average dip of approximately 30N. The Mount Newman Member within the centre of the Hamersley Basin and in a true thickness measures approximately m. This significantly contradicts the Crowther description. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

208 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The Mirrin Mirrin and Davidson Creek deposits have also been interpreted as Marra Mamba Iron Formation although the detailed breakdown between West Angela, Mount Newman, MacLeod and Nammuldi Members was not present. Mineralisation The mineralisation at Robertson Range has been described by Graindorge (Snowden, 2011) as comprising detrital and bedded iron deposit (primary and hard-cap mineralisation). Further, Graindorge describes the bedded iron deposit as discrete lenses of hæmatite (martite)-gœthite hosted within the shale dominated West Angela Member and within the Mount Newman Member. According to Crowther (2013), The Miji Miji mineralisation is hosted within the Mount Newman and West Angela Members of the Marra Mamba Iron Formation. Mineralisation at Miji Miji does not outcrop at the surface. It occurs beneath a layer of cover as three separate deposits generally trending northwest; each mineralised body separated by an area of faulting. Primary mineralisation is dominated by finely bedded hæmatite that is sometimes in specular form. Adjacent to structures and closer to the surface the bedded hæmatite mineralisation contains large amounts of fine material, mostly ferruginous shales and clay. Gœthite occurs in lesser amounts, most commonly within the hydrated zone where it is predominantly massive. The reported Mineral Resource grades at Miji Miji (Table 15) do not suggest (as reported by Crowther) a dominant hæmatite mineralisation but in fact an aluminous gœthite with minor hæmatite. CSA Global completed a review of the Davidson Creek drillhole database assay file, DCH_DVC_DB_DH_davidsonck_2013_dhd_assay which revealed that higher grade (>64% Fe) was present; however, it was not separately domained, and likely too inconsistent or minor to warrant domaining. Snowden Mining Industry Consultants Pty Ltd (Snowden) (Graindorge, 2012) domained a High-grade material within the Davidson Creek deposit using a 55% Fe cut-off grade resulting in an estimated Measured, Indicated and Inferred Mineral Resource of 161.9Mt grading 57.9% Fe, 5.36% SiO2, 2.56% Al2O3, 0.087% P and 8.54% LOI. The LOI reflects a gœthite dominant mineralogy. Snowden also estimated a Medium Grade material (between 52% Fe and 55% Fe), 79.5Mt and a Low Grade (between 52% Fe and 55% Fe). CSA Global understands that it was this material, complemented by Medium Grade material which was beneficiated by crushing, screening and wet beneficiation to improve the grade to produce an approximate fines product specification (58.5% Fe, 4.5% SiO2, 2.5% Al2O3, 0.09% P, 8.5% LOI (FerrAus Definitive Engineering Study, 2011). The Mirrin Mirrin deposit was interpreted by FerrAus Limited (FerrAus) as West Angela and Mount Newman Member. Snowden, on behalf of FerrAus, reported a West Angela Hard-cap and Primary Mineral Resource plus a Mount Newman Member Hard-cap and Primary Mineral Resource. CSA Global noted that the West Angela Member Primary graded notably better than the Mount Newman Member Hard-cap, indicating that there may be a potential issue with the geological interpretation. Structure It is difficult to conclude with any confidence whether the structural setting played any significant role in the promotion of the mineralisation process. The reports (Crowther, 2013) have alluded to crosscutting faulting but whether such features enhanced the mineralisation process or negatively impacted the grades remains unknown. CSA Global believes that the proximity to faulting (potential introduction of aluminous fluids post mineralisation), compounded by the basin marginal affect may go a way to explaining the variable and aluminous grades of the Mineral Resource. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

209 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 208 Figure 9: Davidson Creek Project location plan Source: Atlas

210 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 10: Davidson Creek regional geology plan Source: Atlas. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

211 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 11: Robertson Range sectional interpretation Source: Atlas Miralga Creek Deposit Geology The Miralga Creek Project (also called the Farrell Well Project) consists of three separate deposits (Miralga Creek E45/3601, Sandtrax E45/2380 and Grants E45/2567) in the Abydos area, part of which was recently mined by Atlas, on the northern margin of the Panorama Greenstone Belt within the East Pilbara Terrane. The location of the three main deposits is shown on Figure 12. A fourth prospect, known as Miralga West (E45/3511) is located some 4 km west of Miralga Creek. Miralga Creek The Miralga Creek deposit (E45/3601) is hosted within the Cleaverville Formation, part of the Archaean age Gorge Creek Group. The iron formation of the Cleaverville Formation forms a prominent east-west striking ridge which dips steeply to the north. The deposit is bound to the north by the Lalla Rookh Sandstone. Grants The Grants deposit (E45/2567) is hosted within the Archaean age Cleaverville Formation of the Gorge Creek Group and comprises BIF and chert, separated by thick sequence of quartzites and meta-felsic sandstones (Lo, 2013). Except in the east, it is uncertain whether this is all Cleaverville Formation as the Formation has been described by Lo (2013) as very siliceous and not a true BIF due to the rare iron bands within the chert. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

212 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 12: Miralga Creek project location plan Sandtrax is in the Abydos area (from Lo, 2013) Sandtrax Sandtrax (E45/2308) is located close to the Abydos project area and occurs in the same geological setting. Sandtrax is reported by Crowther, 2012, to occur within the Paddy Market Formation, however later mapping (Sweeney, 2014) confirmed that the Sandtrax deposits occur within the Cleaverville Formation of the Gorge Creek Group. It is bounded to the north by the Lalla Rookh sandstone. The geological map (Sweeney, 2014) is shown as Figure 13. Miralga West Miralga West (E45/3511) is hosted by the Cleaverville Formation of the Gorge Creek Group in a southwest trending range extending along strike from Abydos, some 40 km to the southwest. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

213 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 13: Sandtrax geology (from Sweeney, 2014) Mineralisation Miralga Creek Mineralisation at Miralga Creek is goethitic with minor hæmatite and occurs in three separate shallow lenses. Mineralisation has been recorded to a maximum depth of around 100 m and a hard-cap of approximately 10 m has been identified but has not been domained separately. A review of the database did not reveal any mineralisation assaying above 60% Fe, so the origin of the mineralisation is probably supergene, with the steep dips enabling surface fluids to penetrate to depth. The mineralisation is open to the north (Figure 14). Figure 14: Miralga Creek section (from Stewart, 2015) CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

214 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Grants Mineralisation at Grants has been described as goethitic (which is confirmed by the chemistry) extending to a maximum depth of 90 m in some areas (Lo, 2013). The resource modelling report describes the mineralisation extents as 275 m x 155 m, averaging 35 m deep with hard-cap extending to 10 m. A review of the database did not identify any mineralisation exceeding 60% Fe. Genesis of the mineralisation is probably supergene. Sandtrax The mineralisation at Sandtrax is described as gœthite with minor hæmatite, extending to approximately 50 m in depth. The dimensions of the mineralised lens are 370 m along strike and approximately 50 m wide. It is likely that the mineralisation is entirely hard-capped, although some of the deeper mineralisation may be older supergene. It should be noted that the grade of the Inferred mineralisation at Sandtrax is similar or slightly lower grade to the deposits that have been mined by Atlas at Abydos (Slomp, 2017). Sandtrax is the smallest of the nine deposits, most of which contain between 1.4 Mt and 3 Mt. Miralga West A small amount of outcropping gœthite has been located on the BIF extending for several hundred metres along strike, and an average width of some m. Structure Miralga Creek The Cleaverville Formation has been recorded as dipping steeply to the north. The mapping by the Geological Survey of Western Australia (GSWA) has recorded multiple faults throughout the area, but these do not seem to affect the mineralisation. Grants The structure of Grants does not appear to be well understood. No maps or sections could be found in any of the reports other than the modelling report by Lo (2013). A section from that report is included as Figure 15 and shows a relatively flat sequence of Cleaverville Formation BIF penetrated by several angle holes. The Cleaverville Formation elsewhere is normally steeply dipping so it is unusual for it to be horizontal. This leaves some doubt as to whether the BIF belongs to the Cleaverville Formation or some other, older BIF unit. Considering the small amount of mineralisation and the low grade this is a low priority target. Figure 15: Stratigraphic model for Grants (from Lo, 2013) CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

215 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Sandtrax The structure has been described as complex, with steep dips to both north and south over a short east-west strike length of 370 m. A section from the mapping report (Sweeney, 2014) is included as Figure 16. This shows a steeply dipping to vertical BIF with no indication of dip directions or folding. Figure 16: Cross section of Sandtrax Source: Sweeney, 2014 Miralga West The Cleaverville Formation BIF is dipping to the south at an angle between 60 and 75. The structure is shown on Figure 17: Figure 17: Miralga Creek West cross section Source: Sweeney, 2014 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

216 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Ridley and Pardoo Deposit Geology The Pardoo Project lies within the northern extent of the Archaean Pilbara Craton and comprises a series of BIF and chert sequences belonging to the Cleaverville Formation, that occurs in the lower part of the Gorge Creek Group. The resistant character of the Cleaverville Formation has produced the lows hills of the Ord-Ridley Ranges. The lower Cleaverville formation comprises a cherty BIF, that has been replaced at surface by a thin gœthite carapace, overlain by a stratigraphy consisting of BIF with occasional interbedded thin shale bands. A prominent, up to 30 m true thickness shale marker overlying a red-black BIF, can be traced laterally over most the northern synclinal limb of the S shaped structure. Conformably overlying the BIFs of the Cleaverville Formation at the Project is the Lalla Rookh Sandstone of the Croyden Group. The Pardoo tenement plan is included as Figure 18. Figure 18: Pardoo Project tenement location plan Source: Atlas, 2018; ATR; Slomp Mineralisation Iron enrichment in the Cleaverville Formation is found at all stratigraphic levels in the formation and forms irregular pods (predominantly gœthite) with a distinct orientation to the bedding of the BIF (Slomp, 2018). The pods vary in size from lenses m wide to pods several hundred metres wide and up to 400 m long and m depth. The Pardoo Mineral Resource is stated in Table 21. A JORC (2004) compliant Mineral Resource was declared for the primary magnetite BIF and was reported in 2008 (Table 24). No further work has been conducted on this resource. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

217 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Structure The dominant structure is of a steeply east-plunging syncline in which the northern and southern limbs dip at to the south and northeast, respectively. Notable is the fact that in the nose of the fold, there appears to be no thickening of the sequence, dips being similar to elsewhere (i.e southeast and east). The BIF in the nose of the fold is considerably faulted, drag folded and brecciated by axial faulting (Dale, 2006). Considering that the mineralisation which was present (now mined out) formed relatively poddy and discrete lenses, it is likely that small-scale structure, probably localised faulting/deformational, was responsible Avalon Point/Abydos Deposit Geology The Avalon Point prospect is part of the Abydos Project, situated some 120 km south of Port Hedland. It lies entirely on E45/2428 (Figure 19). The deposit is hosted by the Cleaverville Formation of the Gorge Creek Group and occurs within the Pincunah Trend, a part of the Pincunah Greenstone Belt. However, there is a conflict in the Mineralisation Resource Report (Johnston, 2013) where the stratigraphy is assigned to the Pincunah Formation (p.28) possibly the Pincunah Banded-Iron Member of the Kangaroo Caves Formation (Sulphur Springs Group) (see Australian Stratigraphic Units Database). On page 14 of the same report, the stratigraphy is assigned to the Gorge Creek Group. In this review, the stratigraphy is accepted by CSA Global as being the Cleaverville Formation as the sectional interpretation (Figure 19) clearly indicates Upper and Lower BIF units typical of the Cleaverville Formation elsewhere. Figure 19: Regional geology of Avalon Point Source: Hawke, Note: The unit marked as Pincunah Hill Formation equates to the Cleaverville Formation. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

218 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mineralisation The mineralisation is primarily goethitic with some hæmatite and limonite. The mineralisation extends to approximately 60 m in depth in the west and shallows to the east. A hard-cap (hydrated zone) has been interpreted to extend to approximately 10 m (Figure 19). Figure 20: Mineralised envelope at Avalon Point Source: Johnston, 2013 Structure Avalon Point has been interpreted as a tightly folded syncline along its western side, with folding becoming more open to the east (Figure 21). Figure 21: Structure and stratigraphy of Avalon Point Source: Johnston, 2013 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

219 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets East Newman Projects The East Newman Projects comprise Caramulla South (E52/1823), Jimblebar Range (E52/1772) and McCamey s North (E52/2303) all located approximately km east of the township of Newman (Figure 19). The Wishbone, Warrawanda Project (E52/1815 and E52/1771) is located approximately 50 km southeast of Newman. All projects have differing geological characteristics. Figure 22: East Newman Project Location Plan Source: Atlas, 2018 Caramulla South (E52/1823) Deposit Geology Caramulla South is hosted in the Marra Mamba Iron Formation of the Hamersley Group and has been described as comprising Mount Newman Member and MacLeod Member with a shallow overburden of CzD3 detritals. Mineralisation Mineralisation is present as predominantly hard-capped martite-gœthite within three zones of approximate dimensions: 1 km x 100 m, 400 m x 200 m and 600 m x 250 m. Table 18 shows Caramulla South to have a small subgrade Inferred Resource with elevated silica and alumina grades. Without selective domaining to identify a higher-grade zone (>60% Fe), it is unlikely the Caramulla South mineralisation is saleable in today s market. Structure Described as relatively flat dipping and uncomplicated. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

220 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Jimblebar Range (E52/1772) Deposit Geology The deposit is hosted in an Archaean BIF within the Sylvania Inlier, comprising BIF, chert and shale sequences. Mineralisation Mineralisation is described as gœthite and limonite transitioning into magnetite BIF. Mineralisation distribution appears variable within two zones of approximate 700 m x 100 m and 600 m x 100 m dimensions. The Inferred Mineral Resource (Table 18) shows elevated silica and low iron with low P (<0.07%). These grades are comparable to what Atlas are selling at present; however, the main factor restricting any material valuation is the fact the deposit is isolated and without any clear transport route to port. On an upside, isolated intercepts of +60% Fe mineralisation were reported; however, CSA Global did not delve into the details of the domaining to investigate whether a smaller tonnage but higher grade (>60% Fe) Mineral Resource could be delineated. This idea is not inconceivable. Structure The deposit is relatively uncomplicated with the BIF dipping approximately to the east. There is no evidence of structural complexity contributing to the mineralisation process. McCamey s North (E52/2303) Deposit Geology The deposit is hosted in the Boolgeeda Iron Formation of the Hamersley Group. Mineralisation The deposit comprises martite-gœthite mineralisation with the higher grade (>60% Fe) restricted to the Upper BG9 and Lower BG4 units. The mineralisation extends over an 800 m strike and a variable width of m and has been reported as open at depth. Atlas noted an increase in hæmatite with depth which may be a product of the hard-capping effect; however, did not comment on whether there was marked improvement in the grades. The high silica, alumina and particularly very high P levels (Table 18) are negative connotations for McCamey s North. The mineralisation as a standalone product is unlikely saleable in today s market. Any value may only be retrieved if the product can be blended with a higher quality deposit. This seems unlikely. Structure The deposit is structurally complex, characterised by laterally disjointed and faulted iron formation (Figure 23). The impact on the structural setting with respect to mineralisation was not reported by Atlas nor did Atlas complete any downhole gamma, structural interpretations or geological mapping. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

221 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 23: McCamey s North geological map Red polygons represent structurally disjointed Boolgeeda Iron Formation Source: Atlas, 2009 Wishbone, Warrawanda (E52/1815 and E52/1771) Deposit Geology The deposit is hosted in the Sylvania Inlier Granite/Greenstone Belt and is present as steeply dipping BIFs with interbedded metavolcanics, metasediments and ultramafics; intruded by dolerite sills and granitoids. Mineralisation Mineralisation consists of four elongated zones over an area of approximately 3 km in strike and varying in individual thickness from 35 m to 120 m. An Inferred Mineral Resource (Table 20) indicates that the grades are marginal and suggestive of a gœthite-rich mineralisation. In today s iron ore market, the product is likely unsaleable without a significant price penalty. Structure There has been no geophysical work, geological mapping or downhole survey collected which would aid in the understanding of the structural setting West Newman Projects The West Newman Projects comprise the Western Creek (E52/2300 and E52/2160), Homestead (E52/1912), Western Ridge (E52/1483 and E52/1604) deposits located approximately 30 km east of the township of Newman (Figure 24). The Halley, Levy, Hale-Bopp and Shoemaker deposits which comprise the Hickman Project (E47/2052 and E47/2053) are located approximately 40 km north of Newman. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

222 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 24: West Newman Projects location plan (north to top of figure) Source: Atlas, 2018 Western Creek (E52/2300 and E52/2160) Deposit Geology The deposit is hosted in an approximately 2.5 km x m wide, steeply dipping sequence of Marra Mamba Iron Formation. Atlas state that the mineralisation is hosted in the Nammuldi Member and Mount Newman Member. Mineralisation Mineralisation has been reported as martite-gœthite style with gœthite dominant present to depths of m beneath the surface. The Inferred Mineral Resource (Table 16) indicates mineralisation grades are marginal, particularly the alumina which will be difficult to market without incurring significant price penalties in today s market. Structure The mineralisation is hosted in the apex of an antiform. No other details pertinent to the structural setting of the deposit were reported. No geophysical data was collected which may have aided the structural understanding. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

223 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Homestead (E52/1912) Deposit Geology The deposit is hosted in the Marra Mamba Iron Formation comprising an interpreted West Angela Member, Mount Newman Member and MacLeod Member. In CSA Global s opinion, the Atlas interpretation and justification for the collective domaining used for the resource estimation is vague, and most likely driven by grade as opposed to geology. Downhole geophysics was completed although it was not mentioned whether the gamma logs were instrumental in determining the stratigraphy. Mineralisation Mineralisation is reported as gœthite with a minor hæmatite and a CzD3 detrital component. The mineralisation geometry is described as 1.4 km strike, 200 m width and to a depth of 50 m. Table 16 shows the globalised Inferred Mineral Resource at a 50% Fe cut-off. Domaining (Strat Code BIF) was based on a BIF unit comprising West Angela Member, Mount Newman Member and MacLeod Member. In CSA Global s opinion, the Atlas interpretation and justification for this collective domaining has not been clearly explained, whether driven by grade or by geology. As seen at Western Creek, the reported mineralisation grades at Homestead, particularly alumina, will be difficult to market without incurring significant price penalties in today s market. Given the goethitic nature of the mineralisation, any ability to upgrade the mineralisation via beneficiation will prove difficult (refer to Davidson Creek Hub). Structure The deposit is geologically complex with an inverted sequence of stratigraphy reported. The Marra Mamba Iron Formation is above the Wittenoom Formation which is explained by either thrust fault stacking or an overturned fold. Drilling was insufficient to discern between the theories. Western Ridge (E52/1483 and E52/1604) Deposit Geology The deposit is hosted in the Marra Mamba Iron Formation comprising an interpreted Nammuldi Member and Mount Newman Member. Atlas made no mention of the presence of the MacLeod Member. Downhole geophysics was completed on 12 drillholes, but data was deemed inadequate to incorporate into the geological interpretation. Mineralisation The mineralisation has been described by Atlas as gœthite-rich, implying it is a martite-gœthite style. It is present in two zones, a northern zone of approximately 1.2 km strike x 800 m width, and a southern zone of approximately 700 m strike and 400 m width. An Inferred Mineral Resource (50% Fe cut-off) is shown in Table 16. The Mineral Resource extends to 60 m beneath the surface and is above the water table. The grade-tonnage curve reveals that Western Ridge is very sensitive above a 50% Fe cut-off. The Inferred Mineral Resource from domain 204 (Mount Newman Member Primary) was estimated as 4.4 Mt grading 59.5% Fe, 3.5% SiO2, 2.4% Al2O3, 0.07% P and 9.0% LOI. This is the best quality mineralisation at Western Ridge. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

224 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Structure The deposit is described as flat lying with no mention made of any structural complexities. Halley, Levy, Hale-Bopp and Shoemaker Deposits, Hickman Project (E and E47/2053) Deposit Geology The deposits are hosted in BIF of the Boolgeeda Iron Formation. Mineralisation The mineralisation, present as localised hæmatite and gœthite, extends over the four deposits: 750 m x 180 m (Halley); 1,000 m x 190 m (Levy); 1,400 m x 130 m (Hale-Bopp); and 600 m x 200 m (Shoemaker). The reported Inferred Mineral Resource (Table 17) shows the alumina and phosphorous levels are prohibitively high and are unsaleable in today s market. Applying an iron cut-off of 55% Fe does little to improve the deleterious elements. Structure The dominant structural feature is a series of long narrow folds with northwest trends. What impact the structure has played on the mineralisation was not adequately reported by Atlas West Pilbara (Anthiby Well) Deposit Geology Anthiby Well (E08/1712) is located on the northern margin of the Ashburton Basin, some 120 km to the west of the township of Paraburdoo (Figure 25). Anthiby Well lies on Wyloo Group lithologies, primarily the Mount McGrath Formation and the Cheela Springs Basalt. The tenement contains two small clusters of CID mesas located at its eastern and western ends, the largest of which is approximately 2,000 m long and up to 400 m wide. The mesas extend up to 40 m above the plain level and are incised by recent drainage. The deepest drilled intersection was 32 m of CID. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

225 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 25: Geology of Anthiby Well (from Louw, 2009) Source: Atlas, 2018 Mineralisation The CID is goethitic within an envelope of siliceous channel iron deposit (SCID), which is subgrade (tonnage of SCID not quoted here). The resources (Table 19) are subgrade and would not be marketable in the current environment. They could be blended with higher grade material but are isolated from the rest of Atlas s deposits and mining operations. Structure The mesas are flat lying. There is no indication of channel edges or whether there is any extension of the CID beneath plain level. Figure 26 (from Louw, 2009) shows the flat lying nature of the deposit. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

226 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 26: Section through the Anthiby Well CID (from Louw, 2009) Mid West (Beebyn) Deposit Geology The Beebyn deposit (E51/933) is located approximately 10 km west-southwest of Meekatharra in the mid-west of WA. The deposit occurs within a 3 km long northwest-southeast trending range of Archaean BIF of the Weld Range, which has been intruded by dolerite and gabbro (Hewlett, 2007). The location of the deposits is shown in Figure 27. Figure 27: Location of Beebyn deposit Source: Hawke, 2011; Atlas, 2018 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

227 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mineralisation Gœthite-hæmatite mineralisation occurs within four distinct zones along a 3 km section of the Weld Range, each zone termed W24, W24N, W22 and W23. Individual zones range from 150 m to 600 m in length. Inferred Mineral Resources have been declared (Table 23). The resources are globalised in that no hard-cap has been delineated on any of these deposits, nor has any internal stratigraphy been identified, or reported as absent. Structure The deposits occur within a steeply dipping Archaean BIF sequence. Figure 28: Beebyn Geology Source: Atlas, 2018 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

228 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 2.4 Exploration Summary Mount Webber Daltons/Gibson (including Fender) has been extensively drilled with 224 holes being completed on a 20 m x 20 m grid on Daltons (and nominally 20m x 20m on Fender) and on a 20 m x 20 m grid on Gibson. Drilling on Ibanez totalled 1,101 holes for 57,962 m on a rotated 20 m x 20 m grid. Geological mapping was completed by Compass Geological in August 2008 across all deposits. The mapping appeared lithological, outlining units such as siltstones, BIFs, ultramafics, quartzites, etc., without reference to stratigraphy. The BIF was mapped as one unit (not differentiated into upper and lower BIF) possibly due to masking by hard-cap effects. Mineralisation was not recorded on the geological map. The deposits have been extensively explored with no further work necessary, in CSA Global s opinion Corunna Downs The deposits within the Corunna Downs Project have been geologically mapped by Atlas at various stages and at various scales and have been delineated sufficiently to allow some confidence that all outcropping mineralisation has been identified. Drilling as outlined in Table 3 is appropriate, considering the elongated outcrop of the Cleaverville Formation. Degree of maturity is high. Table 3: Drilling completed at Corunna Downs Deposit RC holes Metres Nominal grid Split Rock , m x 40 m Deepest hole 264 m; deposit is closed off Shark Gully 81 6, m x 40 m Deepest hole 174 m; deposit is closed off Glen Herring 68 7, m x 40 m to 80 m x 40 m Further drilling needed to close-out the deposit to the west Razorback 17 2,180 80m x 20 m Further drilling needed to confirm the resources Runway , m x 40 m Deposit has been closed off TOTAL , Comments McPhee Creek Crescent Moon There has been no geological mapping, however the CID has been extensively reverse circulation percussion (RCP) drilled (192 holes, 5,261 m) on a 25 m x 50 m grid. Main Range Substantial drilling has been conducted over the Cleaverville Formation. A total of 1,210 RCP holes (135,593 m) and 98 HQ/PQ diamond holes (16,509.3 m) have been drilled on a 50 m x 50 m grid. Detailed geological mapping has also been completed over the entire deposit (Russell, 2011). The geology of the deposit is very well understood. Main Range West A total of 125 RCP holes (10,123 m) have been drilled on a 50 m x 50 m grid. Geological mapping was restricted to one traverse conducted during the Main Range mapping Davidson Creek Robertson Range has been extensively drilled on an approximate 50 m x 50 m spaced grid. However, despite the relatively concentrated drilling, the geological understanding appears inconsistent. Miji Miji has been drilled on a variable 50 m x 200 m grid for a total of 205 RCP holes for 28,038 m. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

229 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Previous explorers also completed airborne geophysics, structural interpretations and attempted downhole geophysics Miralga Creek Miralga Creek Miralga Creek has been drilled with 45 RCP holes (4,748 m) on a 40 m x40 m grid spacing and is still open at depth and along strike. Considering the restricted dimensions of the Cleaverville Formation and the patchy nature of the mineralisation, the deposit is well understood. Grants The Grants resource is based on 39 RCP holes (1,560 m) drilled on a 40 m x 20 m grid. The deposit geology is not well understood. Sandtrax The Sandtrax resource is based on 33 RCP holes (1,546 m) drilled on a 20 m x 40 m grid. The deposit is poorly understood structurally, despite the drilling. Miralga West The only work completed at Miralga West is geological mapping and rock chip sampling. Drilling has been planned but not executed Ridley and Pardoo The Pardoo Project has been extensively drilled by Atlas between 2006 and 2012, as summarised in Table 4. Table 4: Pardoo drill summary Atlas ( ) Year RCP holes RCP metres DDH holes DDH metres , ,481 69, , , Total 85 6, , , ,751.1 This drilling history does not include earlier work by Independence Group NL and Atlas Gold Ltd between 2003 and 2006 when approximately 15,000m of air-core and RCP was completed. Other exploration activities throughout the Atlas period included mapping, sampling, geotechnical, metallurgical and hydrogeological work. The fact that Atlas has placed the Pardoo Project into care and maintenance, where it has been since circa 2014, indicates that the residual resource quality is marginal, and any material upside is unlikely Avalon Point/Abydos A total of 41 RCP holes have been drilled on a 40 m x 20 m grid with all holes orientated 60 to the west. The area has been mapped as part of the regional Abydos area mapping in 2008 (Crossing, 2008) and has also been the subject of an airborne geophysical survey (Hawke, 2012) but some doubt remains as to the stratigraphy. Exploration maturity is high, despite the conflict in naming the stratigraphy. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

230 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets East Newman Projects Caramulla South (E52/1823) Total drilling of 159 RCP holes on a variable 100 m x 50 m grid were completed, therefore alluding to a relatively high Exploration Maturity. Ninety-seven (97) holes for 4,485 m were used in the Mineral Resource estimate. Jimblebar Range (E52/1772) A total drilling of 72 drillholes of which 70 holes for 4,987 m drilled on a variable 80 m spaced sections were used in the Mineral Resource estimate. There was no downhole geophysics, aerial geophysics or density work completed. McCamey s North (E52/2303) A total of 235 drillholes for 22,096 m, including 230 RCP drillholes for 21,398 m were used in the Mineral Resource estimate. The significant volume of drilling indicates a very high exploration maturity. Given the high phosphorous style of Boolgeeda mineralisation and the fact that the deposit is densely drilled, any upside potential for higher quality hæmatite mineralisation appears very limited. Wishbone, Warrawanda (E52/1815 and E52/1771) Total drilling comprises 257 RCP drillholes for 19,600 m on an 80 m x 40 m and 60 m x 30 m spaced grid. Total of 249 RCP drillholes for 18,828 m used for the Mineral Resource estimate. All drillholes were orientated 60. The exploration maturity can be described as very high, given the density and volume of drilling West and North Newman Projects Western Creek (E52/2300 and E52/2160) A total of 96 RCP drillholes for 7,148 m completed on an approximate 80 m x 40 m spaced grid. Drillholes were angled 50 to 90. The significant volume of drilling indicates a very high exploration maturity, therefore diminishing the prospects of any upside potential mineralisation. Homestead (E52/1912) A total of 114 drillholes for 12,675 m were completed over a 100 m x 50 m spaced grid, hence the exploration maturity is relatively high. Western Ridge (E52/1483 and E52/1604) A total of 157 RCP drillholes for 9,425 m were completed on a nominal drill spacing of 150 m x 50 m with 144 RCP for 8,631 m used in the Mineral Resource estimate. Most of the drillholes were vertical with some orientated 60 perpendicular to strike. The exploration maturity is high. Halley, Levy, Hale-Bopp and Shoemaker Deposits, Hickman Project (E and E47/2053) Total drilling comprised 97 RCP drillholes for 8,242 m (2010 to 2011) on an approximate 80 m x 40 m and 200 m x 50 m spaced grid representing a high exploration maturity West Pilbara (Anthiby Well) A total of 87 holes (2,644 m) drilled in 2009 (Stewart, 2015) were used in the resource estimate, with drilling being confined to the top of the mesas. Drill spacing is at a nominal 200m by 100m, with local areas of 100m by 100m. There is no indication whether the deposits have been geologically mapped. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

231 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mid West (Beebyn) A total of 44 RCP holes (3,691 m) were used in the resource estimation, with a nominal drill spacing of 100m by 20m. Some geological mapping has been done, but its source was not recorded. 2.5 Exploration Potential Mount Webber Minimal potential remains in the area. The only potential would be along deep-seated structures where the BIF could be metamorphosed by hot fluids from depth. However, unless there has been a major misinterpretation of the geology, this seems unlikely. Mount Vettel The Mount Vettel project area (E45/4029) is located approximately 17 km west of the Mount Webber mine site. The project has been described as being within BIFs of the Paddy Market Formation. CSA Global consider the Mount Vettel target to fall within the larger Mount Webber project area. Goethitic mineralisation has been identified at the Dead Bullock prospect (Sweeney, 2018). This area shows some signs of hydrothermal activity, enhancing the possibility of hæmatitic mineralisation at depth. The structure of this area is not well known, apart from mineralisation being located in a steep synformal structure (Sweeney, 2018). A total of 34 reverse circulation (RC) holes have been completed at the Dead Bullock prospect and targeting exercises have been completed. Some geological mapping and rock chip sampling has been done. The area needs further mapping and drilling to determine its potential Corunna Downs The known deposits (apart from Razorback and Glen Herring) have been drilled on a relatively close spaced grid and have been effectively closed off at depth. Potential for additional mineralisation is present but is limited by the very well-defined outcrop with clear formation boundaries. The resources are at Indicated or Inferred classification, so infill drilling to achieve Measured status will unlikely result in additional resources. The Razorback deposit is small and further drilling is unlikely to add substantially to the resources. There is some potential to add to the Glen Herring resources as the deposit is still open to the west. However, grades are expected to be similar to the current resource. A total of 36 targets have been identified (Hawke, 2014) in the Corunna Downs area based on a combination of field mapping and airborne geophysical survey interpretation, most of them isolated from the four known deposits. Follow-up work needs to be done on these targets, to determine the potential to add to the resources of Corunna Downs McPhee Creek Crescent Moon There is no potential for additional resources as the CID has been drilled out on a close spaced grid. However, it was stated in the resource modelling report (Lo, 2013) that some parts needed infill drilling due to lack of access due to heritage issues. As the required drilling is infill, the potential for increasing the resources is small. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

232 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Main Range The deposit has been extensively drilled and closed off in all directions except in some places on the eastern margin. However, the potential to add substantially to the resources is limited by the outcrop extent on the east, and by a tenement boundary on the west. Exploration potential is low, considering the maturity of the deposit. Main Range West There is some potential for additional mineralisation beneath the hard-cap in the northern zone but considering the close spaced drill grid and the nature of the outcropping Cleaverville Formation, potential for substantially adding to the resource is low Davidson Creek It is difficult to envisage any material upside potential for the Davidson Creek Project. The drilling has been relatively comprehensive, and the style of mineralisation indicates gœthite with elevated alumina and silica. There were no significant intercepts of high-grade (>60% Fe) hæmatite warranting further exploration, but there are extensive areas with material in the high 50s % Fe Miralga Creek Miralga Creek Although the deposit is open to the north, the potential for additional resources within Miralga Creek is limited by the nature of the outcrop and the lack of hæmatite mineralisation at depth. If additional resources are identified, they would likely be of similar grade to the current Inferred Resources. Grants Potential for additional resources appears limited due to the cherty nature of the BIF and its flat lying structure. Any further mineralisation is likely to be less than 60% Fe. Sandtrax Considering the outcropping BIF has been drilled on a close spacing, little to no potential remains on Sandtrax. Miralga West Potential for goethitic mineralisation exists but is limited by the outcrop extents. As the deposit has not been drilled, there may be potential for deeper hæmatitic mineralisation beneath the surface gœthite Ridley and Pardoo The amount of drilling has been extensive, and consequently the potential for significant additional mineralisation is limited Avalon Point/Abydos Some potential remains as mineralisation is open to the north, however this is unlikely to be different to the currently declared grade which is less than ideal. The alumina and silica grades (total greater than 11%), under today s market conditions, will incur significant price penalties unless the resource can be blended with a higher quality product. Considering the current size of the resource, any additional potential tonnages at Avalon Point are likely to be insignificant. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

233 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets East Newman Projects Caramulla South In CSA Global s opinion, the tonnages are insignificant and the reported Mineral Resource grades low. Exploration potential is likely minimal. For these reasons CSA Global concludes that the value of Caramulla is not material to the overall valuation of the Mineral Assets of Atlas or to the value of the Company. Jimblebar Range The concentration of drillholes appears sufficient to assume that any significant upside potential will not be present. CSA Global considers Jimblebar South as a relatively small deposit of marginal iron grade (57.5%) with elevated silica (8%). The exploration maturity is relatively high and the potential for delineating additional material tonnes of >60% Fe appears limited. McCamey s North (E52/2303) Given the high phosphorous style of Boolgeeda Iron Formation mineralisation and the fact that the deposit is densely drilled, any upside potential for higher quality hæmatite mineralisation appears very limited. Wishbone, Warrawanda (E52/1815 and E52/1771) Wishbone is not a high priority deposit. The grades are marginal, and the concentration of drilling alludes to minimal upside potential. Under today s iron ore market, the Mineral Resource grades will attract a significant price penalty West and North Newman Projects Western Creek (E52/2300 and E52/2160) Any value in the project may only be realised if any higher quality (non-hard-capped) Mount Newman Member mineralisation can be domained. The sections presented in the Atlas report discuss the Nammuldi and the Mount Newman Member, however the sections appear grade driven. The downside in tightening the domaining will be a decrease in the tonnage. Homestead (E52/1912) With the relatively close spaced drill density of 100 m x 50 m, any material upside potential is unlikely. The value add may be in re-domaining based on geology to identify potential a +60% Fe unit (Mount Newman Member) with lower, and marketable deleterious elements. This of course will lead to a decrease in the overall reportable tonnage. The conclusion is that the Homestead deposit from a grade perspective is marginal and sensitive to the iron grade above a 50% cut-off. Western Ridge (E52/1483 and E52/1604) Based on the global Inferred Mineral Resource (Table 19) the grades are low. There is minimal upside potential to Western Ridge, as the extensive drilling that has been completed is likely to have identified any upside potential that may have been present. Halley, Levy, Hale-Bopp and Shoemaker Deposits, Hickman Project (E and E47/2053) Given the high drill density and the inherent high phosphorous nature of Boolgeeda mineralisation, it is improbable that there will be any material upside potential for additional higher quality tonnes. Further, the CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

234 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets alumina grades are very elevated, therefore rendering the saleability of the Hickman Project mineralisation doubtful without significant price penalties West Pilbara (Anthiby Well) Nil, beyond the current subgrade CID resource. The tenement has been adequately explored and the nature of the CID mesas precludes any substantial addition to the resources Mid West (Beebyn) The deposit is open at depth and along strike in some areas, but potential is limited by the patchy nature of the mineralisation. CSA Global Assessment Considering the high exploration maturity of the Atlas projects, CSA Global considers the potential for additional mineralisation at any of the projects to be moderate to low. Some upside potential has been identified at Corunna Downs which may result in additional resources. 2.6 Iron Mineral Resources DSO hæmatite Mineral Resources are summarised by project in Table 5, current to 31 March All DSO Mineral Resource estimates are reported in accordance with the JORC Code (2012 Edition). Note that Mineral Resource estimates are not totalled, given CSA Global does not have exact Mineral Resource estimates for all projects. Table 5: Atlas DSO hæmatite Mineral Resource estimate by project, 31 March 2018 Measured Project Indicated Inferred TOTAL Tonnage (Mt)* Fe (%) Tonnage (Mt)* Fe (%) Tonnage (Mt)* Fe (%) Tonnage (Mt)* Fe (%) Cut-off grade (% Fe) Mount Webber** Corunna Downs McPhee Creek Miralga Creek Davidson Creek Hub Western Creek Hickman Jimblebar West Pilbara Warrawanda Pardoo Abydos Mid West *Measured and Indicated Mineral Resource tonnages rounded to the nearest 0.1 Mt; Inferred Mineral Resource tonnages rounded to the nearest 1 Mt. **Depleted Mineral Resource estimates have been provided by Atlas for Mount Webber to account for production until 31 March 2018; the remaining Mineral Resources are summarised from those which have been publicly reported. Magnetite Mineral Resources are shown in Table 6, current to 31 March The magnetite Mineral Resources are reported in accordance with the JORC Code (2004 Edition). CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

235 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 6: Atlas magnetite Mineral Resource estimate, 31 March 2018 Measured Project Indicated Inferred TOTAL Cut-off grade Tonnage (Mt) Fe (%) Tonnage (Mt) Fe (%) Tonnage (Mt) Fe (%) Tonnage (Mt) Fe (%) Ridley - - 1, , % DTR Total - - 1, , % DTR * Indicated and Inferred Mineral Resource tonnages rounded to the nearest 10 Mt. In keeping with the Materiality and Transparency Principles of the VALMIN Code, CSA Global has included all relevant information that investors and their advisors would reasonably require, and expect to find in the Report, for the purpose of making a reasoned and balanced judgement regarding the Technical Assessment being reported. The level of technical assessment completed for each project is commensurate with the perceived materiality of the project with regards to Atlas total asset portfolio. CSA Global has reviewed data collection techniques, geological modelling and Mineral Resource estimate procedures to form an opinion on the validity of the technical work underpinning the Mineral Resource estimates for all projects presented above. CSA Global has also independently queried the reported Mineral Resource tonnage and grade from the block models provided for projects that are considered material to this technical assessment. CSA Global has reviewed the reports prepared by Atlas, and data supporting the Mineral Resource estimates in forming a judgement on the appropriateness of the technical work that has been undertaken Mount Webber Mineral Resource Estimate The Mount Webber DSO Project comprises the Gibson/Daltons, Fender and Ibanez deposits. The Gibson/Daltons Mineral Resource estimate is documented in a report prepared by Atlas in March An update to the Daltons part of the Mineral Resource estimate is documented in a summary report in April The Fender Mineral Resource estimate is documented in a report prepared by Atlas in February An update to the Mineral Resource estimate is documented in a memorandum prepared in April The Ibanez Mineral Resource estimate is documented in a report prepared by Atlas in March The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The depleted Mount Webber Mineral Resource estimate provided by Atlas in April 2018 is shown in Table 7, reported above a cut-off grade of 50% Fe. Gibson/Daltons, Fender and Ibanez have been depleted to 31 March CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

236 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 7: Deposit Mount Webber Mineral Resource estimate, 31 March 2018 Tonnage JORC classification Fe (%) SiO2 (%) (kt) Gibson/Daltons Fender Ibanez Mount Webber Total Al2O3 (%) P (%) S (%) LOI (%) Measured Indicated Inferred 16,800 12, Subtotal Measured Indicated 29,200 5,200 1, Subtotal Measured 7,100 2, Indicated Inferred Subtotal , Measured Indicated 24,100 15, Inferred 1,000 TOTAL 40,000 * Mineral Resource tonnages rounded to the nearest 100 kt. Data Collection Techniques Data used to prepare the Mount Webber Mineral Resource estimate is sourced primarily from RC and a minor number of diamond (DD) drillholes. The drilling is summarised by deposit in Table 8. Prospect Daltons Gibson Fender Ibanez Total GRAND TOTAL Table 8: Hole type DD RC Subtotal DD RC Subtotal DD RC Subtotal DD RC Subtotal DD RC Mount Webber drillhole database No. of drillholes Total depth (m) ,109 1, ,196 2, ,322 43, ,951 5, ,876 16, ,350 59,214 1, , ,958 Drillhole collars were surveyed by licensed surveyors (MHR Surveyors, Perth) using a real-time kinematic (RTK) differential global positioning system (GPS) connected to a state survey mark (SSM) network. Downhole surveys were attempted on all RCP and DD holes using gyroscopic survey methods. Readings were taken at 5 m intervals downhole using a SPT north-seeking gyroscopic survey tool. Quality control (QC) of the gyroscope tool involved field calibration using a test stand and a calibration hole. Since January 2011, RCP chips were logged at 2 m intervals using a standardised set of codes (previously 1 m). Logging codes have been standardised and codes for mineralised material incorporate the lithology, weathering, colour, chip percent, main iron mineral, texture and hardness. Geophysical logging (natural gamma, gamma density, magnetic susceptibility, resistivity) was completed on the vast majority of drillholes. The standard Atlas geological log was entered digitally in the field onto a Toughbook computer. The files are then uploaded into an acquire database. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

237 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets For RCP holes, 3 4 kg samples are collected predominately via cone splitter for each 2 m interval in a prenumbered calico bag. Samples are kept dry where possible. Samples are dried at 105 C for hours and crushed to a nominal size of 3 mm, prior to being pulverised to 90% passing 75 μm. Samples were sent to Ultratrace and ALS Laboratories in Perth for analysis of the Atlas iron ore suite. Subsamples are collected to produce a 66 g sample that is dried further, fused at 1,100 C for 10 minutes and poured into a platinum mould. X-ray fluorescence (XRF) analysis was then completed for Fe, Al 2O 3, SiO 2, CaO, P, S, MnO, MgO, K 2O, Na 2O, TiO 2. Thermo-gravimetric analysis (TGA) was completed for LOI at 1,000 C. Downhole geophysical density measurements were taken every 10 cm as the probe is raised. Regression factors were derived after bulk density determination of DD core (bulk dry density and Archimedes methods) and were applied post estimation (of geophysical density) to obtain a dry bulk density. The width of the hole is also measured as the calliper ascends. This allows for filtering of the data after it is gathered, due to cavities or abnormalities in the drillhole. The effect of water has been disregarded because none of the drillholes intersected the water table. Certified reference materials (CRMs), field duplicates and umpire laboratory analyses were used for quality control. Field duplicates and CRMs were inserted at a ratio of 1:20 with an overall QC insertion rate of 1:10. Sample weights were recorded for all samples. Laboratory duplicates were taken where large samples required splitting down by the laboratory. Laboratory repeats were taken, and standards were inserted at predetermined frequency rate specified by the laboratory. Umpire laboratory analysis was carried out by Ultratrace as independent checks of the primary laboratory assay results and shows good precision. CRMs across a broad range of values were inserted at predetermined intervals by Atlas and randomly by the laboratory at set levels. Results highlight that assay values are accurate and precise. Analysis of field duplicate and laboratory pulp repeat samples reveals that greater than 90% of pairs have less than 10% difference and the precision of samples is within acceptable limits, which concurs with industry best practice. The topographic data was captured and supplied by AAM Pty Ltd with the contours generated using LiDAR technology. The datum used was GDA94 with MGA Zone 50 projection. The contour lines were then used to generate a topography surface using Vulcan software. CSA Global Assessment CSA Global considers that data collection methods, inclusive of drilling methods, data location methods, density, logging, sampling, analytical methods and topographic control, according to the documentation supplied, are consistent with industry standards. At Gibson/Daltons and Fender, due to grade bias and different method of sampling, all holes drilled by Giralia Resources Ltd (Giralia) were excluded from estimation, though they were still used for geological modelling. Data has been collected predominantly by RCP drilling methods which generally provide a high-quality sample, which is supported by a small but adequate number of DD drillholes. Logging, sampling and analytical techniques are considered appropriate, and adequate QC data appears to have been collected to allow the quality of this data to be assessed. CSA Global considers that the manner in which the data was collected does not represent a material risk to the ongoing development, mining or global value of the project. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

238 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Geological Interpretation and Modelling The stratigraphy of the deposit was modelled mainly based on their chemical composition from the assay data supported by geological mapping. The mineralisation is domained generally using >50% Fe and <15% SiO 2 cutoff grades and was divided into two types: hydrated and primary mineralisation. The hydrated mineralisation is generally characterised by high-grade variability, slightly elevated Al 2O 3 and SiO 2, and occasionally anomalous gamma ray data. Primary mineralisation typically shows more consistent mineralisation compared to the hydrated zone, relatively higher grades, and less grade variability. CSA Global Assessment Following a review of the documentation and data supporting the Mineral Resource estimate, CSA Global considers that geological models for the Mount Webber deposits to be well understood by Atlas, and the interpretation of geology and mineralisation to be well constrained using all available data to support decisions. CSA Global considers that the manner in which the geological modelling was carried out does not represent a material risk to the ongoing development, mining or global value of the project. Mineral Resource estimation Statistics were reviewed for a suite of variables including Fe, SiO 2, Al 2O 3, P, S, and LOI. Histograms and summary statistics tables were compiled and reviewed for each variable in each geozone (estimation domain based on lithology and mineralisation wireframes). Histograms generally indicated a single population, and there is no reference to data requiring top/bottom cutting to control outliers. Block models were constructed in Vulcan software using a block size of 10 m(n) x 10 m(e) x 6 m(rl) and a rotation of 30. Grades and density in mineralised geozones were estimated by ordinary kriging (OK). Grades and density in waste geozones were estimated using inverse distance weighting (IDW). The chip percentage is estimated using inverse distance weighting to the power of 2 (IDW2) for all geozones. A hard boundary was used between each mineralisation lens. Search ellipses were orientated based on the orientation of the mineralisation, i.e. 30º with the first pass search range of 50 m(e) x 50 m(n) x 10 m(rl) and with second and third passes of 70 m(e) x 70 m(n) x 15 m(rl) and 90 m(e) x 90 m(n) x 20 m(rl), respectively. A minimum of 12 and a maximum of 24 samples were used to estimate the block grades for the first search pass. The minimum number of samples was reduced to 10 and eight for the second and third pass, respectively. A maximum of four samples per drillhole was used per block estimate with cell discretisation of 5 X by 5 Y by 2 Z. Octant-based searching was not used. Downhole geophysical density data was used to estimate density after undergoing validation and correction using dimensional density data sourced from DD holes. Based on the analysis, the estimated geophysical density values are corrected using the multiplying factor derived from regression analysis. The correction factor takes into account the moisture content and rugosity of the holes. Block grade estimation results were validated by means of visual comparison, statistical comparison against composite data, trend (swath) plots, and histograms. Validation of the block model showed good correlation of the input composite data to the estimated block grades. Correlated elements such as iron and silica were also checked to ensure the relationship is maintained after the estimation. Mineral Resources have been classified as Measured, Indicated and Inferred based on drillhole intercept spacing, geological confidence, grade continuity and estimation quality. Mineral Resource classification has taken into account the data spacing, distribution, continuity, reliability, quality and quantity of data. The input data is comprehensive in its coverage of the mineralisation and does not misrepresent in situ mineralisation. The definition of mineralised zones is based on geological understanding producing a robust model of mineralised domains. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

239 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets CSA Global Assessment Following a review of the documentation and data supporting the Mineral Resource estimate, CSA Global considers the geostatistical analysis, block modelling, grade estimation and classification to be reasonable for the Mount Webber Project and within CSA Global s expectations for deposits of these type. Risk is accounted for in the block model through the coding of cavities, water table (all resources at Mount Webber are above the water table), and the higher confidence parts of the model are considered well estimated with sufficient detail for long-term planning. CSA Global re-reported the Mineral Resource estimate from the block model and was able to reproduce the tonnage and metal estimate tabulated in the Atlas Mineral Resource Reports to within an acceptable tolerance. This gives confidence in Atlas s reporting procedures. CSA Global considers that the manner in which the Mineral Resource estimate was prepared does not represent a material risk to the ongoing development, mining or global value of the project Corunna Downs Mineral Resource estimate The Corunna Downs Project comprises the following deposits: Split Rock the Mineral Resource estimate is documented in a report dated January 2016; Runway the Mineral Resource estimate is documented in a report dated February 2016; Glen Herring the Mineral Resource estimate is documented in a report dated November 2016; Shark Gully the Mineral Resource estimate is documented in a report dated February 2016; and Razorback the Mineral Resource estimate is documented in a report dated May All of the above reports were prepared by Atlas. The Competent Person responsible for the Mineral Resource estimates is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Corunna Downs Mineral Resource estimate is shown in Table 9, reported above a cut-off grade of 50% Fe. No mining has taken place at any of the Corunna Downs deposits. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

240 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 9: Deposit Corunna Downs Mineral Resource estimate, 31 March 2018 JORC classification Tonnage (kt) Fe (%) SiO2 (%) Measured Split Rock Runway Glen Herring Shark Gully Razorback Corunna Downs Total - Al2O3 (%) P (%) S (%) LOI (%) Indicated Inferred 22,100 3, Subtotal Measured Indicated 25, , Inferred Subtotal , ,000 3, , Measured Indicated Inferred Subtotal Measured Indicated 8, Inferred Subtotal 300 9, Measured Indicated Inferred 5, Subtotal Measured 5, Indicated Inferred TOTAL 51,100 13,000 64, * Mineral Resource tonnages rounded to the nearest 100 kt. Data Collection Techniques Data used to prepare the Corunna Downs Mineral Resource estimate is sourced primarily from RCP drillholes. DD core was used for geotechnical work and density determination and was not generally used for analytical purposes or to verify RCP grades. The drilling is summarised in Table 10. Table 10: Corunna Downs drillhole database Prospect Hole type Split Rock (November 2013) Runway (18 February 2015) Glen Herring (7 October 2016) Shark Gully (2 November 2015) Razorback (January 2014) Total GRAND TOTAL CSA Global Report Nº R DD RC RCD Subtotal DD RC Subtotal DD RC Subtotal DD RC Subtotal DD RC Subtotal DD RC RCD No. of drillholes Total depth (m) ,388 19, , ,938 14, ,766 7, ,418 6, ,098 2,098 2,674 49, ,504 Atlas Iron Limited TARGET'S STATEMENT Page

241 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Drillhole collars were surveyed by licensed surveyors (MHR Surveyors, Perth) using a RTK differential GPS connected to an SSM network. Two collars were not surveyed at Runway. At Shark Gully, the 2015 infill drilling collar pick-ups were completed by a trained site geologist using DGPS. The collar locations are consistent with the topography model. Downhole surveys were attempted on all RCP and DD holes using gyroscopic survey methods. Readings were taken at 5 m intervals downhole using a SPT north seeking gyroscopic survey tool. For RCP holes, 3 4 kg RCP chip samples were collected predominately via a cone splitter for each 2 m interval in a pre-numbered calico bag to collect a nominal 4 6 kg sample. Samples are kept dry where possible; however, a proportion of below water table samples are reported as being moist or wet. Where RCP samples were large (>6 kg), they were crushed down to 3 mm and rotary split down to produce a smaller sample suitable for pulverising. Samples were dried at 105 C for hours and crushed to a nominal size of 3 mm, then pulverised to 90% passing 75 μm. RC logging records the abundance/proportion of specific minerals/material types and lithologies, hardness recorded by physical chip percent measurement, weathering and colour. Additionally, DD core was logged for density (dimensional tray method), geotechnical conditions, rock quality designation (RQD), recovery and structure. Each tray was photographed both wet and dry after core mark up and orientation. The entire lengths of RCP holes were logged in 2 m intervals and all drillholes were logged in fill. Where no sample was returned due to voids/cavities, it was recorded as such. All holes were downhole geophysical logged (or attempted) for natural gamma, resistivity, gamma density, calliper and magnetic susceptibility. Not all holes were open at depth which precluded 100% coverage of the drillholes. Samples were submitted to SGS Laboratory or Intertek in Perth and assayed for the extended iron ore suite (24 elements at SGS, 17 elements at Intertek) by XRF and a total LOI by thermogravimetric techniques. Samples were subjected to routine particle sizing analysis by the laboratory to ensure the pulverizing stage is achieving appropriate particle sizes for XRF analysis. This analysis showed that 95% of samples tested returned greater than the 90% passing 75 μm. Diamond twin analysis (where available) showed good precision where core recovery has been sufficient to provide a representative sample of the interval. Geophysical density measurements collected at 10 cm increments were composited to 2 m intervals to correspond with the sample length. Geophysical density measures the in situ density inclusive of moisture and porosity. Filtered and cleaned geophysical density was composited to 2 m and then estimated into the block model in a similar fashion to grades. A regression was applied to account for the moisture, porosity and hole rugosity present in the readings to derive a dry density. The regression has been calculated by comparing geophysical measurements in a DD hole with dry, DD core dimensional density measurements over the same intervals. Geophysical measurements taken in RCP and DD twin holes are also directly compared to account for differences due to downhole effects (rugosity). Dimensional density measurements were determined and used for regression with the geophysics. Density regression factors were applied globally to the Mineral Resources to derive the dry bulk density. At Razorback, geophysical density was estimated on a wet basis; however, a correction is applied to convert the geophysical density to an equivalent dry bulk density. The water table sits approximately 70 m below the ground surface and approximately 38% of the resource is located below water table. Atlas inserts commercially available CRMs at a set frequency of 1:20 (5% of total samples) within its sample batches. Several different standards across a range of grades are used to monitor analytical accuracy and precision. Acceptable levels of accuracy have been achieved with all CRMs reporting within two standard deviations of the certified mean grade for the main elements of interest. Duplicates are inserted at a frequency of 1:20 and analysis shows the data has acceptable precision. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

242 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The laboratory also inserts its own standards at set frequencies and monitors the precision of the XRF analysis. These results also reported well within two standard deviations of the mean grades for all main elements of interest. The laboratory also performs repeat analyses of sample pulps at a rate of 1:20 (5% of all samples). These results compare very closely with the original analysis for all elements. Analysis of field duplicate and laboratory pulp duplicates and repeats reveals that greater than 90% of pairs have less than 10% difference. Sampling precision is within acceptable limits and concurs with industry recommended practices. Atlas sent a selection of pulps to an umpire laboratory (Bureau Veritas, Perth) for verification by an independent laboratory. Comparison of results between laboratories did not reveal any issues and analytical precision was considered acceptable. LiDAR topographic data and imagery was collected by Outline Global Pty Ltd based on 10 cm resolution RGB imagery. Two metre vertical contour interval resolution was derived from stereoscopic imagery DTM. The aerial survey was flown on 16 March At Shark Gully, 2 m vertical contour interval resolution was available with 5 m DTM automatically derived from stereoscopic imagery. CSA Global Assessment CSA Global considers that data collection method, inclusive of drilling methods, data location methods, density, logging, sampling, analytical methods and topographic control, according to the documentation supplied, are largely consistent with industry standards. No perceived issues have been detected in the review completed by CSA Global. Data has been collected by RCP drilling methods which generally provide a high-quality sample. Logging, sampling and analytical techniques are considered appropriate, and adequate QC data appears to have been collected to allow the quality of this data to be assessed. CSA Global considers that the manner in which the data was collected does not represent a material risk to the ongoing development, mining or global value of the project. Geological Interpretation and Modelling Stratigraphy was interpreted mainly based on geochemical data, geological logging data, core photos, aerial photography, downhole gamma (where available) and geological mapping. The stratigraphic units were modelled, with the number varying between deposits. Four units were modelled at Shark Gully, 15 units were modelled at Runway. Stratigraphic units consisted of quartzite, shale, cherty BIF, siltstone, BIF, jaspilitic BIF, and ultramafic (not all units present in each deposit), generally steeply dipping to the west and trending in a north-north east direction. The mineralisation domain (geozone) is generally divided into two types: primary and hydrated mineralisation. The primary mineralisation contains relatively higher and less variable grades with good continuation along strike. The hydrated mineralisation typically has lower grade, is less continuous with higher variation in grades and overlies primary mineralisation. All mineralised domains were constrained using >=50% Fe and <15% SiO 2 cut-off grades. In some deposits, a surficial depleted zone was also modelled. CSA Global Assessment Following a review of the documentation and data supporting the Mineral Resource estimate, CSA Global considers the geological models for the Corunna Downs deposits to be well understood by Atlas, and the interpretation of geology and mineralisation to be well constrained using all available data to support interpretation decisions. CSA Global considers that the manner in which the geological modelling was carried out does not represent a material risk to the ongoing development, mining or global value of the project. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

243 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mineral Resource Estimation Statistics were reviewed for a suite of variables including Fe, SiO2, Al2O3, P, S, and LOI. Histograms and summary statistics tables were reviewed for each variable in each geozone (estimation domain based on geology and mineralisation wireframes). Histograms were generally single population, and there is no reference to data requiring top/bottom cutting to control outliers. Block models were constructed in Vulcan software using a block size of 20 m(n) x 20 m(e) x 5 m(rl) for all deposits except Razorback, which used a block size of 40 m(n) x 10 m(e) x 5 m(rl). Dynamic anisotropy was used for the primary material in several deposits, while constant search rotations were used for hydrated and models that did not use dynamic anisotropy. Grades and density (from geophysics) in mineralised geozones were estimated by OK. Grades and density (from geophysics) in waste geozones were estimated using IDW2. The chip percentage is estimated using IDW2 or OK for all geozones where available. Generally, hard boundaries were used between domains, though at Glen Herring the hydrated geozones were combined to estimate hydrated blocks, while in the primary, a combination of hard/soft boundaries were used. Search neighbourhood parameters are presented in Table 11. Table 11: Deposit Split Rock Shark Gully Razorback Glen Herring Runway Corunna Downs sample search neighbourhoods (grade estimation) Search pass Ranges Minimum Maximum x 100 x x 140 x x 180 x x 100 x 20 (P) 100 x 100 x 10 (H) x 140 x 30 (P) 140 x 140 x 15 (H) x 180 x 40 (P) 180 x 180 x 20 (H) X2.5 DH Spacing X3.5 DH Spacing X4.5 DH Spacing x 60 x 30(P) 80 x 60 x 10(H) x 70 x 40(P) 100 x 80 x 15(H) x 80 x 50(P) 120 x 100 x 20(H) x 80 x x 120 x 20 (P) 140 x 120 x 15 (H) x 160 x 30 (P) 180 x 160 x 20 (H) Maximum per drillhole Discretisation 4 5x5x2 4 5x5x2 4 5x5x2 4 5x5x2 4 5x5x2 Note: P = primary, H = hydrated. Downhole geophysical density data is used to estimate density after undergoing validation and correction using dimensional density data sourced from diamond holes. The correction factor takes into account the moisture content and rugosity of the holes. Based on the analysis, the estimated geophysical density values are corrected using multiplying factors derived for each deposit. Mineral Resource classification has taken into account data spacing and distribution, continuity, reliability, the water table (where applicable), and the quality and quantity of data. The input data is comprehensive in its CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

244 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets coverage of the mineralisation and does not misrepresent in situ mineralisation. The definition of mineralised zones is based on a of geological understanding producing a robust model of mineralised domains. The results of the validation of the block model shows good correlation of the input data to the estimated grades. Density and grade estimation results were validated by means of visual comparison along three different sections (along, across strike and elevations), statistical comparison against composite data, swath plots, and histograms. The correlated elements such as iron and silica were also checked to ensure the relationship is maintained after the estimation. CSA Global Assessment Following a review of the documentation and data supporting the Mineral Resource estimate, CSA Global considers that geostatistical analysis, block modelling, grade estimation and classification has been carried out in a competent manner. The grade continuity modelled is as expected for this style of deposit, and there are low grades in penalty elements (however no specifications sheet was reviewed by CSA Global). The block model validates well against input data and the classification is considered reasonable. Risks are documented in the reports for several deposits and often key risk criteria are coded into the model for downstream use. This is considered good practice. It is noted that grades are estimated into air blocks, which should be removed or re-set to absent to prevent misuse in mine planning. CSA Global re-reported the Mineral Resource estimate from the block model and was able to reproduce the tonnage and metal estimate tabulated in the Atlas Mineral Resource reports. This gives confidence in Atlas s reporting procedures. CSA Global considers that the manner in which the Mineral Resource estimate was prepared does not represent a material risk to the ongoing development, mining or global value of the project McPhee Creek Project Mineral Resource Estimate The Mineral Resource estimate for the McPhee Creek Project was publicly reported by Atlas on 13 August The Mineral Resource estimate includes the Main Range and Main Range West BIF deposits and the Crescent Moon CID. The Mineral Resource estimates were reported in accordance with the JORC Code (2012 Edition). The Competent Person for the Mineral Resource estimates is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The McPhee Creek Mineral Resource estimate is shown in Table 12, reported above a cut-off grade of 48.5% Fe. Table 12: Location Main Range Main Range West Crescent Moon McPhee Creek Total McPhee Creek Mineral Resource estimate, 31 March 2018 JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Measured Indicated 32, , Inferred Measured Indicated 4, Inferred Measured Indicated 4, , Inferred Measured 1,000 32, Indicated Inferred TOTAL 205,000 9, , Note: Measured Mineral Resource tonnages rounded to the nearest 100 kt. Indicated and Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

245 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Data Collection Techniques Data used to prepare the McPhee Creek Mineral Resource estimates is sourced primarily from RCP and DD drillholes. A total of 1,531 RCP holes for 151,103 m, 57 DD holes for 11,147 m and 41 DD tails for 5,370 m support the Mineral Resource estimates. Main Range West and Crescent Moon were drilled by RCP methods, whilst Main Range was drilled by RCP and DD methods. The project was owned by Giralia until March 2011, when it was acquired by Atlas. Drillhole collars were surveyed by licensed surveyors using differential GPS methods. Downhole surveys at Main Range and Main Range West were completed using a north seeking multi-shot gyroscopic tool, with hole azimuths and dips measured every 5 m to a high degree of accuracy. Downhole geophysical measurements were collected concurrently, comprising in situ density, calliper, magnetic susceptibility and natural gamma, with readings taken at 10 cm intervals. Drillholes at Crescent Moon collapsed soon after completion of drilling and downhole surveys were unable to be carried out. These holes were of shallow depth and vertical, therefore any unrecorded deviation would have minimal effect upon the Mineral Resource estimate. RC drilling conducted by Giralia was sampled at 1 m intervals. The drill samples were geologically logged onto paper templates after which the data was entered into Microsoft Excel templates. The spreadsheets were loaded into a structured query language (SQL) database by the Giralia database administrator. RCP drilling conducted by Atlas was sampled at 2 m intervals, with the drill samples geologically logged and data entered into field devices loaded with acquire field logging templates. Data was loaded into the centralised acquire drillhole database by the Atlas database administrator. Enforced data validation rules were employed at the data entry and database loading stages, with any validation errors interrogated and issues resolved. All RCP samples collected by Giralia were sourced from 1 m drillhole intervals, with the samples riffle split and the split fractions then composited to 2 m sample lengths. The 2 m composite samples were then re-split by riffle splitting, in order to reduce the total amount of sample sent for XRF analysis. Since Atlas acquired the project, 2 m RCP samples were collected in pre-numbered calico bags using cone splitters. DD core was sampled at 1 m intervals with the whole core sampled after geological logging, density measurements and photography were completed. Samples from the Giralia drilling were sent to Spectrolabs, located in Geraldton for sample preparation and analysis. The Atlas samples were sent to Ultratrace and later, SGS for sample preparation and analysis. Samples were dried at 105 C for up to 24 hours, then crushed to a nominal 3 mm size, and pulverised in an LM2 mill to 90% passing 75 µm. A 66 g pulp sample was taken and fused at 1,100 C for 10 minutes and poured into a platinum crucible prior to analysis by XRF. The iron ore suite of elements analysed by XRF included Fe, SiO 2, Al 2O 3, P, CaO, K 2O, MgO, MnO, S, TiO 2, Na 2O. A thermogravimetric measurement was completed for LOI at 1,000 C. Downhole geophysical measurements at Main Range were collected from most DD and RCP holes, capturing in situ density and calliper results. The density data did not account for rock porosity and rugosity (borehole smoothness), and it was therefore correlated with dry bulk density results from DD core. The dry bulk density results were measured by a modified form of the calliper method, where the entire core tray was weighed, the mass of the empty tray subtracted, and divided by the volume of core in the tray. A comparison of geophysical and calliper data resulted in a regression formula which was applied to the geophysical data. The geophysical values were multiplied by 0.96 to derive a dry bulk density value. These values were subsequently interpolated into the block model. No DD holes were drilled at Main Range West and Crescent Moon, hence regression of in situ against dry bulk densities was not possible. The Main Range regression formula was applied to the Main Range West model, and a more conservative regression calculation of 0.90 was applied to the Crescent Moon in situ densities to derive a dry bulk density. Atlas submitted CRMs and field duplicates into the sample stream at a rate of 1:20. Atlas note that the field duplicate XRF analyses mirror the original sample with only small differences between the calculated means. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

246 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas also indicate that the majority of results were around the expected mean and within two standard deviations of the expected mean, with some outliers. Additional QC results include laboratory repeats (pulp duplicates) with results showing the original and repeat results closely correlated. No twinned drilling of RCP and DD holes were carried out at McPhee Creek. Batches of pulp samples were sent from Spectrolabs to Ultratrace for umpire analyses with results showing no issues and confirming the Giralia sampling and sample analyses were suitable for use in the Mineral Resource estimate. Topographic data was obtained from an aerial survey flown in 2008 (Crescent Moon) and 2010 (Main Range/Main Range West), with 1 m contour data provided to Giralia who prepared the DTM. The datum of the survey matches the datum of the project data. CSA Global Assessment Following a review of the documentation and data supporting the Mineral Resource estimate, CSA Global considers that data collection method, inclusive of drilling methods, data location methods, density, logging, sampling, analytical methods and topographic control, according to the documentation supplied, are largely consistent with industry standards. Atlas s QC procedures appear to be robust and of industry standard, and the conclusions drawn by Atlas from the summarised QC results support the reporting of a Mineral Resource. Data has been collected by RCP and DD drilling methods which provide a high-quality sample. Logging, sampling and analytical techniques are considered appropriate, and adequate QC data appears to have been collected to allow the quality of this data to be assessed. CSA Global considers that the manner in which the data was collected does not represent a material risk to the ongoing development, mining or global value of the project. Geological Interpretation and Modelling Gœthite-hæmatite iron ore mineralisation at Main Range and Main Range West is hosted in BIF and in ferruginous laterite/canga. Iron ore mineralisation is predominantly stratabound within the BIF; however, nearsurface supergene enrichment and remobilisation has created zones of mineralisation crosscutting the stratigraphy. Areas of complex folding often contain substantial thicknesses of mineralisation, suggesting structural control and iron enrichment in synformal hinges. Mineralisation is bounded by fault zones along the east. The geological models were prepared from data collected from RCP and DD holes. For the Main Range and Main Range West models, a stratigraphic model was prepared as a base, and mineralisation zones interpreted based upon cut-off grades of >50% Fe and <15% SiO 2. Drill samples interpreted as mineralisation and with elevated TiO 2 and CaO were interpreted to fall within a hydrated zone. Depletion zones were also interpreted where iron was <50% fe. Mineralisation at Crescent Moon is a CID with a strike length of approximately 1,500 m and depth of approximately 15 m. Mineralisation is hosted within gœthite rich pisolites and contains localised volumes of clay pods. The deposit overlies a shale of the Corboy Formation, which has elevated Al 2O 3 and is therefore easy to distinguish in drill samples using the XRF analyses. Mineralisation domains were interpreted using cut-off grades of >50% Fe and <15% SiO 2 as a guide. All geological models were created following sectional interpretation using the geological logs and geochemistry of RCP and DD samples. Three-dimensional (3D) wireframe solids and surfaces were constructed based on the sectional interpretations. Vulcan software was used for all geological modelling, grade interpolation and reporting of Mineral Resources. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

247 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets CSA Global Assessment The geological interpretations for the McPhee Creek deposits appropriately considered stratigraphic and structural controls for the Main Range and Main Range West deposits, with the mineralisation models constrained by these controls. The geological interpretation for the Crescent Moon CID deposit also appropriately considers the control of the palaeochannel containing the pisolite iron mineralisation, with mineralisation domains using defined geochemical limits constrained within the pisolite model. CSA Global considers that the manner in which the geological modelling was carried out does not represent a material risk to the ongoing development, mining or global value of the project. Mineral Resource Estimation Drill sample data were initially flagged by stratigraphic and mineralisation domains, then composited to 2 m prior to statistical analysis and grade interpolation. Descriptive statistics was compiled for Fe, SiO 2, Al 2O 3, P, CaO, K 2O, MgO, MnO, S, TiO 2, Na 2O, LOI (1,000 C) and geophysical density, grouped by geozone field (estimation domain based on lithology and mineralisation wireframes). Normal scores variograms were modelled for the 12 elements and geophysical data for all geozones for Main Range and Crescent Moon. Main Range West contained insufficient number of samples to allow meaningful assessment of the variograms. Block models were constructed using the solids and surfaces representing the lithology and mineralisation domains to constrain and flag blocks within the block model. Parent block sizes were selected based on half the typical drillhole spacing and assumed mining bench height, with the Main Range and Main Range West block models rotated to represent the strike of mineralisation. The Crescent Moon block model is not rotated. Subblocking was used to adequately fill the wireframe volumes with blocks. The Main Range and Main Range West block models used a parent block size of 25 m(n) x 25 m(e) x 5 m(rl) while the Crescent Moon block model used a parent size of 12.5 m(n) x 25 m(e) x 5 m(rl). For the Main Range and Crescent Moon block models, grades were estimated by OK for all grade and geophysical variables. A hard boundary was used between mineralisation domains. The Main Range West block model was interpolated using IDW2. IDW2 was chosen because variograms were not modelled. Sample search parameters were determined following quantitative kriging neighbourhood analysis (QKNA), where parameters were optimised based upon the variogram model and local data distribution. Search ellipses were orientated according to the geometry of the mineralisation domain, with the ellipse radii doubled and tripled for the second and third estimation passes respectively. The in situ density values derived from the geophysical probing were interpolated into the block model using OK, after being composited to 2 m lengths and flagged according to mineralisation domain. The interpolated block density grades were corrected for moisture by applying a regression formula to each block estimate, with a reduction of 4% applied to the in situ density to derive the dry bulk density. Mineral Resources were classified based on drillhole spacing, nature and quality of the drilling and sampling methods, geological understanding and confidence, grade continuity, QAQC analysis, confidence in the estimate of the mineralised volume, results of the model validation and results of metallurgical testwork. The geological interpretations are based on a high-level of geological understanding of the deposits producing robust models of the mineralisation and stratigraphic domains. Measured Mineral Resources were defined at Main Range where the drilling density is 50 m x 50 m (or less), mineralisation displays strong continuity with low variability, is within the primary mineralisation zone and above the water table, is not geologically complex, and estimation results are robust. Indicated Mineral Resources were classified for Main Range and Crescent Moon where the drill spacing is 50 m x 100 m (or less), geological and grade continuity is good, the mineralisation is either primary or hydrated, the area is not geologically complex, and estimation quality is good. Inferred material is classified where the drill spacing is 50 m CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

248 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets x 100 m (or less), mineralisation continuity was poor, geology was considered to be complex, and estimation quality is considered poor. Main Range West was wholly classified as Inferred. Block model validation was completed by visual comparison of sample and block grades, statistical comparison of sample and block grades, swath plots, total assay checks and global change of support assessments. The Mineral Resource block models were reported above a cut-off grade of 48.5% Fe, supported by de-sliming processing technology which demonstrated that this cut-off grade will yield good recovery of product grade material to specification. CSA Global Assessment Following a review of the documentation and data supporting the Mineral Resource estimate, CSA Global considers that statistical and geostatistical analyses were carried out competently and the interpreted results support the Mineral Resource classification. The block model block sizes are appropriate for each deposit, and the blocks were correctly flagged according to geological and mineralisation domains. The use of OK for interpolating grade into Main Range and Crescent Moon is considered appropriate by CSA Global; however, CSA Global believe that OK could have been used for the Main Range West model instead of IDW2, by using variogram parameters and sample search parameters from the Main Range model. A material increase in confidence would not be expected by using OK for grade interpolation instead of IDW2; however, CSA Global consider OK to be a more robust estimation technique which is reliant upon the sample population rather than IDW2 which only considers distance to the sample. CSA Global considers that industry good practise has been adopted when forming a judgement on Mineral Resource confidence. The quality of the input data, confidence in the geological interpretation and sampling density were considered. CSA Global re-reported the Mineral Resource estimate from the block model and was able to reproduce the tonnage and metal estimate tabulated in the Atlas Mineral Resource Report. This gives confidence in Atlas s reporting procedures. CSA Global considers that the manner in which the Mineral Resource estimates were prepared does not represent a material risk to the ongoing development, mining or global value of the project Miralga Creek Project The Mineral Resource estimate for the Miralga Creek Project was publicly reported by Atlas on 25 May The technical report is dated 25 July The Mineral Resource estimate was classified and reported in accordance with the JORC Code (2012 Edition). The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Miralga Creek Mineral Resource estimate is shown in Table 13, reported above a cut-off grade of 50% Fe. Table 13: Miralga Creek Mineral Resource estimate, 31 March 2018 JORC classification Tonnage (kt)* Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Inferred 4, Total 4, * Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. Data Collection Techniques Data used to prepare the Miralga Creek Mineral Resource estimate is sourced primarily from RCP drillholes. A total of 45 RCP holes for 4,748 m was available to support preparation of the Mineral Resource estimate. Drillhole collars were surveyed by licenced surveyors (MHR Surveyors Perth) using a differential GPS instrument. Downhole surveys were completed using a gyroscopic survey tool, which was calibrated on site using a test stand and calibration hole. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

249 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Geological logging was completed for every sample. The entire lengths of the RCP holes were logged. Logging was both qualitative and quantitative in nature. Features that were logged included the abundance/proportion of specific minerals/material types and lithologies, hardness, weathering and colour. Sampling was completed using RCP drill rigs. A 4 6 kg sample was collected via a cone splitter for every 2 m interval directly into a pre-numbered calico bag which was submitted to SGS Laboratory in Perth for analysis. Sample recoveries were generally good. Samples were dried at 105 C for hours prior to being crushed to a nominal 3 mm size and pulverised to 90% passing 75 µm. Analysis for the iron ore suite (24 elements) was completed by XRF while total LOI was determined by thermogravimetric techniques. CRMs (1:20), field duplicates (1:20) and umpire laboratory analysis samples were used for external QC. Gamma density was attempted on all RCP holes. Topographic data was based on an aerial survey completed in April 2014 on 2 m resolution contours. CSA Global Assessment CSA Global considers that data collection methods, inclusive of drilling methods, data location methods, density, logging, sampling, analytical methods and topographic control, according to the documentation supplied, are largely consistent with industry standards. Data has been collected by RCP drilling methods which generally provide a high-quality sample, and recorded sample recoveries are high. Logging, sampling and analytical techniques are considered appropriate, and adequate QC data appears to have been collected to allow the quality of this data to be assessed. Field duplicate and CRM results demonstrate good sample precision and analytical accuracy respectively. CSA Global considers that the manner in which the data was collected does not represent a material risk to the ongoing development, mining or global value of the project. Geological Interpretation and Modelling The Miralga Creek stratigraphic model comprises a number of BIF, chert and shale units belonging to the Cleaverville Formation. Mineralisation is predominantly hosted within the upper and middle BIF units. Discontinuous mineralisation is hosted within the lower BIF. Mineralisation occurs in three separate zones at Miralga Creek. All three zones contain a thin layer of hydrated mineralisation from surface down to approximately 10 m. This zone is characterised by elevated titanium and alumina grades and erratic iron grades. Primary mineralisation underlies the hydrated mineralisation and follows bedding. Sectional interpretation of stratigraphic domains was completed using surface geological mapping, drillhole logging and drillhole geochemistry. These interpretations were used to generate stratigraphic surfaces. Mineralisation domains were then interpreted based on cut-off grades of >50% Fe and <15% SiO 2. The combination of stratigraphic and mineralisation interpretations defined geozones, which were used to control grade estimation. Two hydrated domains (geozones 504 and 506) and two primary mineralisation domains (geozones 202 and 204) were defined. CSA Global Assessment Surface mapping and drilling has been completed to support the stratigraphic and mineralisation interpretations. Stratigraphic interpretations appear well considered and the use of >50% Fe and <15% SiO 2 cutoff grades to define the limits to the mineralisation appears broadly appropriate. All stratigraphic and mineralisation wireframes and drillholes were loaded into Datamine for review. The mineralisation interpretations were consistent with the documented method of construction, largely CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

250 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets encapsulating the >50% Fe and <15% SiO 2 material. Three coherent zones of elevated Fe mineralisation were apparent. CSA Global considers that the manner in which the geological modelling was carried out does not represent a material risk to the ongoing development, mining or global value of the project. Mineral Resource Estimation Variography was completed in Supervisor software for geozone 204. Fe, SiO 2, Al 2O 3, P, LOI, MnO, CaO, MgO, TiO 2, K 2O, S, Na 2O and geophysical density variograms were created and modelled. Geozone 204 was divided into two structural zones (S1 and S2). No variograms were modelled in Geozones 202, 504 and 506 due to a lack of data. Geozone 202 adopted the same parameters as Geozone 204 (S2) due to similar bedding and mineralisation orientations, while variogram parameters were not used for Geozones 504 and 506 given that kriging techniques were not applied. QKNA was carried out to optimise search parameters and block sizes. Two to three search passes were used, with the search ellipse dimensions varying between geozones. A fixed search ellipse was used for each geozone. A minimum of 6 12 samples and a maximum of 36 samples were used to inform the estimate. The maximum number of samples per drillhole was set to four. If any blocks were left unestimated, mean grades (or densities) were applied for that geozone. Block models were constructed in Vulcan software using a parent block size of 20 m(n) x 20 m(e) x 5 m(rl). Subblocks of 5 m(n) x 5 m(e) x 2.5 m(rl) were created to honour boundary positions. Geozones 202 and 204 were estimated by OK methods. A hard boundary was used between each geozone. Hydrated geozones and waste zones were estimated using IDW2 methods. A discretisation mesh of 5 x 5 x 2 was used for all blocks. A regression was applied to the estimated (geophysical) density to determine the dry in situ bulk density. All Mineral Resources were classified as Inferred based on drill spacing, data quality, geological and grade continuity, and confidence in the estimation. Block model validation was completed by visual comparison of sample and block grades, statistical comparison of sample and block grades per geozone, comparison of composite and block model grade histograms, swath plots, and change of support (comparison of the theoretical block grade distribution with the composite grade distribution and actual block grade distribution). CSA Global Assessment CSA Global considers that geostatistical analysis, block modelling, grade estimation, and classification has been carried out in a competent manner. CSA Global re-reported the Mineral Resource estimate from the block model and was able to reproduce the tonnage and metal estimate tabulated in the Atlas Mineral Resource Report. This gives confidence in Atlas s reporting procedures. CSA Global considers that the manner in which the Mineral Resource estimate was prepared does not represent a material risk to the ongoing development, mining or global value of the project Davidson Creek Hub Project Mineral Resource Estimate The Mineral Resource estimate for the Davidson Creek Hub Project was publicly reported by Atlas on 13 August 2014 with three of the four Mineral Resources prepared by Snowden in late 2011 for FerrAus, the previous owners of three of the deposits in the project. The Mineral Resource estimate includes the Miji Miji, Robertson Range, Davidson Creek and Mirrin Mirrin deposits. The Miji Miji Mineral Resource was prepared by Atlas. The Mineral Resource estimates were classified CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

251 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets and reported by Atlas Iron in accordance with the JORC Code (2012 Edition). The Competent Person for the Miji Miji Mineral Resource estimate is Leigh Slomp, and the Competent Person for the Robertson Range, Davidson Creek and Mirrin Mirrin Mineral Resource estimates is John Graindorge from Snowden. The Davidson Creek Hub Mineral Resource estimate which was publicly reported in August 2014 is shown in Table 14, reported above a cut-off grade of 50% Fe. Table 14: Deposit Davidson Creek Hub Project Mineral Resource estimate, 31 March 2018 Tonnage JORC classification Fe (%) SiO2 (%) Al2O3 (%) (kt) Miji Miji Measured Indicated - Robertson Range Inferred Measured Indicated P (%) S (%) LOI (%) ,800 27,900 47, Inferred Measured 15,100 15, Davidson Creek Indicated Inferred Measured 224,000 34, Mirrin Mirrin Indicated Inferred Measured 68,000 11,500 43, Davidson Creek Hub Total Indicated Inferred 339,100 94, TOTAL 476, Note: Mineral Resource tonnages rounded to the nearest 100 kt CSA Global was able to reproduce the tonnage and grade estimates for all deposits except Robertson Range, where minor discrepancies were noted. The Mineral Resource estimate reported by CSA Global above a cut-off grade of 50% Fe is shown in Table 15. The differences are not material. Table 15: Deposit Davidson Creek Hub Project Mineral Resource estimate, 31 March 2018 JORC Tonnage Fe (%) SiO2 (%) Al2O3 (%) classification (kt) Measured Miji Miji - P (%) S (%) LOI (%) Indicated Inferred 32, Measured Indicated Inferred 36,700 38,300 15, Davidson Creek Measured Indicated 15, , Mirrin Mirrin Inferred Measured Indicated 34,900 68, Inferred Measured Indicated 11,500 52, , Inferred 94, TOTAL 476, Note: Mineral Resource tonnages rounded to the nearest 100 kt Robertson Range Davidson Creek Hub Total CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

252 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Data Collection Techniques Data used to prepare the Davidson Creek Hub Mineral Resource estimates is sourced primarily from RCP and DD drillholes. A total of 2,109 RCP holes for 239,096 m and 176 DD holes for 21,233 m support the Mineral Resource estimate. Davidson Creek, Robertson Range and Mirrin Mirrin were drilled by RCP and DD methods, whilst Miji Miji was drilled by RCP methods only. Drillhole collars were surveyed by licensed surveyors using differential GPS methods. Drillholes at Davidson Creek, Robertson Range and Mirrin Mirrin were not downhole surveyed, with the exception of eight holes at Robertson Range, comprising 12% of all holes, and 13 DD holes at Mirrin Mirrin, which were surveyed at 30 m intervals. These holes are all vertical and the majority are over 50 m in depth, with many exceeding 100 m depth. The majority of the RCP holes at Miji Miji were downhole surveyed using a north seeking gyroscopic tool with readings taken every 5 m. RC and DD drilling were sampled at 2 m intervals, with the DD samples locally adjusted to reflect lithological contacts. For Davidson Creek, Robertson Range and Mirrin Mirrin, the drill samples were geologically logged and loaded into a Microsoft Access database by FerrAus. Data validation rules were employed when the data was loaded into Datamine, with any validation errors interrogated and issues resolved. During the Miji Miji drilling, the geological logs were entered into field laptops and then transferred into an acquire database managed in Atlas s Perth office. All RCP samples were sourced from 2 m drillhole intervals and passed through a cone splitter. RCP samples were collected in pre-numbered calico bags. The water table at Davidson Creek, Robertson Range and Mirrin Mirrin is interpreted to be between 35 m and 45 m which resulted in a large number of wet RCP samples. The water table at Miji Miji is located above the zones of mineralisation however wet samples were not recorded. RCP samples from Miji Miji were weighed and sample recoveries recorded, with most deemed to be good. No sample recoveries were recorded for the RCP holes from the other three deposits. DD drill core was sampled at 2 m intervals with HQ size half core and NQ size full core samples taken, after geological logging, density measurements and photography were completed. Samples were sent to either ALS, SGS or Ultratrace Laboratories for sample preparation and analyses. The samples were dried at 105 C, then crushed and pulverised to 85 90% passing 75 µm. A pulp sample was taken and fused with flux to form a glass bead prior to analysis by XRF. The iron ore suite of elements analysed by XRF included Fe, SiO 2, Al 2O 3, P, CaO, K 2O, MgO, MnO, S, TiO 2, Na 2O. A thermo-gravimetric measurement was taken for LOI. Density measurements were collected at Davidson Creek, Robertson Range and Mirrin Mirrin from DD core which were wax coated, and densities measured using the water displacement method. Density measurements from Davidson Creek totalled 402, while 477 measurements were taken at Robertson Range and 376 at Mirrin Mirrin. Downhole geophysical records for in situ density from six RCP holes at Davidson Creek were also available but not used as part of the Mineral Resource estimate. Downhole geophysical measurements for in situ density were recorded from some holes at Miji Miji but the quantity regarded as insufficient to support meaningful analysis. The absence of DD holes at Miji Miji prevented any regression formulae to be produced. FerrAus submitted CRMs into the sample stream at Davidson Creek, Robertson Range and Mirrin Mirrin at a rate of 1:25. FerrAus also indicated the majority of results were around the expected mean and within three standard deviations of the expected mean, with some outliers (<1% of total CRM results). Field duplicates were collected from the cone splitter at a rate of 1:15. The Competent Person believes a reasonable sampling and assaying precision was achieved, after consideration of the number of samples taken from wet ground. Nine DD holes at Davidson Creek, eight at Robertson Range and 13 at Mirrin Mirrin were completed as twins to RCP drillholes to test the validity of the wet RCP samples, with the DD holes typically drilled within 5 m of the RCP hole. The Mirrin Mirrin twin drilling results suggest a loss of fine-grained gœthite sample material from the CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

253 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets wet RCP samples although the grade difference is minor. Discussion was not provided by Atlas for the other Mineral Resource estimates. Overall, the DD holes showed a reasonable comparison with the corresponding RCP hole, especially within the mineralised interval and no material difference identified between the drilling methods. For the Miji Miji drilling, Atlas inserted CRMs and field duplicates at a rate of 1:20. The Competent Person deemed the QC results to be of acceptable precision and analytical accuracy to allow the assay data to be used to support the Mineral Resource estimate. Topographic data was obtained from an aerial survey flown in 2007 (Davidson Creek and Robertson Range) and 2008 (Mirrin Mirrin) with 2 m contour data provided to FerrAus who prepared the DTM. Topographic contours for Miji Miji were derived from a gravity survey in 2007, with contours provided at a resolution of 6 m. CSA Global Assessment CSA Global considers that data collection methods, inclusive of drilling methods, data location methods, density, logging, sampling, analytical methods and topographic control, according to the documentation supplied, are largely consistent with industry standards. Atlas s QC procedures appear to be robust and of industry standard, and the conclusions drawn by Atlas from the summarised QC results support the reporting of a Mineral Resource. Data has been collected by RCP and DD drilling methods. The DD methods provide a high-quality sample. Although the field duplicate and twin drilling results from wet RCP samples from Davidson Creek, Robertson Range and Mirrin Mirrin suggest the wet sampling has not had a significant impact upon the quality of sampling, CSA Global believe there has been insufficient QC and statistical analyses upon the wet RCP samples. Logging and analytical techniques for the Davidson Creek Project are considered appropriate, and adequate QC data appears to have been collected to allow the quality of this data to be assessed. The absence of downhole surveys supporting the Davidson Creek, Robertson Range and Mirrin Mirrin Mineral Resource estimates presents a risk to the deeper volumes of the Mineral Resources, with the location of drill samples lacking quality assurance. There are Indicated Mineral Resources at depths of >100 m and Measured Mineral Resources at depths between 50 m and 100 m, which are potentially susceptible to volumetric and grade changes once correct sample locations are applied to the block model. However, a cross sectional review of the block model suggests any sample location adjustments will not make a material difference to the grade and tonnage distribution. CSA Global considers that the manner in which the data was collected does not represent a material risk to the ongoing development, mining or global value of the project. Geological Interpretation and Modelling Hæmatite-gœthite mineralisation at the Davidson Creek Hub Project deposits occurs within the Mount Newman and West Angeles members of the Marra Mamba Formation, with the majority of mineralisation in the Mount Newman Member. The deposits occur along the northern and eastern limbs of a regional scale anticline. Davidson Creek and Mirrin Mirrin are located along strike from one another and have a combined strike length of 9.7 km (Robertson Range 2.3 km, and Miji Miji 6.3 km). The Davidson Creek and Mirrin Mirrin mineralisation is not continuous along strike with localised faulting offsetting mineralisation into distinct prospects. Lesser mineralisation occurs in the stratigraphically overlying West Angeles Member, and angular hæmatite-gœthite clasts form detrital mineralisation in the transported cover. Mineralisation at the Robertson Range deposit is comprised of continuous hæmatite-gœthite lenses hosted within the Mount Newman Member, with thickness varying from 25 m to 50 m. Discrete lenses of hæmatitegœthite occur within the overlying West Angeles Member with thickness up to 30 m, and detrital mineralisation comprises angular hæmatite-gœthite clasts at the southern end of the deposit, with thickness up to 50 m. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

254 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mineralisation at Miji Miji is not continuous along strike with primary mineralisation dominated by finely bedded hæmatite, sometimes of specular form. Gœthite occurs in lesser amounts within the hydrated zone. The geological models were prepared from data collected from RCP and DD holes. For the Robertson Range, Davidson Creek and Mirrin Mirrin models, a stratigraphic model was prepared as a base, and mineralisation zones interpreted based on a cut-off grade of >50% Fe, and geological logs of drill samples. For the Miji Miji model, a stratigraphic model was prepared as a base, and mineralisation zones interpreted based upon cut-off grades of >50% Fe and <15% SiO 2. Drill samples which were considered as mineralisation with elevated TiO 2 concentrations and fluctuating SiO 2 and Al 2O 3 concentrations, were interpreted to fall within a hydrated zone. Depletion zones were interpreted where Fe was <50%. All geological models were created from sectional interpretation of the geological logs and geochemistry of RCP and DD samples, with 3D wireframe solids and surfaces constructed. Datamine software was used by Snowden (Robertson Range, Davidson Creek and Mirrin Mirrin models) and Vulcan software by Atlas (Miji Miji) for all geological modelling, grade interpolation and reporting of Mineral Resources. CSA Global Assessment The geological interpretations for the Davidson Creek Hub deposits appropriately considered stratigraphic and structural controls for the deposits, with the mineralisation models constrained by these controls. CSA Global considers that the manner in which the geological modelling was carried out does not represent a material risk to the ongoing development, mining or global value of the project. Mineral Resource Estimation Drill sample data was initially flagged by stratigraphic and mineralisation domains, then composited to 2 m lengths prior to statistical evaluation of data and grade interpolation. Descriptive statistics were compiled for Fe, SiO 2, Al 2O 3, P, CaO, K 2O, MgO, MnO, S, TiO 2, Na 2O and LOI (1,000 C), grouped by mineralisation domain. Composited drill data from Davidson Creek, Robertson Range and Mirrin Mirrin were then unfolded into planar space prior to variography, with traditional semi-variograms modelled for the 12 elements. Selected secondary grade variables were top-cut prior to variography and grade interpolation. No top-cuts were applied to Miji Miji composited samples prior to variography. Block models were constructed using the solid models and surfaces representing the stratigraphic and mineralisation domains to constrain and flag blocks. Parent block sizes were selected based on half the typical drillhole spacing and the assumed mining bench height. Sub-blocking was used to adequately fill the wireframe volumes with blocks. The Davidson Creek block model used a parent block size of 25 m(n) x 50 m(e) x 4 m(rl), the Robertson Range block model used a parent size of 25 m(n) x 25 m(e) x 4 m(rl), the Mirrin Mirrin block model used a parent size of 25 m(n) x 50 m(e) x 4 m(rl) and the Miji Miji block model used a parent size of 50 m(n) x 100 m(e) x 5 m(rl). The Davidson Creek, Robertson Range and Mirrin Mirrin block models were unfolded prior to grade interpolation by OK. A hard boundary was used between mineralisation domains. Sample search parameters were determined from the variogram models. Search ellipses were orientated according to the geometry of the mineralisation domain, with the ellipse radii doubled and trebled for the second and third estimation passes respectively. A minimum of 10 and maximum of 50 samples were used for any block estimate, with search radii for Davidson Creek of 150 m(x) x 100 m(y) x 20 m(rl), Robertson Range of 70 m(x) x 70 m(y) x 20 m(rl), and Mirrin Mirrin of 150 m(x) x 150 m(y) x 25 m(rl). The Miji Miji block model was interpolated using IDW2, with a minimum of 12 and maximum of 36 samples used per block estimate. Search radii of 450 m (major direction) by 175 m x 30 m were used, with the major radius approximately 2.5x the drill spacing. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

255 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Dry bulk density values for all measured samples were flagged by stratigraphic and mineralisation domain, and a statistical analysis completed to determine the average density per domain. The average density per domain was applied to the block model. The Miji Miji domains utilised the density values from the Davidson Creek model. Mineral Resources were classified as Measured, Indicated and Inferred based on drillhole spacing, nature and quality of the drilling and sampling methods, geological understanding and confidence, grade continuity, QAQC analysis, confidence in the estimate of the mineralised volume, results of the model validation and results of metallurgical testwork. Measured Mineral Resources were defined at Robertson Range and Davidson Creek within hard-cap mineralisation within the Mount Newman Member <100 m deep where the drilling density is 50 m x 50 m (or less). Indicated Mineral Resources were classified for Robertson Range, Davidson Creek and Mirrin Mirrin where drill spacing is 100 m x 50 m (or less) and where the mineralisation displays good continuity. Some Measured volumes were downgraded to Indicated where there was structural complexity or poor geological continuity. Inferred Mineral Resources were classified where the drill spacing is >100 m x 50 m. Miji Miji was wholly classified as Inferred. Block model validation was completed by visual comparison of sample and block grades, statistical comparison of sample and block grades and swath plots. The Mineral Resource models were reported above a cut-off grade of 50% Fe, supported by metallurgical testwork which demonstrated that this cut-off grade will yield good recovery of product grade material to specification. CSA Global Assessment CSA Global consider that statistical and geostatistical analysis was carried out competently and the interpreted results support the Indicated and Inferred Mineral Resource classifications. CSA Global believes there has been insufficient QC data to support use of wet RCP samples. Local block estimates, particularly within the Measured volumes below the water table, should be treated with caution. The block model block sizes are considered large in the easting direction at Davidson Creek within the Measured volumes, where they match the drill spacing, which will have resulted in excessive smoothing of the block grades. The blocks were correctly flagged according to stratigraphic and mineralisation domains. The use of OK for interpolating grade into the deposits is considered appropriated by CSA Global and the use of IDW2 to interpolate grade into the Miji Miji model is appropriately reflected by the Inferred classification. CSA Global considers that industry good practice has been adopted when forming a judgement on Mineral Resource confidence. The quality of the input data, confidence in the geological interpretation and sampling density were considered. CSA Global attempted to re-report the Mineral Resource estimate from the block models and was able to reproduce the Mineral Resource estimate tabulated for Miji Miji, Davidson Creek and Mirrin Mirrin, as publicly reported in August CSA Global was not able to exactly reproduce the Mineral Resource estimate for Robertson Range, however the difference is not material. CSA Global also notes that the Davidson Creek, Robertson Range and Mirrin Mirrin Mineral Resources reported publicly in 2014 were not accompanied by JORC Table 1 and a summary discussion as required under ASX Listing Rule Atlas has all necessary documentation however to support these Mineral Resources being reported in accordance with JORC (2012). CSA Global considers that the manner in which the Mineral Resource estimates were prepared does not represent a material risk to the ongoing development, mining or global value of the project. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

256 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Western Creek Project All Mineral Resources presented from Section to were subject to a lower level of assessment that those presented from Sections to A lower level of technical assessment was considered justified given the perceived materiality of each project with regard to Atlas s total project portfolio. CSA Global did not import the block models, drillhole database and geological interpretations into a 3D software package to review the work. A judgement was made on the technical merit of the work following a review of publicly available documentation and technical reports provided by Atlas. The Mineral Resource estimate for the Western Creek Project is shown in Table 16. Table 16: Western Creek Project Mineral Resource estimate, >50% Fe, 31 March 2018 Location JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Western Creek Inferred 22, Western Ridge Inferred 47, Homestead Inferred 10, Total Inferred 79, Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the Western Creek Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Western Creek Mineral Resource estimate was completed around June 2013, with the associated technical report dated 21 August The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Western Ridge Mineral Resource estimate was completed around October 2013, with the associated technical report dated 18 October The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. CSA Global review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Homestead Mineral Resource estimate was completed around March 2013, with the associated technical report dated 24 June The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Hickman Project The Mineral Resource estimate for the Hickman Project is shown in Table 17. Table 17: Hickman Project Mineral Resource estimate, >50% Fe, 31 March 2018 Location JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Shoemaker Hale-Bopp Inferred 40, Inferred 11, Halley Inferred 10, Levy Inferred 9, Total Inferred 70, Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the Hickman Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

257 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The Shoemaker Mineral Resource estimate was completed in March 2013, with the associated technical report dated 28 August The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Halley, Levy and Hale-Bopp Mineral Resource estimates were completed in October 2011, with the associated technical report dated November The Mineral Resource estimates were classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Jimblebar Project The Mineral Resource estimate for the Jimblebar Project is shown in Table 18. Table 18: Jimblebar Project Mineral Resource estimate, >50% Fe, 31 March 2018 Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Indicated 41, Inferred 6, Jimblebar Range Inferred 13, Caramulla South Inferred 9, Indicated 41, Inferred 28, TOTAL 69, Location McCameys North Jimblebar Project Total JORC classification Note: Indicated Mineral Resource tonnages rounded to the nearest 100 kt. Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the Jimblebar Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The McCameys North Mineral Resource estimate was completed around June 2011, with the associated technical report dated June The Mineral Resource was classified as Indicated and Inferred and reported above a cutoff grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Jimblebar Range Mineral Resource estimate was completed around September 2012, with the associated technical report dated 28 October The Mineral Resource was classified as Indicated and Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Caramulla South Mineral Resource estimate was completed around October 2013, with the associated technical report dated 24 October The Mineral Resource was classified as Indicated and Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

258 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets West Pilbara Project The Mineral Resource estimate for the West Pilbara Project is shown in Table 19. Table 19: West Pilbara Project Mineral Resource estimate, >50% Fe, 31 March 2018 Location JORC classification Anthiby Well Inferred Total Inferred Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) 38, , Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the West Pilbara Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Anthiby Well Mineral Resource estimate was completed around December 2009, with the associated technical report dated December The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Warrawanda Project The Mineral Resource estimate for the Warrawanda Project is shown in Table 20. Table 20: Warrawanda Project Mineral Resource estimate, >53% Fe, 31 March 2018 Location JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Wishbone Inferred 24, Total Inferred 24, Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the Warrawanda Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Wishbone Mineral Resource estimate was completed around June to September 2011, with the associated technical report dated September The Mineral Resource was classified as Inferred and reported above a cut-off grade of 53% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Pardoo Project The Mineral Resource estimate for the Pardoo Project is shown in Table 21. Table 21: Pardoo Project Mineral Resource estimate, >53% Fe, 31 March 2018 Location JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Clare Floyd Inferred 1, Inferred 6, Isobel Inferred 1, Willy Inferred 1, Total Inferred 9, Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the Pardoo Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Clare and Floyd Mineral Resource estimates were completed around May 2013, with the associated technical report last edited 6 June The Mineral Resource was classified as Inferred and reported above a CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

259 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets cut-off grade of 50% Fe in the technical report, however in the ASX Announcement dated 13 August 2014, a cutoff grade of 53% Fe was adopted. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Isobel Mineral Resource estimate was completed around June 2009, with the associated technical report dated September The Mineral Resource was classified as Inferred and reported above a cut-off grade of 53% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Willy Mineral Resource estimate was completed around late The associated technical report is not dated; however, the Mineral Resource is reported as at January The Mineral Resource was classified as Inferred and reported above a cut-off grade of 53% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Abydos Project The Mineral Resource estimate for the Abydos Project is shown in Table 22. Table 22: Abydos Project Mineral Resource estimate, >50% Fe, 31 March 2018 Location JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Sandtrax Inferred 1, Avalon Point Inferred 1, Total Inferred 2, Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for the Abydos Project was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August 2014, which included Cove, Contacious, Leightons, Mettams, Mullaloo, Sandtrax, Scarborough, Trigg and Avalon Point deposits. Mining depletion has occurred after this announcement, however, leading to continued reduction in Mineral Resources. Mineral Resources remain at the Sandtrax and Avalon Point deposits only. The Competent Person for the Mineral Resource estimates is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. The Sandtrax Mineral Resource estimate was completed around June 2012, with the associated technical report dated June The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards. The Avalon Point Mineral Resource estimate was completed around October 2012, with the associated technical report dated 21 August The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Mid West Project The Mineral Resource estimate for the Mid West Project is shown in Table 23. Table 23: Mid West Project Mineral Resource estimate, >50% Fe, 31 March 2018 Location JORC classification Tonnage (kt) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) Beebyn Total LOI (%) Inferred 7, Inferred 7, Note: Inferred Mineral Resource tonnages rounded to the nearest 1,000 kt. The Mineral Resource estimate for Beebyn was publicly reported in accordance with the JORC Code (2012 Edition) by Atlas on 13 August The Competent Person for the Mineral Resource estimate is Leigh Slomp. Leigh Slomp is a full-time employee of Atlas. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

260 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The Beebyn Mineral Resource estimate was completed around December 2007, with the associated technical report dated 11 December The Mineral Resource was classified as Inferred and reported above a cut-off grade of 50% Fe. Review of the documentation indicates that the processes applied when preparing the Mineral Resource estimate are consistent with industry standards Ridley Project The Mineral Resource estimate for the Ridley Project was publicly reported by Atlas on 26 November The associated technical report is dated 1 December There has been no additional work completed on the project since the time of the resource estimation and no material changes have occurred. The Mineral Resource estimate was classified and reported in accordance with the JORC Code (2004 Edition) in 2008 and has not been updated or re-reported in accordance with the JORC Code (2012 Edition) on the basis that the information has not materially changed since it was last reported. The CP still concludes that there are reasonable prospects for eventual economic extraction of the deposit over the multi-decade timeframe relevant for large bulk commodity projects such as magnetite iron ore. The Competent Person for the Mineral Resource estimate is Malcolm Titley. Malcolm Titley was a full-time employee of CSA Global when the Mineral Resource estimate was prepared. The following review was completed by CSA Global personnel with no previous involvement with the project. The Ridley Mineral Resource estimate is shown in Table 24, reported above a cut-off grade of 15% Davis Tube Recovery (DTR). Concentrate grades are shown in Table 25. Table 24: Ridley Mineral Resource estimate (DTR and head grades), 31 March 2018 Tonnage (Bt)* DTR (%) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Indicated Inferred Total JORC classification * Indicated and Inferred Mineral Resource tonnages rounded to the nearest 0.01 Bt. Table 25: Ridley Mineral Resource estimate (concentrate grades), 31 March 2018 JORC classification Tonnage (Bt)* DTR (%) Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI (%) Indicated Inferred Total * Indicated and Inferred Mineral Resource tonnages rounded to the nearest 0.01 Bt. The Ridley Mineral Resource is not currently being regularly reported by Atlas. The fact that the BIF contains crocidolite (an asbestiform mineral) and is most likely negatively impacted from an economic beneficiation perspective (assumed very high bond work index, fine grind size and less than 40% weight recovery, based on similar projects), potentially limits the near-term economic viability of this deposit. Data Collection Techniques Data used to prepare the Ridley Mineral Resource estimate is sourced primarily from DD and RCP drillholes. A total of 161 holes for 35,943 m was extracted from the database to prepare the Mineral Resource estimate. This includes 95 DD holes for 24,690 m and 66 holes for 11,253 m. RC holes were completed using a face-sampling hammer and DD holes were primarily NQ size. RCP methods were primarily used from 2006 to 2007, and DD methods were primarily used in Approximately 70% of the data was collected in 2008 and the remaining 30% was collected from 2006 to Collars were located with a differential GPS instrument and a gyroscope was generally used to survey drillholes downhole. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

261 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets All drillholes were geologically logged by the geologist as soon as practicable after the completion of the hole. DD core was oriented at the time of drilling using either an orientation spear or a Ballmark orientation tool. Logging was both qualitative and quantitative in nature. The presence and quantity of magnetite and a description of the colour and scale of the chert layering was recorded. Percentages of the other minerals present were recorded as well as a brief description of the rock being logged. An assessment of the level of weathering was also made. All core was photographed. Core was generally sampled for analysis as 4 m quarter core composites for the entire length of the hole. RCP samples were also taken as 4 m composites. Documentation describing sampling and analytical methods from 2006 to 2007 was not provided to CSA Global. All samples for the 2008 program were submitted to ALS Laboratory in Karratha for primary crushing to 100% passing 3.5 mm. A 1 kg subsample was taken for each sample and dispatched to the ALS facility in Malaga, Perth. Samples were then pulverised for head sample chemical analysis and DTR testwork (P80 sizing of 30 µm). The concentrate from the DTR testwork was then dried and subject to chemical analysis. The head and concentrate samples were analysed by fused disc XRF. At the head grade analysis stage, the magnetic susceptibility for each sample was measured using Magnasat. Magnasat measurements were taken prior to DTR testwork. If the Magnasat reading indicated <10% magnetite was present, no DTR test was completed. Quarter core duplicate samples (1:25), CRMs (1:25), and umpire laboratory analysis (1:20) samples were used for external QC. Although some issues were noted with the QC results, none were considered to have a material effect on the Mineral Resource estimate. Density measurements were routinely taken at a rate of one sample every drill run using the water immersion method. A total of 22,355 measurements were available to assist with the preparation of the Mineral Resource estimate. CSA Global Assessment CSA Global considers that data collection methods, inclusive of drilling methods, data location methods, density, logging, sampling, and analytical methods, according to the documentation supplied, are largely consistent with industry standards. Data has been collected by RCP and DD drilling methods which generally provide a high-quality sample. Logging, sampling and analytical techniques are considered appropriate, and adequate QC data appears to have been collected to allow the quality of this data to be assessed. Although some issues with QC results were noted, none are considered to have a material effect on the Mineral Resource estimate. CSA Global considers that the manner in which the data was collected does not represent a material risk to the ongoing development, mining or global value of the project. Geological Interpretation and Modelling Mineralisation occurs as magnetite-bearing BIF at the Ridley Project. The BIF units predominantly consist of magnetite and silica, with accessory hæmatite, minor carbonate, biotite and members of the amphibole group including actinolite, riebeckite, crocidolite, grunerite and amosite. Magnetite if generally fine-grained and occurs as discrete cm bands intercalated with chert and jaspilite. In areas of strong deformation, the magnetite has been remobilised and occurs as disseminations within the chert. Within the zone of weathering, which is in the order of 20 m to 100 m, the magnetite has been partially or completely oxidised to hæmatite and gœthite. Five steeply dipping BIF units were modelled at the Ridley Project as follows, listed from hangingwall to footwall: Jaspilite BIF Breccia Unit (JBB); CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

262 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Thickly Bedded Jaspilite Unit (TBJ); Central Jaspilite Unit 1 (CJP1); Central Jaspilite Unit 2 (CJP2); and Mixed BIF Unit (MBF). Sectional interpretation of stratigraphic domains was completed using surface geological mapping, drillhole logging and drillhole geochemistry. A high degree of geological continuity exists, evidenced through surface mapping of good exposures and drillhole logging and geochemistry. In addition to the BIF units, a weathering surface was modelled based largely on DTR results and recoverable Fe in the concentrate. Above this surface low DTR values are recorded due to the oxidation of magnetite. CSA Global Assessment Surface mapping and drilling has been completed to support the stratigraphic and mineralisation interpretations. A large amount of detailed geological work has been completed which has led to interpretation of multiple BIF units. Each unit is very continuous laterally and at depth. The presence of the asbestiform minerals crocidolite and amosite represents a risk to the project which will need to be appropriately managed if the project is developed. All stratigraphic wireframes and drillholes were loaded into Datamine for review. The review indicated that the models have been prepared to a high standard. CSA Global considers that the manner in which the geological modelling was carried out does not represent a material risk to the ongoing development, mining or global value of the project. Mineral Resource Estimation Given almost all sample data was collected at 4 m intervals, samples were composted to 4 m prior to statistical analysis and interpolation. Statistical analysis was completed to understand the distribution of head and concentrate grades, and also the DTR results, within each unit. This analysis led to the selection of OK as an interpolation technique. Top-cuts were applied to head P (0.25%), AL 2O 3 (0.8%), S (0.5%), LOI (13%), and concentrate AL 2O 3 (0.5%) following statistical analysis. A bottom-cut was applied for head SIO 2 (25%). Statistics were also compiled to understands the distribution of grades above and below the base of oxidation to assist with grade domain definition. A hard boundary was used for all estimated constituents following this analysis. Density statistics were compiled by oxidation state and lithology type, to enable an approach to block model density allocation to be derived. A mean density value for each BIF unit, in addition to a mean value for the oxidised material, was calculated to assign to the block model. Assigned density values were as follows: JBB: 3.4 g/cm 3 TBJ: 3.4 g/cm 3 CJP1: 3.5 g/cm 3 CJP2: 3.6 g/cm 3 MBF: 3.5 g/cm 3 Oxidised material (all domains): 3.4 g/cm 3. Variography was completed for head Fe and other major elements, DTR, and concentrate grades in Supervisor software. The best quality variograms were generated within the CJP2 unit given that this domain contained the most data, including close-spaced (20 m interval) drilling. Variogram parameters from this domain were used to interpolate the other domains. Head Fe parameters were used for Head Fe, SiO 2, Al 2O 3 and LOI grade CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

263 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets interpolation. Separate variogram parameters were used for DTR, and head P and S. Head Na 2O adopted DTR parameters. Concentrate grades were estimated using the concentrate SiO 2 variogram parameters. Head grades (Fe, SiO 2, P, Al 2O 3, S, LOI, Na 2O), DTR and concentrate grades (Fe, SiO 2, P, Al 2O 3, S, LOI) were estimated into the block model. A constant fixed search ellipse was used with the dimensions 300 m along strike x 100 m across strike x 100 m vertically, striking at 080 for the eastern zone and 040 for the western zone (given the change in strike of the stratigraphy). The search dimensions were increased by a factor of three and then 12 if blocks were not informed. A minimum of 12 samples and a maximum of 30 samples were used for the first search pass, and the maximum number of samples per drillhole was set to six. The minimum number of samples was reduced to eight for the second and third search passes. Block models were constructed in Datamine software using a parent block size of 50 m(n) x 50 m(e) x 12 m(rl). Sub-blocks of 5 m(n) x 5 m(e) x 2.4 m(rl) were created to honour boundary positions. A hard boundary was used between each domain and across the base of oxidation. All Mineral Resources were classified as Indicated and Inferred based on drill spacing, and the distance of projection from drillhole data. Indicated Mineral Resources were classified where drilling was completed on 200 m sections, with holes a nominal distance of 80 m apart on each section. The upper limit was placed at the base of oxidation and the lower limit at the base of drilling, and the lateral limits were projected 100 m. Inferred Mineral Resources were classified where drilling was completed on 400 m sections. Inferred Mineral Resources were projected 200 m along strike and m down dip of the limit of drilling. Block model validation was completed by visual comparison of sample and block grades, statistical comparison of sample and block grades per domain, comparison of composite and block model grade histograms and swath plots. CSA Global Assessment CSA Global considers that geostatistical analysis, block modelling, grade estimation, and classification has been carried out in a competent manner. CSA Global re-reported the Mineral Resource estimate from the block model and was able to reproduce the tonnage and metal estimate tabulated in the Atlas Mineral Resource Report. CSA Global considers that the manner in which the Mineral Resource estimate was prepared does not represent a material risk to the ongoing development, mining or global value of the project. 2.7 Mining CSA Global has completed a review of the technical components of the life of mine plans and corporate financial model for Atlas. The mining operations considered in this review include the Mount Webber operations and Corunna Downs feasibility study. The contribution of these two sites has been considered in terms of supporting a DCF representation of value. The McPhee Creek Project has been considered but excluded from the DCF approach, as there is currently insufficient technical and economic support to form a reasonable basis of valuation via the DCF methodology. Valuation of the in-ground Mineral Resource for the McPhee Creek Project is recommended as the most appropriate valuation approach at this time Site Visit A site visit to Mount Webber and Mount Dove was completed on 4 May 2018 by Karl van Olden (CSA Global Principal Engineer/Manager Mining). The operations visited included CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

264 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mount Webber: o Ibanez o Fender o Gibson/Daltons o Processing facility o Haulage route Mount Webber to Port Hedland. Mount Dove: o Crushing, screening and haulage operations o Haulage route Mount Dove to Port Hedland Mining Approach The mining approach to the Mount Webber deposit is by conventional open pit mining methods using drill and blast methods. Mined material is mined in 6 m-high benches. The blasted rock is loaded across two 3 m-high flitches by backhoe excavators into rigid body trucks. Ore and waste is differentiated through grade control practices and ore is trucked to the run-of-mine (ROM) stockpile. Ore is segregated into grade categories, namely: H % Fe H to 60% Fe H2 55 to 57.5% Fe (Ibanez and Fender) H to 57.5% Fe (Gibson/Daltons) H to 55% Fe (Ibanez and Fender) H3 50 to 53.5% Fe (Gibson/Daltons). The ore is fed through the primary crusher of the processing facility by front-end loaders to meet the grade blend required. The ore is blended to fulfil the product specifications, on a shipment by shipment basis out of Port Hedland Mine Design The mine design for the Mount Webber open pit operations are predominantly controlled by the mineralisation and the terrain surrounding the deposits. All pits have been designed to analysed geotechnical specifications. The pits are relatively shallow and geotechnical performance has a limited impact on the risks of the deposit. The pits have been sufficiently drilled to estimate the Mineral Resource on which the mine designs are based. The pits have been designed to extract the Mineral Resource and extend to the basement of mineralisation. The Ibanez pit has mostly been depleted, with some higher-grade pods at the base of the pit, being mined at the time of this report. The pits target mineralisation at elevated portions of the Mount Webber Range. The Fender deposit is at the top of a narrow ridge with the processing plant situated to the south of Fender and Gibson/Daltons to the north. The upper benches of the Fender pit have been mined to form an access-way to Gibson/Daltons. Waste from the Fender pit has been used to develop a roadway bridge across a gully to reach Gibson/Daltons. The Gibson/Daltons deposit is scheduled to be mined simultaneously with the Fender pit with the final sequence being a retreat mining approach from north to south for the Fender pit. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

265 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mine Equipment Atlas employs a specialist mining contractor to undertake mining and processing operations. The contractor provides the mining and processing equipment, completes operations and maintenance activities,.and the contractor charges according the established contract on a fixed and variable cost basis, driven by the activities completed. The updated mining contract is reflected in the life of mine financial model for the Atlas operations. The primary mining equipment pieces include: Excavators: o 1 x Komatsu PC2000 (200-t) o 1 x Komatsu PC1250 (100-t). Haul trucks: o 150-t Ancillary equipment, including: o Drill-rigs o Dozers o Front-end loaders o Water trucks o Graders Mine Schedule The life-of-mine (LOM) mining schedule is a continuation of current activities with completion of the active pits forecast in December The mining schedule has been developed in a detailed manner targeting the delivery of product quantity and quality to specifications (Table 26). Table 26: Mount Webber mining and processing LOM schedule (including process at Mount Dove) Unit Total Mining high-grade (fines and lump) Wkt 31,837 4,071 7,258 Mining waste Wkt 10,482 2,309 2,156 Total material moved Wkt 42,319 6,380 Mining fines Wkt 16,342 Mining lump Wkt 15,495 Total ore mined Wkt Mount Webber processing fines ,032 6,987 6, ,105 1,962 1, ,414 9,137 8,949 8, ,997 3,721 3,644 3,621 3, ,075 3,537 3,388 3,366 3, ,837 4,071 7,258 7,032 6,987 6, Wkt 16,510 2,080 3,695 3,736 3,640 3, Mount Webber processing lump Wkt 15,638 2,136 3,515 3,474 3,385 3, Total ore processed Wkt 32,148 4,216 7,210 7,210 7,025 6, Mount Dove Processing fines Wkt Mount Dove Processing lump Wkt Total ore processed Wkt Total ore shipped Mount Webber Wkt 31,990 4,002 7,260 7,220 7,020 6, Total ore shipped Mount Dove Wkt Total ore shipped Wkt 32,307 4,319 7,220 7,020 6, , Note: 2018 from June Years are Calendar years (Jan to Dec). Mining Sequence The mining schedule addresses completion of Ibanez, mining of Fender and Gibson/Daltons with the final sequence being completion of Fender in a north to south direction. The mining is scheduled to be complete in December CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

266 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mining Capacity The mining fleet has been mining ore at a rate of 9.0Mt per year for the previous 12-months. The exclusion of the Mount Dove crushing operations has limited the total available crushing capacity for Mount Webber to 7.0Mt per year at the Mount Webber facility. The mining fleet has a demonstrated capacity to mine at a rate of 9.0Mt per year and is thus assumed to be capable fo achieving the planned amount of approximately 7.0 Mt per year. As of June 2018, the Ibanez pit is mostly depleted. The mining activities for the remainder of the LOM will focus on the Gibson/Daltons pit and the completion of the Fender pit. Access to Gibson/Daltons is across the Fender pit, which will be mined in a retreat fashion in a coordinated LOM schedule Waste Mining and Disposal Waste is dumped in locations as close to the mining area as possible. The waste is used for roadway construction around the active pits, whenever possible. The LOM strip ratio is 1 : 0.32 (ore t : waste t). Material is classified as waste when the grade is below 53.5% Fe for Ibanez and Fender and below 50% Fe for Gibson/Daltons. CSA Global Assessment CSA Global considers that the mining operations and associated mine planning have been completed to an appropriate standard. The mining operations and capability to perform the planned mining activities are considered a low risk to the valuation of the operation. The relatively consistent iron grades across the deposits, with isolated higher-grade pods of ore, provide very little opportunity to mine the available Mineral Resources in a selective manner to increase the iron grade. The highlevel of Mineral Resource definition and grade control practices (blast hole sampling and modelling with in-pit controls) will enable the operation to segregate the mined material on the ROM pad for accurate blending of grade and contaminant elements such as Si, Al, and P Processing The processing plant at the Mount Webber site was commissioned with a capacity of 6.0 Mt per year and it regularly achieves levels of 7.0 Mt per year. The planned LOM processing throughput for the plant is 7.0Mt per year until completion in December The ROM pad is adjacent to the plant from which fingers are dumped according to designated grade increments. The ROM ore is fed into a primary crusher and then through one of two circuits to produce Lump or Fines material in a crushed cone. Figure 29: Mount Webber processing plant CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

267 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Front-end loaders then load quad road-trains from the crushed ore cones, for transport to the port. As can be seen in Figure 29. Figure 30: Road-train loading Mount Dove Crushing Operations The Mount Dove crushing facility has been used to process approximately 2.0Mt per year of Mount Webber run-of-mine ore. This practice is planned to end in July 2018 as the project economics are detrimentaly affected by the additional costs of the haulage and rehandling involved in this activity. CSA Global Assessment CSA Global considers that the termination of the Mount Dove crushing operation in July 2018 is a sound decision based on economic grounds. The impact on Mount Webber is to extend the mining life from an end in April 2022 to December Ore Blending The ore delivered to the ROM pad is segregated into one of four grade bins according to the %Fe grade bands shown in Figure 31 and Figure 32. The grade bands differ slightly for each pit (Ibanez (IBA), Fender (FEN) and Gibson/Daltons (DAL)) based on the grade distribution of each deposit. Each shipment is built from a blend of these grade bins to meet specifications. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

268 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 31: Grade bands from April 2018 to August Source: Atlas, 2018 PIT Figure 32: GRADE BINS GRADE BANDS High Grade Fe% IBA H0 H1 H2 H3 >= 60 >= 57.5 to < 60 >= 55 to < 57.5 >= 53.5 to < 55 FEN H0 H1 H2 H3 >= 60 >= 57.5 to < 60 >= 55 to < 57.5 >= 53.5 to < 55 DAL H0 H1 H2 H3 >= 60 >= 57.5 to < 60 >= 53.5 to < 57.5 >= 50 to < 53.5 Grade bands from August 2018 for LOM. Source: Atlas, 2018 CSA Global Assessment CSA Global considers that grade bins are appropriate to deliver the necessary blended product required in the LOM plan Haulage Ore will be hauled by contractors from the mine site to the Utah Point terminal. The ore is hauled in road-trains with a payload of up to 130 tonnes each (Figure 33). The road-trains are loaded with a front-end loader at the processing facility and dumped with a side-cast mechanism at the port destination. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

269 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 33: Typical quad road-train Capital Cost Estimates The Mount Webber capital cost estimate comprises a total of A$1.2 million of sustaining capital at an average rate of A$30,000 per month. The sustaining capital is associated with the infrastructure on site such as buildings, roads, services and facilities. The sustaining capital related to mining and processing equipment is included in the operating cost contract rates for the activities as all capital equipment is owned by the contractors Operating Cost Estimates All costs referenced in this report are Real, 2018 values before escalation. The Mount Webber LOM plan applies operating costs to the physical production profile. These operating costs are based on actual and contracted costs. Operating costs are applied as fixed and variable costs (see Table 27. These are real values in 2018 terms. The model escalates these values to nominal values through the application of escalation factors. This escalation is not addressed in this report. Table 27: Mount Webber operating cost estimate (real 2018) Element Mining variable Mining fixed (average monthly) Processing variable Processing fixed (average monthly) Haulage to Port variable Haulage to Port fixed (average monthly) Port handling variable Port handling fixed (average monthly) Admin and support variable Admin and support fixed (average monthly) Unit Value A$/wmt real 5.04 A$M real 2.35 A$/wmt real 2.25 A$M real 1.06 A$/wmt real A$M real 0.73 A$/wmt real 8.30 A$M real - A$/wmt real - A$M real 0.74 The above figures exclude processing and haulage for Mount Dove Mining The mining costs used in the LOM financial model are based on actual and contracted costs and volumes; they include the mining contractor costs and the Atlas mining and administration staff costs. The mining costs include: Clear and grub (Vegetation and topsoil clearance before mining begins) Drill and blast CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

270 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Load and haul Mining administration Mining technical services Mobile equipment maintenance Ancillary services. The boundaries of the mining section are from the open pit to the primary crusher. The mining variable operating cost averages to be A$5.04/wet tonne across the LOM. The fixed mining operating cost applied across the LOM is A$2.35 million per month. Processing The processing operating costs relate to the costs from the primary crusher to the loading point for the haulage road trains. In the Mount Webber LOM financial model, the processing variable cost for Mount Webber is A$2.25/wet tonne. The fixed processing cost is A$1.06 million per month. CSA Global Assessment CSA Global considers that the mining and processing costs are reasonable in real terms as these have been based on contract and actual costs. The fixed and variable rates applied to the physical activities will account for the increased unit costs expected as the operations wind-down at the end of the LOM. Any rise and fall escalations for inflation should be represented in the financial modelling to achieve nominal values. Haulage to Port The haulage to port comprises loading the road-trains, road haulage to Port Hedland, unloading and the return trip. The one-way distance between Mount Webber and Port Hedland is 230 km. The cost per tonne-kilometre (tkm) is budgeted at A$0.07/tkm for a total variable cost of A$16.35/wet tonne. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

271 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets CSA Global Assessment CSA Global considers that the haulage cost in the LOM financial model is an appropriate estimate that is based on current operations. The cost of A$0.07/tkm is within a comparable range when compared to a typical industry benchmark. This reflects an efficient haulage operation. The fleet of 55 road-trains are being operated efficiently. The roads on which the road-trains operate are sealed and in good condition. There is very little terrain undulation along the haul route. Port Handling The port handling costs relate to the costs incurred from the point where the truck unloads the crushed ore, to loading into the ship. These real costs average approximately A$8.30/wet tonne. These costs are based on current costs and are applied consistently to all the tonnes from the various deposits. A cost of A$0.20/wet tonne is included for demurrage at the port. Administration Administration and support costs are applied at an average rate of A$0.74 million per month for the LOM. This value is a weighted average of approximately $1.27 per tonne processed. CSA Global Assessment CSA Global considers that the port handling costs and administration costs are reasonable as these are based on actual costs incurred and the current Atlas operating budget Corunna Downs Feasibility Study The feasibility study for the Corunna Downs iron ore operation was reviewed in terms of assessing the technical inputs to the Atlas corporate financial model. The Corunna Downs Project is located approximately 30 km to the northwest of the Mount Webber operations on the road to Marble Bar. The Corunna Downs area is located centrally between the Mount Webber mine and the potential future McPhee Creek Project. The Corunna Downs Project is located 237 km from Port Hedland and 35 km south of Marble Bar. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

272 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 34: Corunna Downs location The above-water table Corunna Downs Project will deliver up to 5 million wet tonnes per annum of Lump and Fines iron ore to market over a mine life of approximately five years (refer Table 28). CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

273 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 28: Corunna Downs Corporate Model Production Physicals Unit Mining high-grade (fines and lump) Mining waste Total material moved Mining fines Mining lump Total ore mined Processing fines Processing lump Total ore processed Total ore shipped Wkt Wkt Wkt Wkt Wkt Wkt Wkt Wkt Wkt Wkt Total ,900 12,760 33,660 9,841 11,059 20,900 9,846 11,362 21,208 20, , ,845 3,023 7,868 2,230 2,614 4,845 2,258 2,663 4,921 5,010 4,743 2,985 7,728 2,212 2,531 4,743 2,321 2,664 4,985 4,960 4,833 2,920 7,753 2,250 2,583 4,833 2,311 2,653 4,964 4,980 4,833 2,920 7,753 2,250 2,583 4,833 2,311 2,653 4,964 4, , The proposed mining model includes engagement of a proven mining contractor, managed by Atlas to mine the deposit by open pit method using truck and excavator for load and haul. This is consistent with Atlas s current operating strategy. The mining contractor will be appointed subject to a tendering process. The open pits will be drilled and blasted on 5 m benches and mined on two 2.5 m flitches, consistent with the approach at other Atlas operations. The mining strategy is based on 12 months of capital works prior to ramping up to full production of up to 5.0 Mt per annum over three months. Runway pit which has a low strip ratio is closest to the ROM pad and is therefore mined first, followed by Shark Gully and Split Rock with Razorback being the last pit to be mined. Split Rock is the largest of all pits within the project area and will be the main source of ore supply for the majority of the mine life. Ore from the pits will be hauled to the ROM pad for blending into the processing plant. The processed ore will be stockpiled and transported by road via Marble Bar to the Utah port facility in Port Hedland. Road haulage of 237 km via Marble Bar will deliver product to Utah to Atlas s Stockyard 1 (SY1) or Stockyard 2 (SY2) facilities as shown in Figure 34. This will require the upgrade of a 22 km section of the Marble Bar Hillside Road and bypass around Marble Bar, which will also be sealed to reduce the impacts of noise and dust and reduce road maintenance. CSA Global Assessment CSA Global considers that the operating parameters estimated for the Corunna Downs Project, mining and production plan is estimated to industry standards. The physical mining and production components of the Corunna Downs Project are considered tp be appropriate. The mining scenario for the Corunna Downs feasibility study is production from three deposits, namely Split Rock, Runway, and Shark Gully. The Razorback deposit was identified in the DFS mining plan but has not been included in the Atlas financial model. A fifth Resource has been identified further north from the other deposits, but has not yet been included the production profile, namely Glen Herring. These deposits are shown in Figure 35. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

274 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 35: Location of Corunna Downs Mineral Resources CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

275 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The current project scenario assumes the use of contractors for the following capital works and operating activities: Public road upgrade Bypass around Marble Bar upgrade Mine access road construction Crushing and screening Mining (load and haul, and drill and blast) Camp construction Camp management Road haulage. The overall operating philosophy for the Corunna Downs Project is as per Atlas s current operations, contract mining and processing, combined with contract haulage. The operating strategy that has been used as a basis for the feasibility study: A reputable mining contractor will provide drill and blast and load and haul services to the project. The mining contractor will provide all services (excluding mine survey, mine planning and geology), to extract the ore and waste material. Ore will be stockpiled at the project s ROM pad in preparation for crushing and screening. A reputable crush and screen contractor will provide crushing, screening and stacking services at a rate of 5 Mt per annum. The crushing and screening operator s service will include provision of a mobile plant, site establishment, ROM bin feed via front-end loaders from the ROM stockpiles, crushing and screening, sampling and product stacking in preparation for load-out for road haulage to port. A reputable haulage contractor will load road-trains, followed by road haulage from the mine to port, and finally side-tip unloading at the port. The Pilbara Port Authority (PPA) provides port services at the Utah Point Port Facility in concert with a reputable stevedore to receive product from haulage, and then stack, reclaim and load the product onto vessels. A reputable camp services contractor provides site accommodation services for the mine, including camp maintenance, messing, cleaning and laundry services. A suitable accommodation village will be free-issued to the contractor to meet the project s demand. Capital Cost Estimate The development capital expenditure (capex) for the project is estimated at A$54 million. This estimate is based on a detailed cost estimation process detailed in the feasibility study. The costs relate to the following categories: Site earthworks, roads and construction Contractor mobilisation for mining and plant Haul road construction and upgrade, including Marble Bar bypass Non-processing site infrastructure including camp, water treatment and power supply Owners costs, flights and accommodation Contingency ( 15%). A LOM sustaining capital cost of A$3.2 million has been estimated. The sustaining capital is associated to the infrastructure on site such as buildings, roads, services and facilities. The sustaining capital related to mining and processing equipment is included in the contract rates for the activities as all capital equipment is owned by the contractors. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

276 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Corunna Downs Operating Cost Estimate The operating costs in the June 2018 Atlas financial model are shown in Table 29. These are real values. The model escalates these values to nominal values through the application of escalation factors, these are not addressed in this report. Table 29: Corunna Downs operating cost estimate (2018 real) Element Mining variable Mining fixed (average monthly) Processing variable Processing fixed (average monthly) Haulage road variable Haulage road fixed (average monthly) Port variable Unit Value A$/wmt real 3.48 A$M real 1.66 A$/wmt real 2.29 A$M real 0.62 A$/wmt real A$M real 0.00 A$/wmt real 8.30 Port fixed (average monthly) A$M real 0.00 Admin and support variable A$/wmt real 1.55 A$M real 0.00 Admin and support fixed (average monthly) Mining Operating Costs The mining operating costs have been developed on a scenario that is similar to Mount Webber operations. It should be noted that the variable mining operating cost over the life of the Corunna Downs operations (A$3.48/t) is substantially lower than that of Mount Webber (A$5.04/t). The fixed mining cost for Corunna Downs is A$1.66 million per month and the average fixed mining cost for Mount Webber is A$2.35 million per month. Based on a total mining cost for the LOM of each deposit, the Corunna Downs costs are approximately 24% lower than Mount Webber. Processing Costs The processing variable costs of A$2.29/wet tonne are similar to Mount Webber (A$2.25/wet tonne). The fixed processing costs are lower for Corunna Dowwns (A$0.62 million per month) than Mount Webber (A$1.06 million per month). Haulage Costs The haulage costs of A$19.20/wet tonne result in a unit cost per tonne kilometre of A$0.08/tkm. This compares closely to the A$0.07/tkm budgeted for Mount Webber over a slightly longer distance. Haulage will be on the Marble Bar to Port Hedland national road. Port Handling The port handling operating cost estimate matches the estimate for Mount Webber. Administration The administration operating cost estimate is 22% higher than the similar operation at Mount Webber. This is primarily due to the lower tonnage mined from the Corunna Downs deposit compared to Mount Webber. CSA Global Assessment CSA Global understands that the mining operating costs have been based on DFS budget submissions and in the case of the processing and mining costs, a tender process run in early There is no executed contract for these figures and they remain at a budget estimate level of confidence. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

277 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets However, there is a moderate to high risk that the mining operating cost estimate for Corunna Downs has been under-estimated. The difference between Mount Webber and Corunna Downs estimates is approximately 24%. The mining at Corunna Downs occurs over three small deposits located several kilometres apart. The detailed work in the DFS provides a level of confidence that the mining operating costs are credible. The main reason for the difference in the mining costs has been expressed by Atlas as being the timing of the Mount Webber contract in a more buoyant part of the market cycle, versus the more subdued view of the iron ore industry during the tender process for Corunna Downs. Based on this, CSA Global recommends that the mining operating costs for the Corunna Downs financial model are not changed to align with Mount Webber for the valuation. The increase in administration costs for Corunna Downs is appropriate Key physical and financial parameters In this report, CSA Global have considered the key physical and financial parameters for the Atlas LOM financial model. CSA Global have made comments to several sections and have specific comments as below: Freight Prices The freight prices used in the modelling show an increasing trend over the life of the operations. These applied rates used in the valuation are within a reasonable range to be expected for the volumes and vessels envisaged over this period, based on the primary destination being Asian destinations such as China, Japan and Korea. Lump Premium The achieved Lump premium estimated in the financial model is based on 55% of the consensus lump premium of iron ore at 62% Fe. This matches current trends and has been applied to the estimated price over the life of operations. This is a reasonable estimate aligned with current values. Benchmark Discount for Lump The financial model has applied a 70% factor to the realised fines benchmark discount to arrive at an estimate for the lump benchmark discount. This value is in line with recent trends and is a reasonable estimate. Rehabilitation The financial model includes an allowance for approximately A$39.2 million (real 2018 terms) for rehabilitation and ongoing monitoring for the Atlas sites over the life of operations and after the operations have ended production. Current operations complete rehabilitation activities during production wherever possible. The costs in this estimate are mostly for de-construction, landform profiling and monitoring. This estimate is a typical allowance for final rehabilitation of the operations. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

278 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 3 Other Projects In addition to Atlas s core iron ore projects in the Pilbara, Atlas s tenement portfolio also holds potential for a range of other commodities, notably lithium, copper and other base metals, as well as gold. CSA Global notes that while of interest as exploration projects, the majority of the portfolio (apart from the tenure covering known resources) covers ground of limited prospectivity or is at an early stage of exploration maturity. Given this status, CSA Global has concluded that these parts of Atlas s tenement portfolio are not material to the valuation of the mineral assets of Atlas. Projects of elevated interest are briefly discussed below. 3.1 Ownership and Tenure CSA Global relies on the independent opinion of MMTS, as stated in their letter to Atlas entitled Atlas Iron Limited Tenure Review and dated 30 June 2018 (see Appendix 2), with regards to the validity, ownership and good standing of the Atlas tenure for material projects. CSA Global makes no other assessment or assertion as to the legal title of the tenements and is not qualified to do so. A summary tenement schedule, as provided by Atlas, is presented in Appendix 2 of this Report. 3.2 Lithium Atlas s Cisco and Pancho lithium projects are located approximately km south of Port Hedland, in the Pilbara region of Western Australia. Access to the tenements is via the Great Northern Highway and then via access roads and various pastoral tracks. Figure 36: Location of the Cisco and Pancho Projects Over greyscale TMI image. Source: Atlas CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

279 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mount Francisco Project Atlas has a joint venture with Pilbara Minerals over the Mount Francisco Cisco Lithium Project (E45/4270), which lies about 130 km south of Port Hedland, and 15 km south-southwest of the main Atlas/Global Advanced Metals (GAM) mining centre at Wodgina. The Cisco Project area contains evidence of small-scale, historical, alluvial mining and dry blowing. There is also significant evidence of hard rock mining, generally confined to six identified pegmatites in the central-western portion of the project area. A desktop review of the project area by Atlas (Slomp, 2016) concluded that the project was prospective for lithium-enriched pegmatite bodies. The identified swarm of pegmatite dykes at Mount Francisco was interpreted to contain lithium-caesium-tantalum (LCT) pegmatites, and comprehensive work by Talison and GAM has resulted in the definition of a small tantalum/tin Mineral Resource. Evidence of a high degree of fractionation and favourable geochemical assemblages and mineral occurrences indicate the presence of elevated lithium within the area. Historical RCP drilling intersected anomalous Li2O in two drill holes as shown in Figure 37 (AGO ASX Release 29 March 2017). Pilbara Minerals plan to commence detailed mapping and subsequent drilling in the September 2018 quarter. Figure 37: Simplified Geological Map of the Cisico and Pancho Projects, CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

280 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Pancho Project showing key prospects and historical drilling Li2O results (Source: Atlas) The Pancho Project (E45/4517) covers Archaean greenstones of the Wodgina Greenstone Belt to the southwest of the Wodgina Li-Ta deposits, and the Stannum LCT pegmatite. Historical tin, tantalum and beryl mines are present in the tenement. Field traversing has confirmed the presence of a number of pegmatites, with rock chip samples providing geochemical results suggesting an LCT-type pegmatite signature. The structural setting of the pegmatites in an interpreted anticline is also conducive to intrusion of pegmatites. Figure 38: Pancho pegmatite targets CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

281 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Source: Cornelius and Grigson (2004), annotation by Atlas Pilgangoora DSO Spodumene Pilbara Minerals is mining the Pilgangoora Project in the Pilbara and producing a DSO product. Atlas has agreed to purchase Mt of DSO lithium product over a 15-month period. Atlas will process and transport this material using its existing infrastructure. A binding offtake agreement has been signed with Sinosteel, and the first export sale has been achieved in June Atlas expect to achieve an operating margin of A$15 20/t based on current market prices. CSA Global Assessment CSA Global has reviewed the available Pilgangoora Project technical assumptions and financial projections, such as operating cost, capital cost, moisture content and production profile. These values are considered appropriate and fit with typical performance expectations for an operation of this nature. These operations have commenced and CSA Global considers it likely that PLS will deliver according to the agreement. The ocean freight charges have been estimated at US$11.50/t of product. CSA Global considers this estimate to be consistent with similar freight charges for relatively small quantities to a typical Chinese port. The revenue assumptions are based on an established contract and the profit margin estimates are based on reasonable estimates of costs for both parties. The margin split has been agreed between the parties Altura Royalty Altura is targeting its first lithium concentrate sale from their Pilgangoora Project in the September 2018 quarter. Atlas holds a 5% gross sales royalty over M45/1231, which covers the majority of Altura s Pilgangoora Project. The value of this royalty has been considered by BDO in their Independent Experts Report. CSA Global Assessment Based on the available information CSA Global considers that the physical mining and production plan is in line with expected values for an operation of this nature. CSA Global has reviewed the inputs to the cash flow model developed for the royalty to Atlas and concluded that the value of the royalty aligns with available information on the project and is a reasonable estimate based on the available technical and cost information. CSA Global considers that the revenue assumptions and projected sales price over the life of mine,used by Altura, is within a range of forecast prices that aligns with other industry forecasts Copper Copper Range Project The project area is located in the Southeast Pilbara region of Western Australia, approximately 50 km eastsoutheast of Newman (Figure 39). The Copper Range Project is located within the Archaean Jimblebar Greenstone Belt along the north-eastern margin of the Sylvania Inlier. The greenstone sequence comprises north-south striking felsic volcanics, ultramafic schists, quartzites, cherts and BIF (Figure 40). Many of these units have been intruded by granitoids, ultramafics and felsic intrusions. There are also minor exposures of east-west striking Proterozoic units in the north of the project area. At Copper Range, the succession comprises a lower sequence of mafic flows and sills, overlain by the Copper Range unit a schist believed to have been derived from dacitic flows and volcaniclastics. A sequence of mafic and ultramafic schists sits stratigraphically above the Copper Range unit. This sequence has been intruded by CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

282 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets numerous pyroxenite, peridotite gabbro and dolerite intrusions. The granite-greenstone rocks in the inlier are structurally complex, with several deformation events evident. The Copper Range Project covers a 9 km strike length of the Copper Range unit a continuous sequence of felsic volcanic rocks that hosts known copper-(gold-zinc-cobalt) mineralisation. The mineralisation styles discovered to date at the Copper Range Project include (in order of exploration priority): VHMS Massive Sulphide Cu-(Au); VHMS Disseminated (stringer/stockwork) Cu-(Au); and VHMS Exhalite Hosted Cu-Au-magnetite. These three deposit styles represent primary volcanogenic-hosted massive sulphide (VHMS) mineralisation that has been re-mobilised and re-constituted by subsequent structural and metamorphic processes during tectonothermal overprinting of a regional VHMS system. Figure 39: Copper Range Project location and simplified geology Source: Atlas, 2018 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

283 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 40: Copper Range Project geology and exploration targets Source: Atlas, 2018 In October 2017, Atlas completed a six-hole RCP drilling program at Copper Range (50 km east of Newman), with four drillholes drilled at Copper Knob to test the down-dip continuity and western strike extent of the previously identified copper mineralisation, and two holes drilled at Copper Knob East to confirm historical work and test continuity along strike to the east (Figure 41). Six holes totalling 1,363 m were drilled with every hole encountering anomalous copper mineralisation. Significant intersections reported by Atlas (ASX release, 29 January 2018) include: 16 m at 0.26% Cu from 46 m (including 8 m at 0.48% Cu) in CRRC0001; 5 m at 0.27% Cu from 32 m (including 2 m at 0.48% Cu) in CRRC0002; 6 m at 0.27% Cu from 76 m (including 2 m at 0.54% Cu) in CRRC0003; 14 m at 0.31% Cu from 181 m (including 9 m at 0.39% Cu) in CRRC0003; CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

284 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 2 m at 0.53% Cu from 120 m in CRRC0004; 41 m at 0.28% Cu from 126 m (including 9 m at 0.42% Cu) in CRRC0004; 14 m at 0.30% Cu from 117 m (including 5 m at 0.52% Cu) in CRRC0005; and 9 m at 0.24% Cu from 156 m (including 2 m at 0.39% Cu) in CRRC0006. Figure 41: Copper Range RCP drilling in December 2017 Source: Atlas Results from the 2017 RC drill campaign found the wide mineralised Copper Knob resource (>0.15% Cu) further extended to the west and at depth, with several intercepts >0.3% Cu. While results found mineralisation at Copper Knob East continues at depth and occurs widely across the stratigraphy which has not been historically adequately tested. Furthermore, gold association at Copper Knob East seems to overprint within the copper lodes, suggesting a boudinaged system. Atlas concluded that this is favourable for additional structural settings along the remaining 8 9 km of Copper Range prospective strike, and also down dip and down plunge of known mineralisation. A significant observation by Atlas was that copper occurrences at surface both as malachite and trace chrysocolla within ferruginised chloritic schists, and in quartz lodes and quartz breccias indicate that copper mineralisation sits in at least three positions, be they stratigraphic or structural, that extend along the prospective 8 9 km of Copper Range strike potential. Further exploration including geophysics and drilling is required to fully assess the extents of the copper enrichment at the Copper Range Project area Walker Project The Walker Project is about 110 km southeast of Port Hedland (Figure 42). In December 2017, Atlas conducted a small RC drill program to test the northern extent of an undercover geophysical target, located near Atlas s Miralga Creek iron ore Resource, and adjacent to existing Abydos infrastructure. With limited outcrop in the immediate area, the drill program was designed to test the potential for the northeast-southwest trending CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

285 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets anomaly to be a buried volcanic sequence that may host a VMS-style polymetallic deposit; given some interpreted similarities to the Sulphur Springs VMS deposit approximately 20 km southwest of the project. Figure 42: Walker Prospect location Source: Atlas, 2018 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

286 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets A total of nine holes for 1,062 m were completed with several holes intersecting visible sulphides. The sulphide occurrences range from disseminated to semi-massive in nature. Assays for drillhole MRRC0047 have returned the following significant intercepts across two distinct zones of mineralisation (Atlas ASX release, 29 January 2018): 12 m at 0.46% Cu from 50 m (including 4 m at 1.00% Cu and 10.8 g/t Ag from 58 m); and 14 m at 0.48% Cu from 94 m (including 4 m at 1.08% Cu and 5.6 g/t Ag from 94 m). In addition, this hole encountered several other zones of enrichment above 0.15% Cu and drillholes MRRC0053 and MRRC0054 also returned intersections above 0.15% Cu. Atlas was encouraged by these results; with the southern extent of the geophysical anomaly yet to be tested and two very similar undercover geophysical targets identified to the southwest. Atlas is planning further work in this area. 3.4 Gold Potential of Pilbara Portfolio Atlas s large tenement portfolio in the Pilbara covers substantial areas of stratigraphy currently being targeted by other companies for gold mineralisation. Around 1,600 km 2 of Atlas Pilbara tenement package covers greenstones, with substantial structures interpreted to cut through these rocks. Numerous small gold mineral occurrences are known. A first principles mineral systems review of the East Pilbara district (Wilson 2018), identified a number of key criteria for gold deposit formation including: The presence of suitable structural architecture providing pathways for mineralising hydrothermal fluids; Evidence of sources and reservoirs such as gold occurrences, mapped alteration minerals associated with gold systems, gradient changes mapped by geophysical data, and multielement geochemical indicators; and Potential trap sites for gold mineralisation including intersecting structures, jogs and bends in shear zones, and rheological contrasts between rock types. Specifically, the McPhee Creek, Corunna Downs and Abydos Project areas contain major structures and recorded gold occurrences enhancing gold prospectivity of these project areas; while the Mount Webber, Mount Dove and Wodgina areas contain major structures, with recorded gold occurrences adjacent to or immediately along strike from Atlas tenure. Gold nuggets have been found by numerous parties recently, and also over a long period dating back to the 19 th century, in conglomerates near the Mount Roe Basalt. New theories about the significance and origin of this gold have been proposed, and significant interest in tenements covering the key stratigraphic locations was notable in late Since that time there is only been limited news flow from companies focussing on this target type, and the heightened interest in these tenements has receded to a degree. In October 2017, Atlas completed an internal review to determine the prospectivity of its tenements for conglomerate-hosted gold mineralisation. The review was conducted in light of recent gold exploration success in the Pilbara. Atlas has yet to complete any work to validate these target areas, beyond early stage desktop review. In conjunction with the review, Atlas entered into discussions with several exploration companies active in the Pilbara to advance exploration for conglomerate-hosted gold, but market interest in the Pilbara conglomerate story has waned (pers. comm C. Els, 2018). CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

287 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets CSA Global Assessment CSA Global has considered this aspect of the Atlas tenement portfolio and concluded that a sizable proportion of the Pilbara tenement package (in the order of 1,570 km²) has potential to host gold mineralisation (predominantly of the orogenic lode gold type). Around 1,000 km², of the tenure covers, or is adjacent to, mapped Mount Roe Basalt and/or Hardey Formation the key stratigraphic units associated with the conglomerate gold model that has recently been the focus of exploration attention in the Pilbara. The gold prospectivity of these areas of interest is still largely at a conceptual, grassroots, stage with Atlas yet to undertake much exploration targeting gold. Given this conclusion, CSA Global has decided that the valuation of the gold potential is unlikely to be material to the overall valuation of the mineral assets, but is worthy of quantification. CSA Global has treated the value of gold rights as a separate valuation issue, in addition to the iron ore valuations. This is because gold rights can be easily separated from the iron rights, and the gold exploration potential is mostly in rock types separate to those hosting iron mineralisation. 3.5 Balance of Tenement Portfolio CSA Global used Atlas s most recent investor presentation (ASX release 14 March 2018) as guide to the assets that the Company considered material. As shown in Appendix 2, Atlas have an extensive tenement portfolio covering directly held tenure, as well as beneficial interests and royalties. CSA Global undertook an assessment of the tenements that do not contain the main mineral assets discussed above in this report. CSA Global concluded that these additional tenements are either peripheral to the main projects, not prospective (e.g. covering areas of granite) or at an early stage of assessment. For these reasons CSA Global has decided that these remaining tenements are not material to the valuation of Atlas. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

288 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 4 Valuation of Mineral Assets not forming part of the DCF Models Valuation of Mineral Assets is not an exact science and a number of approaches are possible, each with varying positives and negatives. While valuation is a subjective exercise, there are several generally accepted procedures for establishing the value of Mineral Assets. CSA Global consider that, wherever possible, inputs from a range of methods should be assessed to inform the conclusions about the Market Value of Mineral Assets. The valuation is always presented as a range, with the preferred value identified. The preferred value need not be the median value and is determined by the Practitioner based on their experience and professional judgement. Refer to Appendix 1 for a discussion of Valuation Approaches and Valuation Methodologies, including a description of the VALMIN classification of Mineral Assets Iron Ore Projects Commodities Market Prior to 2009, iron ore was not traded in an open market like other commodities, instead large miners (iron ore sellers) and steel mills (iron ore buyers) negotiated the price to be paid on an annual basis. This price was then used by others as a benchmark price for that year. There was also a comparatively small spot market where iron ore could be sold in a relatively open market and where prices could fluctuate based on demand. The price paid reflected the grade of iron in the ore but also, equally importantly, the deleterious element chemistry of the ore as well as physical parameters and whether the product is lump or fines. The key deleterious elements are silica, alumina, phosphorus and sulphur, but vanadium and titanium, depending on their content, can also be considered deleterious, or a positive, depending on the market. The grade of the deleterious elements is required to be below threshold values, otherwise price penalties are incurred. Since 2009, the largest sellers and buyers have moved away from an annual benchmarking process towards an indexed market that adjusts the price on a quarterly basis, and further to short-term (monthly) contracts and spot sales. The move to spot sales appears to have accelerated since the end of 2011 as the sharp drop in the price of iron ore at that time encouraged buyers to push for contracts to be renegotiated to shorter terms. The RBA estimated that by late 2012, monthly contracts and spot sales accounted for more than half of all Australian iron ore exports, although the share varied somewhat across producers. For simplicity, CSA Global has chosen to use the iron ore fines price as a benchmark. The graph presented in Figure 43 shows the prices for 62% Fe iron ore fines and 58% Fe iron ore fines CFR6 Qingdao China. The specifications for these concentrate types are provided in Table 30, along with the specifications for the high alumina 58% index, and the premium 65% Fe index. Table 30: Product specifications for Platts Indices Index S (%) LOI (%) Moisture. (%) Fe (%) SiO2 (%) Al2O3 (%) P (%) Platts 65% Fe IOPRM Platts 62% Fe Index TS Platts 58% Fe Index TS Platts high Al 58% IODFE Sources: S&P Global Platts (2018a, 2018b) 6 CFR Cost and freight to port CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

289 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets From Figure 43 (below), it is seen that the iron ore price has decreased dramatically from a monthly average high of US$154.64/t in February 2013 (down from a historic peak of US$185.60/t in January 2011) to a monthly average low of US$39.58/t in December Since then, the iron ore price has remained volatile but has increased to US$65.40/t by 25 May Short-term spikes have seen a monthly average high of US$88.07/t in February 2017 and a monthly average low of US$56.01/t in June 2017, with the most recent monthly average high being US$77.46/t in February The dramatic changes in the iron ore price over this period highlights the need to normalise prices when comparing transactions that occurred over this period. Figure 43: Iron ore price history Source: S&P Global Market Intelligence Forecasts of iron ore pricing are provided in Table 31 and Table 32, and discussed in detail in the BDO IER. Note that the Comparative Transactions (Section 4.1.5) have been normalised to the average spot price for June 2018, which is US$64.81/t. A disconnect in price for the 62% grade product and the 58% grade product from late 2015 can be seen in Figure 43, and is illustrated more clearly in Figure 44 and Figure 45. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

290 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 44: Iron ore pricing Jan15 Feb18, and Fe grade discount showing increasing discount for lower-grade iron products (<62% Fe) Source: Liao, 2018 Table 31: 2017 (actual) Average price SNL commodity consensus pricing, 62% Fe June 2018 (US$) Average price Average forecast price as at 13 June (forecast) 2019 (forecast) 2020 (forecast) High Low No. of estimates Average price High Low No. of est. Average price Source: S&P Global Market Intelligence. High Low No. of est. Table 32: BDO Iron ore price forecasts (nominal) CFR Iron Ore Prices CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 Fines prices CFR (US$/t) Lumps prices CFR (US$/t) Source: BDO IER (2018) Arnold (2018) notes the recent reduction in the high-grade (65% Fe) premium to the 62% Fe benchmark, whereas discounts remain elevated, and Liao (2018) agrees that the discount experienced by the 58% fines will remain high. S&P Global (2018a) notes that discounts on lower-grade material are broadly stable, based on the S&P Global Platts 58% Fe index discounts began 2018 at 41% to the 62% Fe index and were 44% by 20 February On 27 March 2018, FMG announced that it had amended its iron ore price guidance to reflect an expected contractual realisation of approximately 65% of the average benchmark Platts 62 CFR index for the financial year ending 30 June 2018 (FMG, 2018). Barich (2018a) notes that the consensus among analysts at a major iron ore conference in Perth in late March 2018 was that Chinese steel mills preference for higher-grade ore and continuing discounts for lower grades is a structural shift, not cyclical, which will favour the big four 7. The Atlas management view, supported by some other market analysts, is that the shift is likely to be cyclical, and linked to steel demand. 7 Rio Tinto, BHP, Vale and FMG CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

291 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 45: Continuing discount for low-grade iron ore Source: S&P Global (2018b) Barich (2018a) also noted that penalties had risen for alumina and silica discounts, which by March 2018 had more than doubled since the middle of S&P Global (2018b) show that by June 2018 silica penalties had decreased to early 2017 levels, but alumina penalties have increased dramatically Previous Valuations CSA Global has asked Atlas to provide information on any relevant previous valuations of the mineral assets that are currently in the public domain. CSA Global was advised of a previous valuation of Atlas as an operating company, completed by PPB Advisory in April 2016 as part of a debt restructure. PPB Advisory concluded that the fair market value of the business of Atlas, on an ungeared basis, was in the range of A$540 million to A$641 million as at 30 November 2015 (Atlas ASX release 5 April 2016). CSA Global notes that there have been changes in market conditions since November 2015, as discussed above. CSA Global has not been tasked with opining on the value of Atlas as a business. CSA Global has been tasked with opining on the market value of individual mineral assets held by Atlas, specifically the mineral assets not included in the current mine plans. Table 33 summarises previous transactions that CSA Global is aware of, which included some of the relevant mineral assets. CSA Global notes that a draft technical specialists report was prepared in May 2018 but not finalised by CSA Global for BDO in relation a scheme of arrangement between Atlas Iron and Mineral Resources; this draft material was used in the preparation of this Report. CSA Global used new internal peer reviewers, who had no previous involvement with the draft report for the scheme booklet, to check and review the current document. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

292 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 33: Date Previous transactions involving the Atlas mineral assets Relevant assets Buyer Seller Atlas Shaw River Manganese Limited Details Atlas acquired mineral rights to Pardoo Tenements from Shaw River for A$150,000. Atlas and Warwick Resources agreed to a merger, with one Atlas share to be issued for every three Warwick shares, valuing Warwick at about A$82 million. May 2009 Pardoo September 2009 Western Creek, Jimblebar Range, Jigalong, Woggaginna, Caramulla South, McCamey s South, Upper Ashburton CIDs Atlas Warwick Resources Ltd December 2010 McPhee Creek, Daltons-Mount Webber, Western Creek, Anthiby Well, Beebyn Atlas Giralia Resources NL Atlas launched an off-market takeover bid for Giralia, offering 1.5 Atlas shares per Giralia share, valuing Giralia at about A$828 million. Atlas FerrAus Ltd Atlas agreed to make an off-market bid for the 61% interest in FerrAus that it did not already hold. Atlas offered one Atlas share for every four FerrAus shares, with an implied bid price of A$106 million for the 61% interest. Atlas Gondwana Resources Ltd Atlas entered into an agreement to acquire a 90% interest in the Corunna Downs DSO Project from Gondwana A$2.1 million in cash, paid in three tranches. Atlas entered into an agreement to acquire the remaining 25% of the iron ore rights it did not already own on the Daltons Joint Venture tenements from Haoma Mining for A$10 million in cash, A$23 million in Atlas shares, and additional annual payments on a pro-rata basis for any additional Reserves estimated on the Daltons joint venture tenements above 24MT, equivalent to A$5.50/t (indexed) for Haoma s 25% share. June 2011 November 2011 Davidson Creek Hub Corunna Downs March 2012 Mt Webber Atlas Haoma Mining NL December 2014 Mount Webber Atlas Altura Mining Limited Atlas acquired the Mount Webber tenements from Altura for A$22 million and a royalty on production from the tenements. March 2017 Cisco lithium prospect Pilbara Minerals Limited Atlas Iron Limited Pilbara agreed to purchase a 51% interest in E45/4270 for A$2.3 million in either cash or shares, at Pilbara s election Valuation Approach The Valuation Basis employed by CSA Global is Market Value, as defined by the VALMIN Code (2015). The Valuation Date is 1 July The currency is Australian dollars (A$) unless otherwise stated. In forming an opinion on the Market Value of the Mineral Assets, the valuation approach adopted by CSA Global has been to rely primarily on Market-based methods (primarily the Comparative Transaction method). This was based on the declared Mineral Resources of the iron ore projects and the tenement area of the lithium and copper projects. CSA Global has considered several alternative valuation methods to crosscheck our valuation opinion (Table 34). Alternative methods considered included the income approach (DCF analysis), Yardstick market factors, and the appraised value approach, based on holding costs. The choice of alternative valuation method employed was dictated by the exploration stage of the asset and the availability of information. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

293 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 34: Valuation basis and methods employed Mineral Asset Development stage Basis of valuation Valuation methods Mount Webber resources outside of the mine plan Pre-Development Declared Resource Comparative Transactions, Yardstick Corunna Downs resources outside of the mine plan Pre-Development Declared Resource Comparative Transactions, Yardstick McPhee Creek resources Pre-Development Declared Resource Comparative Transactions, Yardstick Miralga Creek resource Pre-Development Declared Resource Comparative Transactions, Appraised Value Davidson Creek Hub Resources Pre-Development Declared Resource Comparative Transactions, Appraised Value Pardoo Pre-Development Declared Resource Comparative Transactions, Appraised Value Abydos Pre-Development Declared Resource Comparative Transactions, Appraised Value Mid West Pre-Development Declared Resource Comparative Transactions, Appraised Value Hickman Pre-Development Declared Resource Comparative Transactions, Appraised Value Western Creek Pre-Development Declared Resource Comparative Transactions, Appraised Value Jimblebar Pre-Development Declared Resource Comparative Transactions, Appraised Value Warrawanda Pre-Development Declared Resource Comparative Transactions, Appraised Value West Pilbara Pre-Development Declared Resource Comparative Transactions, Appraised Value Ridley Magnetite resources Pre-Development Declared Resource Comparative Transactions, Appraised Value Cisco lithium tenement Advanced Exploration Exploration Tenure Comparative Transactions, Appraised Value Pancho lithium tenement Early-Stage Exploration Exploration Tenure Comparative Transactions, Appraised Value Copper Range Advanced Exploration Exploration Tenure Comparative Transactions, Appraised Value Walker Copper Project Advanced Exploration Exploration Tenure Comparative Transactions, Appraised Value Gold potential Early-Stage Exploration Exploration Tenure Comparative Transactions, Modified Kilburn Pilgangoora DSO spodumene interest Development DCF Project-Specific Value Drivers Project-specific value drivers are discussed below. Key value drivers for the iron ore projects include the quality of the deposits (e.g. iron grade and deleterious element grades), as well as the size of the deposits, and their location in relation to available infrastructure (port, rail, road). CSA Global notes that the effect of these value drivers is cumulative. For example, low iron grade ores are saleable, albeit at a discount to benchmark prices. Products exceeding benchmark specifications for deleterious elements such as silica and aluminium are also saleable up to certain maxima, but attract a further discount based on their concentrations. At some point, the cumulative effect renders the product unattractive to most buyers. The relative quality and size of the Atlas iron ore deposits is depicted in Figure 46, with the location of the project areas depicted in Figure 47, and the relative locations of the Pilbara projects indicated in Figure 48. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

294 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 46: Comparative grade and quality of the Atlas projects Note: The blue arrow indicates a trend of increasing iron grade and decreasing silica and aluminium in both diagrams. The ternary diagram (triangle graphic above) normalises the sum of all input variables to 100%, so the axes on the ternary diagram do not represent percentages. The Reference Material symbol (*) indicates the iron ore index specifications listed in the legend to the left. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

295 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 47: Location of Atlas projects Source: Atlas, 2018 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

296 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Figure 48: Location of Atlas Pilbara projects Source: Atlas, 2018 Mount Webber The Mount Webber deposits (Figure 48) are extensively drilled on a relatively close spacing, therefore the geological risk is minimised. The remaining resources are in the immediate vicinity of resources that are currently being mined, therefore benefit from established infrastructure. Corunna Downs The deposits are extensively drilled on a relatively close spacing, therefore the geological risk is minimised. The remaining resources are in the immediate vicinity of resources that are included in the current mine plan for the Corunna Downs development project (Figure 48), which has been approved, but is currently on hold. The remaining resources will therefore benefit from the infrastructure that has been committed to. McPhee Creek The deposits (Figure 47 and Figure 48) are extensively drilled on a relatively close spacing, therefore the geological risk is minimised. This project is the subject of a completed feasibility study, with mine planning and infrastructure requirements engineered in detail. The development project has not been committed to, as the current iron ore prices do not deliver sufficient cash flows to encourage the development of this project. The project has been technically de-risked to a large extent. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

297 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Ridley Ridley is the only magnetite resource being valued as part of this package of iron ore assets. It is also the only resource that has not been reported in accordance with the 2012 edition of the JORC Code, as there has been no material work completed in recent years, and it was originally reported in accordance with the 2004 edition of the JORC Code. CSA Global notes the comparative lack of market activity in magnetite iron ore projects in WA in the past three years. It is a comparatively large deposit (~2 Bt), relatively close to the port at Port Hedland (Figure 48). However, it is unlikely to be able to access the nearby rail infrastructure, which is controlled by BHP. Other transport solutions will need to be considered, such as a slurry pipeline considered in the previously completed PFS. Pardoo The Pardoo deposit is close to Ridley (Figure 48). The BIF surrounding the deposit contains asbestiform minerals, the actual deposit does not. The deposits are small, lower grade and are mostly remnants from earlier mining. Miralga Creek The deposit is well understood by the Atlas geology team. The deposit is small and comparatively isolated (Figure 48), but of relatively good quality (Figure 46). There is minor upside potential from the less well understood Grants and Sandtrax deposits. Distance to road infrastructure is not insurmountable, but the size of the deposit may make extending the existing infrastructure unattractive. Newman Projects In today s seaborne iron ore market, it is difficult to assign a value beyond the tenement holding cost to any of the East and West Newman projects. The negative contributing factors include: Distance from the coast without an established and accessible rail infrastructure or economically feasible transport route (Figure 47); Relatively small tonnages with limited upside exploration potential; and Prohibitive high deleterious grades, notably, alumina, silica and phosphorous grades (Figure 46). Location Each of the East, West and North Newman projects and Newman Central can be colloquially classified as stranded in that, based on today s iron ore market prices, there is no readily accessible and economic option available to transport mined product to port (Port Hedland) for export. The closest existing rail infrastructure in the region is BHP s Newman Hedland rail line and there is no realistic opportunity to access the BHP infrastructure, nor is it likely that BHP has any interest in the deposits. The remaining options are: Construct a new rail infrastructure system, or Transport ore via road. CSA Global considers that the size of the deposits and their respective product specifications (see below) when compared to other projects are very unlikely to warrant the construction of standalone rail infrastructure. Transporting the product from these deposits on public highways (e.g. via super quad road-trains), on preliminary assessment likewise to rail appears unattractive. However, distances to the infrastructure controlled by FMG or Roy Hill may provide a viable option to link these assets to the infrastructure solutions already in place. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

298 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Quantity With exception of the Davidson Creek Hub, which has a total reported Mineral Resource estimate of 476 Mt, none of the remaining Newman projects possess tonnages of significant size (all less than 60 Mt of Mineral Resource) to justify standalone rail construction. Rail construction can only be justified on large scale (on the order of a billion tonnes or more) expandable projects comprising marketable quality Mineral Resources. None of the Newman projects possess these attributes. CSA Global understands that higher grade zones within the Davidson Creek deposit have been identified, with a total of Mt at a grade of 57.9% Fe, 2.56% Al2O3, 5.36% SiO2 and 0.087% P. Studies have shown that this may potentially be beneficiated to a 58.5% Fe product. Mineral Resource upside potential is also limited given the high exploration maturity. Quality The host lithologies of the Newman group of projects comprise Marra Mamba Iron Formation, Boolgeeda Iron Formation and Archaean BIF. In each project reviewed, a majority had significant grade quality issues (Figure 46), which in today s iron ore market (irrespective of the above-mentioned location issues) would either deem them unsaleable or they would incur significant sale price penalties. A case in example is FMG, whose mix of blend products is sold at a significant discount to benchmark prices, with FMG guidance on the discount currently at 35% (FMG, 2018). The Marra Mamba Iron Formation projects comprising the Davidson Creek Hub, Caramulla South, Homestead, Western Ridge and Western Creek are characterised, in every case, by elevated silica and alumina, often above 6% SiO2 and 3% Al2O3. In the case of Caramulla South, the SiO2 was reported above 8% and the Al2O3 above 6%. The Boolgeeda Iron Formation projects comprising McCamey s North and Hickman projects are characterised by high phosphorous, silica and alumina levels. The silica and phosphorous levels are higher than in the Marra Mamba Iron Formation projects with phosphorous levels greater than 0.15%. Any potential product would most likely attract significant price penalties in today s seaborne iron ore market. The Jimblebar Range and Wishbone/Warrawanda Project mineralisation is hosted in Archaean BIF of the Sylvania Inlier. Warrawanda is characterised by high silica (greater than 7% SiO2) and alumina (3% Al2O3) levels, and like the Marra Mamba Iron Formation projects, would incur significant price penalties if able to be sold into the seaborne iron ore trade. Jimblebar Range is the only Newman Project which exhibits alumina grades (approximately 2% Al 2O3) at a marketable level. The negative connotation are the silica levels of approximately 7% SiO2. Conclusion It is unlikely that any of the Newman group of projects are of grade or tonnage that would support an economic mining project in today s iron ore market. Irrespective of their stranded location, the levels of the deleterious elements are in many instances prohibitively high, and if saleable would incur significant price penalties. The only retrievable value beyond the holding cost of the tenement would be if the mined product could be blended with a higher quality ore to achieve a blended product aligned to the 62% Fe Platts Index. Given the high exploration maturity and the absence of any material Mineral Resource quality and quantity upside potential, this seems unlikely. Avalon Point/Abydos Production complete; remnant resources are small and isolated. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

299 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Mid West (Beebyn) The deposit is small, of poor quality (Figure 46), isolated and stranded (Figure 47). West Pilbara (Anthiby) The deposit is small, of poor quality (Figure 46), isolated and stranded (Figure 47). Project-specific discount/premium factors Based on the considerations discussed above, CSA Global has exercised professional judgement in selecting project-specific discounts or premiums, as summarised in Table 35. Table 35: Project-specific discount/premium factors Project Valuation considerations Pardoo Poor quality, small, remnants closer to port 0.5 Abydos Remnant mineralisation small 0.5 Mount Webber Operating mine established infrastructure 1.5 McPhee Creek DFS completed currently cashflow negative Miralga Creek Small resource, reasonable quality 0.5 Corunna Downs Infrastructure planned and budgeted 1.2 Mid West Stranded, small, poor quality 0.1 Hickman Stranded, small, poor quality 0.1 Western Creek Stranded, small, poor quality 0.1 Jimblebar Stranded, small, poor quality 0.1 Warrawanda Stranded, small, poor quality 0.1 Davidson Creek Hub Large, poor quality, but with the potential to beneficiate about 1/3 of the resource. Far from port. 0.3 West Pilbara Stranded, small, poor quality 0.1 Ridley Large project, reasonably close to port. Resource reported under previous edition of JORC Code. Magnetite market has been less active Discount/premium factor 1 Comparative Transactions Valuation DSO Mineral Resources CSA Global has conducted a search for recent market transactions involving Australian DSO iron ore projects, as well as magnetite iron ore projects. As CSA Global s brief was to assess the value of the iron ore resources outside of the current mine plans, the transactions selected were generally project-level transactions, and involved mostly non-producing assets. The notable exception was the May 2016 acquisition of a 15% interest in Atlas by Glencore. Due to the negative market sentiment, there were not a large number of relevant transactions involving projects that were deemed to be reasonable comparatives to Atlas assets. CSA Global identified 11 transactions involving DSO iron ore projects in WA within the last five years. Details of the transactions are provided in Appendix 3. The Mount Gibson acquisition of Shine was excluded as a high outlier (an order of magnitude higher than all the other transactions), therefore the analysis detailed below includes 10 transactions. In analysing the Comparative Transactions, CSA Global assessed the implied purchase price on the basis of A$/t of contained iron in the declared resource base of the project at the time of the transaction. This was then normalised to the June 2018 iron ore price of US$64.81/t (A$87.69/t) to correct for movements in the iron ore price over the period being considered. Table 36 summarises some of the analyses carried out on these transactions. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

300 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 36: Summary of analysis of WA DSO iron ore Comparative Transactions All transactions (Excluding outlier) Projects >20 Mt Implied (A$/t) Normalised (A$/t) Implied (A$/t) Normalised (A$/t) Minimum Maximum Median Mean Weighted average Count CSA Global Assessment From this analysis, CSA Global concludes that suitable valuation factors based on contained iron in the declared resources would be a low factor of A$0.15/t, a high factor of A$0.45/t and a preferred factor of A$0.22/t. The high factor is based on the maximum value. This value pertains to the Ascot acquisition of Wonmunna in March This transaction included a large deferred payment, with approximately 67% of the consideration paid after five years. In addition, the major part of the upfront payment was share-based. CSA Global consider that a current cash transaction would likely have a lower value, as the risks inherent in deferred payment would not apply. The low factor is based on the mean and the weighted average of the transaction set. The transaction with a value most similar to this factor is the Todd acquisition of Flinders in March CSA Global consider that the Atlas portfolio includes several projects at a more advanced stage than Flinders Pilbara Iron Ore Project was at when this transaction occurred, and therefore conclude that Atlas s key assets are likely to have a higher value than this. The preferred factor is based on the upper quartile of the transaction set. The transaction with a value most similar to this was the Maiden acquisition of North Marillana in September This transaction involved a small (15.6 Mt) low grade (54% Fe) iron ore deposit, but occurred at a time when the iron ore price was high (US$133.96/t). Table 37 summarises the valuation of the remaining DSO iron ore mineral resources, assuming there is no further mining at Mount Webber, and that mining of Corunna is indefinitely deferred. Table 37: # Undiscounted valuation of DSO iron ore resources considering Comparative Transactions Project Contained Fe (Mt) Low (A$M) High (A$M) Preferred (A$M) Pardoo Abydos Mount Webber McPhee Creek Miralga Creek Corunna Downs Mid West Hickman Western Creek Jimblebar Warrawanda Davidson Creek Hub# West Pilbara Davidson Creek contained Fe based on high-grade portion only CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

301 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Based on the project-specific value drivers discussed in Section 4.1.4, CSA Global has exercised professional judgement in selecting project-specific discounts or premiums, as summarised in Table 35. Applying these project-specific discounts and premiums to the values obtained from the consideration of the Comparative Transactions, results in the Discounted Valuation summarised in Table 38. Table 38: # Discounted Valuation of DSO iron ore resources considering Comparative Transactions Project Contained Fe (Mt) Discount/premium factor Low (A$M) High (A$M) Preferred (A$M) Pardoo Abydos Mount Webber McPhee Creek Miralga Creek Corunna Downs Mid West Hickman Western Creek Jimblebar Warrawanda Davidson Creek Hub# West Pilbara Davidson Creek contained Fe based on high-grade portion only Table 39 considers the undiscounted value of the Mount Webber and Corunna Downs Mineral Resources that are not included in the current mine plans, i.e. the value of the resources that would remain after mining. Table 39: Project Undiscounted valuation of resources outside of the Webber & Corunna financial model based on Comparative Transactions Contained Fe (Mt) Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs Table 40 considers the discounted value of the Mount Webber and Corunna Downs Mineral Resources that are not included in the current mine plans, i.e. the value of the resources that would remain after mining. Table 40: Discounted Valuation of resources outside of Webber & Corunna financial models based on Comparative Transactions Project Contained Fe (Mt) Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs Magnetite Mineral Resources CSA Global also identified and assessed six transactions involving magnetite iron ore projects in Australia within the last five years. Details of these transactions are provided in Appendix 2. In analysing the comparative transactions, CSA Global assessed the implied purchase price on the basis of A$/t of contained iron in the declared resource base of the project at the time of the transaction. This was then normalised to the June 2018 iron ore price of US$64.81/t (A$87.69/t) to correct for movements in the iron ore price over the period being considered. In analysing the transactions (Table 41), it was clear that the Formosa earn-in to the Ironbridge Project was an outlier. This transaction was the earliest of the transactions considered, and the iron ore price was still very high. In addition, the resource involved was very large, with over 1.5 Bt of contained Fe. For this reason, CSA Global CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

302 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets excluded this transaction when assessing a suitable valuation factor for the Ridley deposit, and focused instead on the five remaining transactions, which occurred in the period December 2013 to the current date. Table 41: Summary of analysis of WA magnetite iron ore Comparative Transactions All transactions Implied (A$/t) Count Excluding Ironbridge Normalised (A$/t) Implied (A$/t) Normalised (A$/t) Minimum Maximum Median Mean Weighted average CSA Global note that the transaction involving the resource most similar to the Ridley magnetite iron ore project in terms of grade and contained iron, is the GIM acquisition of Ularring in October 2015, which is also the latest transaction considered. This transaction had a normalised transaction price of A$0.02/t Fe. CSA Global Assessment From this analysis, CSA Global concludes that suitable market-based valuation factors for the Ridley magnetite iron ore project would be a low factor of A$0.01/t, a high factor of A$0.03/t, and a preferred factor of A$0.02/t. The preferred factor is based on the mean and weighted average of the five remaining transactions, which is similar to the transaction price of Ularring. The low factor is rounded from the minimum transaction value, and the maximum is based on the median value, and was selected as an appropriate symmetrical range around the preferred value. Table 42 summarises the undiscounted valuation of the Ridley magnetite project based on these factors. Table 42: Project Undiscounted Valuation of Ridley magnetite project using Comparative Transactions Contained Fe (Mt) Low (A$M) High (A$M) Preferred (A$M) Ridley Applying the project-specific discount factors summarised in Table 35 results in the Discounted Valuation summarised in Table 43. Table 43: Project Discounted Valuation of Ridley magnetite project using Comparative Transactions Contained Fe (Mt) Low (A$M) High (A$M) Preferred (A$M) Ridley Yardstick Order of Magnitude Check CSA Global used the Yardstick method as an order of magnitude check on the Mineral Resources valuation completed using comparative transactions. The Yardstick order of magnitude check is simplistic (e.g. it is very generalised and does not address project specific value drivers but takes an industry-wide view). It provides a non-corroborative valuation check on the primary comparative transactions valuation method, allowing CSA Global to assess the reasonableness of the derived comparative transactions valuation and whether there are any potential issues with their preferred primary valuation method. For the Yardstick order of magnitude check, CSA Global used the average 62% Fe spot price for iron ore for June 2018, being US$64.81/t. Using the exchange rate of US$0.739/A$ (RBA monthly exchange rate for June 2018), and a 16% discount for the 58% Fe product (based on the reported Platts 62% Fe Index and Platts 58% Fe Index average spot prices for June 2018), this gives a discounted spot price of A$73.04/t. In addition, CSA Global utilised the following Yardstick factors for DSO iron ore, in line with commonly used factors for bulk commodities: CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

303 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Inferred Mineral Resources: 0.1% to 0.2% of spot price Indicated Mineral Resources: 0.2% to 0.5% of spot price Measured Mineral Resources: 0.5% to 1.0% of spot price. CSA Global also used the following Yardstick factors for magnetite iron ore, based on the difference in market prices for magnetite projects compared to DSO projects: Inferred Mineral Resources: 0.01% to 0.02% of spot price Indicated Mineral Resources: 0.02% to 0.05% of spot price Measured Mineral Resources: 0.05% to 0.1% of spot price. The average 62% Fe spot price for iron ore for June 2018 used as the starting point for the Yardstick order of magnitude check was consistent with that used for the evaluation of Comparative Transactions data so that the results could be compared. Applying these factors to the Atlas resources results in the preferred values and valuation ranges summarised in Table 44. Table 44: Project Summary of Yardstick order of magnitude crosscheck Low (A$M) High (A$M) Preferred (A$M) Pardoo Abydos Mount Webber McPhee Creek Miralga Creek Corunna Downs Mid West Hickman Western Creek Jimblebar Warrawanda Davidson Creek Hub# West Pilbara Ridley* * Magnetite Yardstick factors applied for Ridley; DSO Yardstick factors applied to all other resources. # Davidson Creek contained Fe based on high-grade portion only Table 52 summarises the value of the Mount Webber and Corunna Downs resources that are not included in the current mine plans. Table 45: Yardstick Valuation of resources outside the Mount Webber and Corunna Downs financial models Project Low (A$M) High (A$M) Preferred A$M) Mount Webber Corunna Downs Appraised Value (Tenement Holding Costs) CSA Global considered the value of the projects in terms of the annual holding costs of the tenements that comprise the projects (Table 46). The annual holding costs of the tenements are based on information on the annual rent, rates and minimum required expenditure reported by MMTS (2018). The preferred value is based on the total holding costs plus a 10% premium, and the range is 50% above and below this preferred value. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

304 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 46: Project Valuation of Atlas projects considering Appraised Value Total annual Area holding Tenements 2 costs (km ) (A$ 000) Low (A$ 000) High (A$ 000) Preferred (A$ 000) Abydos M45/1157, M45/1158, M45/1159, M45/1190, M45/1191, R45/0003 M45/1179, M45/1241 Mount Webber McPhee Creek M45/1197, M45/1209 M45/ , Miralga Creek Corunna Downs Mid West E45/3601 M45/1257 R51/ , , , , Hickman E45/2052, E45/2054 E52/2160, E52/2300, R52/0002, R52/0004 E52/2303, E52/3306 R52/ Cisco E45/ Pancho E45/ Note: Operating and Development stage projects highlighted in green Pardoo and Ridley Western Creek Jimblebar Warrawanda Davidson Creek Hub West Pilbara Mount Dove ground holding M52/1034, M52/1043, R52/0003, R52/0008 E08/1712 M47/ Valuation Opinion for Iron Ore Projects CSA Global understand that under BDO s Current Discount Scenario, they have assumed that production at Mount Webber will cease and that Corunna Downs will not be developed. Therefore BDO has instructed CSA Global to value Mount Webber and Corunna Downs on a resource basis. CSA Global s opinion on the value of the iron ore mineral resources of Atlas as at 1 July 2018 is provided in Table 47, assuming that production at Mount Webber will cease and that Corunna Downs is not developed. In the event that Mount Webber and Corunna Downs are mined, CSA Global s opinion on the value of the material iron ore resources that will remain after completion of current mine plans, as at 1 July 2018, is provided in Table 48. CSA Global stresses that this is an opinion on likely value, and not actual value, which can only be tested by going to market. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

305 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 47: Value of Atlas iron ore Mineral Resources as at 1 July 2018 Project Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs McPhee Creek Ridley Davidson Creek Hub Mount Dove ground holding Miralga Creek West Pilbara (Anthiby) Mid West (Beebyn) Western Creek Hickman Jimblebar Warrawanda Pardoo Abydos Total Table 48: Value of remaining iron ore Mineral Resources post current mine plan completion as at 1 July 2018 Project Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs Total The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur. CSA Global s opinion of the valuation ranges and the preferred values of the Mount Webber, Corunna Downs and McPhee Creek resources, as well as the high-grade portion of the Davidson Creek resource, are primarily based on the Comparative Transactions valuation outcomes, as supported by the Yardstick order of magnitude check. This is also the case for the Ridley magnetite project, where the Yardstick order of magnitude check did not match the Comparative Transactions valuation outcomes as closely, but was nevertheless of the same order of magnitude. CSA Global s opinion of the remaining iron ore assets is primarily based on the Appraised valuation method, which is based on the holding costs of the tenure. In CSA Global s view, the discounted valuation completed using the Comparatives Transaction method justifies that there is some value to these tenements, and that incurring the holding costs to maintain the tenure is therefore reasonable. However, in CSA Global s professional judgement, these particular assets are unlikely to attract a price much higher than the holding costs in the current market, due to the combination of low iron grade, relatively high deleterious element concentrations, generally small isolated resources, and the lack of available infrastructure. The one exception is the Miralga Creek Project, which (although small and isolated) does have a better-quality resource base. CSA Global s opinion on the value of this project is based on the Comparative Transactions valuation outcomes, as supported by the Yardstick order of magnitude check. Due to its small size, the value of Miralga Creek is also not deemed to be material in the context of the total value of Atlas. CSA Global notes that this results in some greenfields projects, such as the Mid West and West Pilbara, having lower values than remnant resources associated with operations that have ceased, such as Pardoo and Abydos. This is a function of our view on the relative attractiveness of the projects to prospective buyers, based on resource grade and quality, project scale, project isolation, and the availability of infrastructure. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

306 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 4.2 Other Projects In line with generally accepted accounting practice, CSA Global has applied a threshold of materiality for individual projects of 10% of the overall value of the mineral asset portfolio, and projects less than 5% of the portfolio are presumed not to be material. Given the iron projects outside the Life of Mine plans have a valuation range of A$50 million to A$65 million, the threshold for a material project will be A$5 6 million, and projects less than $ million can be presumed to be non-material. CSA Global notes that while of interest as exploration assets, the majority of the tenement portfolio (apart from the tenure covering known resources) covers ground of either limited prospectivity, or at an early stage of exploration maturity. Given this status, CSA Global has concluded that these parts of Atlas s tenement portfolio are not material to the valuation of the mineral assets of Atlas. Of the projects specifically discussed above, namely Pancho, Cisco, Copper Range, and Walker, CSA Global completed a check of the project values using Comparative Transactions and the Geoscientific Factor methods. Details of the analysis are presented in Appendix 3 (Comparative Transactions) and Appendix 5 (Geoscientific Factor Method). The valuation outcomes of the analysis are presented in Table 49. Table 49: Summary valuations of key other projects, as at 1 July 2018 Area (km2) Principal Commodity Focus Low Value (A$M) High Value (A$M) Preferred Value (A$M) Cisco 70.4 Li Pancho 9.6 Li Copper Range 5.6 Cu Cu ,1171,569 Au Projects Walker Gold Potential of the Atlas Pilbara tenements* Total other projects * Around Corunna Downs, Miralga Creek and McPhee Creek areas adjacent to existing Atlas infrastructure The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur. CSA Global also notes that in our view, an incoming party is likely to rationalise the tenement portfolio held by Atlas by reduction of some of the low value or low priority holdings. 4.3 Summary of valuations CSA Global understand that under BDO s Current Discount Scenario, they have assumed that production at Mount Webber will cease and that Corunna Downs will not be developed. Therefore, BDO has instructed CSA Global to value Mount Webber and Corunna Downs, as well as McPhee Creek, on a resource basis. CSA Global s opinion on the value of the iron ore Mineral Resources of Atlas as at 1 July 2018 is provided in Table 50, assuming that production at Mount Webber will cease and that Corunna Downs is not developed. In the event that Mount Webber and Corunna Downs are mined, CSA Global s opinion on the value of the material iron ore resources not included in the current mine plans, as at 1 July 2018, is provided in Table 53. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

307 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 50: Value ofmineral Assets as at 1 July 2018 Project Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs McPhee Creek Ridley Davidson Creek Hub Mount Dove ground holding Miralga Creek West Pilbara (Anthiby) Mid West (Beebyn) Western Creek Hickman Jimblebar Warrawanda Pardoo Abydos Cisco Li Pancho Li Copper Range Cu Walker Cu Gold potential of the Atlas Pilbara tenements* TOTAL The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur. Note: the Mt Webber & Corunna Downs Mineral asset valuations above are for the full resource base including any residual resources outside the mine plan the value of these residual resources are shown below in Table 2 Table 51: Value of remaining iron ore Mineral Resources outside the current mine plans as at 1 July 2018 Project Low (A$M) High (A$M) Preferred (A$M) Mount Webber Corunna Downs TOTAL The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur. There is significant range in the values derived for the Company s projects. CSA Global has considered these ranges and concludes that it provides a reasonable representation of possible valuation outcomes for the projects, given the uncertainties inherent in valuing exploration projects. It is stressed that the valuation is an opinion as to likely values, not absolute values, which can only be tested by going to the market. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

308 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 5 References Arnold, A., Platts Analytics: Ore quality & discounts, S&P Global Platts presentation, Global iron ore & Steel Forecast Conference, Perth, 21 March Atlas Iron Limited, Annual Report Atlas Iron Limited, Annual Report Atlas Iron Limited, Miralga West Prospect, Miralga Creek Project, Proposed Drilling Programme. Australian Stratigraphic Units Database, Geoscience Australia Barich, A., 2018a. China s shift to high-grade iron ore structural not cyclical, experts say, S&P Global Market Intelligence, 22 March Barich, A., 2018b. Fortescue s low discount dream evaporating, analysts say, S&P Global Market Intelligence, 29 March Cornelius, H. & Grigson, M Lithostructural Setting and Controls on Tin-Tantalum Mineralisation in the Wodgina Greenstone Belt, Pilbara Craton, Western Australia. Sons of Gwalia internal Report. Crossing, J Geological mapping, Mount Webber Prospect, Pilbara WA for Atlas Iron. Compass Geological. Crowther, H 2012 Sandtrax deposit, Abydos. Mineral Resource Report, Western Australia. Atlas Iron Limited Crowther, H Caramulla South Resource Estimate Report, September 2013, Atlas Iron Limited. Crowther, H Homestead Resource Estimate Report, June 2013, Atlas Iron Limited. Crowther, H Jimblebar Range Resource Estimate Report, October 2013, Atlas Iron Limited. Crowther, H Miji Miji Deposit Mineral Resource Estimate, March 2013 Crowther, H Western Creek Resource Estimate Report, August 2013, Atlas Iron Limited. Crowther, H Western Ridge Resource Estimate Report, October 2013, Atlas Iron Limited. Crowther, H Razorback Deposit Mineral Resource Estimate. Atlas Iron Dale, G Pardoo Iron Ore Project, Assessment of Magnetite Potential by Promet Engineers Pty Lt on behalf of Atlas Iron Limited. Doyle, A., Drivers of price differentials in iron ore. CRU presentation, Global iron ore & Steel Forecast Conference, Perth, 21 March FMG, iron ore price realisation guidance, FMG ASX announcement, 27 March Goldsworthy, J., Joyce, R.M., Bonato, P., D Hulst, A Discovery and Geology of the McPhee Creek Iron Deposit, Northern Pilbara, Western Australia Hawke, P Review of geophysics and target generation of tenements covered by the 2011 aeromagnetic survey area 8 (Beebyn/Beebynganna, Weld Range Project). Hawke Geophysics Pty Ltd Hawke, P Results of detailed magnetic survey and geophysical interpretation covering the Pincunah (Avalon Point) project area. Hawke Geophysics Pty Ltd Hermawan, W Fender, Gibson and Dalton Mineral Resource Report, Atlas Iron Hermawan, W Main Range West Deposit Mineral Resource Estimate, December Atlas Iron Limited Hermawan, W Ibanez Deposit Mineral Resource Estimate, Atlas Iron Hermawan, W Glen Herring Mineral Resource Estimate. Atlas Iron Hermawan, W Runway Deposit Mineral Resource Estimate Report. Atlas Iron Hermawan, W Shark Gully Deposit Mineral Resource Estimate. Atlas Iron Hewlett, A Giralia Resources NL, Summary Report, Mineral Resource Estimate, Beebyn Iron Deposit. CSA Australia Pty Ltd. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

309 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Hickman, A Wodgina WA 1: Geological Sheet 2655, second edition, Geological Survey of Western Australia Johnston, A Avalon Point - Mineral Resource Report. Atlas Iron Limited Joint Ore Reserves Committee, Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The JORC Code, 2012 Edition. online. Available from (The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia). Liao, T., iron ore and Steel Market Outlook, Commodities Strategy, March 2018, Citi Research presentation, Global iron ore & Steel Forecast Conference, Perth, 21 March Lo, Crescent Moon Mineral Resource Estimate. Atlas Iron Limited Lo, Main Range Deposit Mineral Resource Estimate. Atlas Iron Limited Lo, A Grants Mineral Resource Estimate. Atlas Iron Limited Lo, A Miralga Creek Mineral Resource Estimate. Atlas Iron Limited Louw, G Giralia Resources NL, Anthiby Well Project, Mineral Resource Report, Western Australia. CSA Global Pty Ltd. McMahon Mining Title Services Pty Ltd, Atlas Iron Limited Tenure Review. Report prepared for Atlas Iron Limited, dated 10 May Porter, M Porter, S Mirrin Mirrin Deposit, Resource Estimate, August 2011 FerrAus Limited Russell, R Geological mapping of the McPhee Creek Iron Ore Deposit, Northeast Pilbara, WA. Atlas Iron Limited S&P Global Platts, 2018a. Methodology and specifications guide iron ore January Available from: S&P Global Platts, 2018b. BHP Billiton switches to IODEX to price Yandi fines: term customers. Available from: S&P Global, 2018a. Commodity Briefing Service iron ore February Available from: S&P Global, 2018b. Commodity Briefing Service iron ore June Available from: Slomp, L Summary Report on Lithium Prospectivity of Mt Francisco E45/4270-I. Internal Atlas Iron Report 159-GEO- EX-REP DRAFT. Slomp, L 2017 Annual Report for the Period 1 May 2016 to 30 April 2017, Abydos Project C40/2007. Atlas Iron Limited Slomp, L, H Pardoo Project Annual Technical Report, Atlas Iron Limited, February 2018 Slomp, L Annual Report for the Period 1 May 2016 to 30 April 2017, Abydos Project C40/2017. Atlas Iron Limited Slomp, L Annual Report for the period 30 March 2016 to 29 March 2017, Mount Webber E45/4269, E45/4540, M45/1209, P45/2822. Atlas Iron Smith, M Halley, Levy, Hale-Bopp and Shoemaker Deposits, Mineral Resource Report, Atlas Iron Limited. Smith, M McCamey s North Deposit, Jimblebar, Mineral Resource Report, Atlas Iron Limited. Smith, M Wishbone Deposit, Warrawanda, Mineral Resource Report, Atlas Iron Limited. Stewart, M Annual Report for the period 8 October 2014 to 7 October 2015, Anthiby Well. Atlas Iron Limited Stewart, M Davidson Creek / Jigalong Project Annual Technical Report for period ending Dec 2014 Sweeney, S Crescent Moon and Crescent Moon West Geology and Drilling Report, October Atlas Iron Limited Sweeney, S Abydos Project. Regional Targets Sandtrax, Sandtrax East and Sandtrax West, E45/2308, Target Review and mapping report. Atlas Iron Limited Sweeney, S Proposed field work across mapping targets of E45/2922 and Mt Vettel s Dead Bullock prospect. Atlas Iron Limited Sweeney, S Mt Webber Regional Desktop Review of P45/ and E45/2922. Atlas Iron Limited CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

310 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Teale, G.S., A Mineragraphic Investigation of a Suite of drill core samples from the McPhee Creek Iron Deposit, Western Australia. Teale & Associates Pty Ltd, Report No CR536 VALMIN, 2015, Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (The VALMIN Code), 2015 edition. online. Available from (The VALMIN Committee of The Australasian Institute of Mining and Metallurgy, and The Australian Institute of Geoscientists). Warner, S., Hermawan, W, 2016 Split Rock Mineral Resource Estimate. Atlas Iron CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

311 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 6 Glossary Below are brief descriptions of some terms used in this report. For further information or for terms that are not described here, please refer to internet sources such as Wikipedia Aeromagnetic Antiformal Archaean: BIF Channel iron deposits Concentrate Density Direct ship ore (DSO) Dmt DTR Fluvial Gœthite Granitoid Greenstone terrane Hæmatite Hard cap Hypogene Intraformational Laterite Mafic Magnetic anomaly Magnetite A survey undertaken by helicopter or fixed-wing aircraft for the purpose of recording magnetic characteristics of rocks by measuring deviations of the Earth s magnetic field. A topographic feature which is composed of sedimentary layers in a convex formation, but may not actually form a real anticline (i.e., the oldest rocks may not be exposed in the middle). Widely used term for the earliest era of geological time spanning the interval from the formation of Earth to about 2,500 million years ago. A rock consisting essentially of iron oxides and cherty silica and possessing a marked banded appearance. Iron-rich fluvial sedimentary deposits. A product containing valuable metal from which most of the waste material has been eliminated (in this case high-grade magnetite or hæmatite). Mass of material per unit volume Material of sufficient grade and quality that little processing is required to produce a saleable product. Dry metric tonne. Davis Tube Recovery, a test to measure the weight recovery of magnetite from iron ore. Processes associated with rivers and streams and the deposits and landforms created by them. Gœthite is an iron oxyhydroxide containing ferric iron. It is the main component of rust and bog iron ore. A variety of coarse grained plutonic rock similar to granite which mineralogically is composed predominantly of feldspar and quartz. Greenstone belts are zones named for the green hue imparted by chlorite minerals within the rocks, which are variably metamorphosed (greenschist) mafic to ultramafic volcanic sequences associated with sedimentary rocks. A mineral form of iron(iii) oxide (Fe2O3), one of several iron oxides. It is generally reddish or brown in colour. Ferruginised land surface which occurs across all banded iron formation outcrops, as a result of current climatic processes. In ore deposit geology, hypogene processes occur deep below the earth's surface, and tend to form deposits of primary minerals, as opposed to supergene processes that occur at or near the surface, and tend to form secondary minerals. Being or occurring within a geologic formation. A cemented residuum of weathering which is generally leached in silica with a high aluminia and/or iron content. A silicate mineral or igneous rock that is rich in magnesium and iron and is thus a portmanteau of magnesium and ferric. Most mafic minerals are dark in colour, and common rock-forming mafic minerals include olivine, pyroxene, amphibole, and biotite. Zone where the magnitude and orientation of the Earth s magnetic field differs from adjacent areas. A mineral with the chemical formula Fe₃O₄. It is one of the oxides of iron and is ferromagnetic; it is attracted to a magnet and can be magnetised to become a permanent magnet itself. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

312 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Martite Pisolite Plutonic Spot price Supergene Synclinal Syncline Turbidite A variety of hæmatite that is pseudomorphic after magnetite crystals. Spheroidal crystalline particle larger than 2 millimetres in diameter Relating to or denoting igneous rock formed by solidification at considerable depth beneath the earth's surface. Current delivery price of a commodity traded in the spot market. In ore deposit geology, supergene processes or enrichment are those that occur relatively near the surface as opposed to deep hypogene processes. Sloping downward from opposite directions so as to meet in a common point or line. A fold with younger layers closer to the centre of the structure. The geologic deposit of a turbidity current, which is a type of sediment gravity flow responsible for distributing vast amounts of clastic sediment into the deep ocean. Ultramafic Igneous and meta-igneous rocks with a very low silica content (less than 45%), generally >18% MgO, high FeO, low potassium, and are composed of usually greater than 90% mafic minerals. Unconformable Waste Consisting of a series of younger strata that do not succeed the underlying older rocks in age or in parallel position, as a result of a long period of erosion or nondeposition. Material which does not contain minerals of economic merit. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

313 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 7 Abbreviations and Units of Measurement % percent degree(s) C degrees Celsius 3D three-dimensional AIG Australian Institute of Geoscientists Altura Altura Mining ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange Atlas Atlas Iron Limited AusIMM Australasian Institute of Mining and Metallurgy BDO BDO Corporate Finance (WA) Pty Ltd BIF banded iron formation Bt billion tonnes CID channel iron deposit CRM certified reference material CSA Global CSA Global Pty Ltd DCF Discounted Cash Flow DD diamond core (drilling) dmtu dry metric tonne units DSO direct shipping ore DTR Davis Tube Recovery FerrAus FerrAus Limited GAM Global Advanced Metals Giralia Giralia Resources Limited GPS global positioning system g/t Grams per tonne GSWA Geological Survey of Western Australia ha hectares Hancock Hancock Prospecting Pty Ltd IDW inverse distance weighting IDW2 inverse distance weighting to the power of 2 IER Independent Expert s Report km kilometres km 2 square kilometres LCT lithium-caesium-tantalum LOI loss on ignition LOM life of mine CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

314 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets m M mm MMTS Mt OK Pilbara Minerals PPA RBA QAQC QC QKNA RC RCP Redstone ROM RQD RTK SCID Snowden SQL SSM t TGA tkm VHMS WA XRF metre(s) million(s) millimetres McMahon Mining Title Services million tonnes ordinary kriging Pilbara Minerals Limited Pilbara Port Authority Reserve Bank of Australia quality assurance and quality control (for sampling and assaying) quality control quantitative kriging neighbourhood analysis reverse circulation (drilling) reverse circulation percussion (drilling) Redstone Corporation Pty Ltd run of mine rock quality designation real-time kinematic siliceous channel iron deposit Snowden Mining Industry Consultants Pty Ltd structured query language state survey mark tonne(s) thermogravimetric analysis tonne-kilometre volcanogenic-hosted massive sulphide Western Australia x-ray fluorescence CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

315 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Appendix 1: Valuation Approaches Mineral Assets are defined in the VALMIN Code as all property including (but not limited to) tangible property, intellectual property, mining and exploration Tenure and other rights held or acquired in connection with the exploration, development of and production from those Tenures. This may include the plant, equipment and infrastructure owned or acquired for the development, extraction and processing of Minerals in connection with that Tenure. Business valuers typically define market value as The price that would be negotiated in an open and unrestricted market between a knowledgeable, willing, but not anxious buyer, and a knowledgeable, willing but not anxious seller acting at arm s length. The accounting criterion for a market valuation is that it is an assessment of fair value, which is defined in the accounting standards as the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm s length transaction. The VALMIN Code defines the value of a Mineral Asset as its Market Value, which is the estimated amount (or the cash equivalent of some other consideration) for which the Mineral Asset should exchange on the date of Valuation between a willing buyer and a willing seller in an arm s length transaction after appropriate marketing where the parties had each acted knowledgeably, prudently and without compulsion. Market Value usually consists of two components, the underlying or Technical Value, and a premium or discount relating to market, strategic or other considerations. The VALMIN Code recommends that a preferred or mostlikely value be selected as the most likely figure within a range after taking into account those factors which might impact on Value. The concept of Market Value hinges upon the notion of an asset changing hands in an arm s length transaction. Market Value must therefore take into account, inter alia, market considerations, which can only be determined by reference to comparative transactions. Generally, truly comparable transactions for Mineral Assets are difficult to identify due to the infrequency of transactions involving producing assets and/or Mineral Resources, the great diversity of mineral exploration properties, the stage to which their evaluation has progressed, perceptions of prospectivity, tenement types, the commodity involved and so on. For exploration tenements, the notion of value is very often based on considerations unrelated to the amount of cash which might change hands in the event of an outright sale, and in fact, for the majority of tenements being valued, there is unlikely to be any cash equivalent of some other consideration. Whilst acknowledging these limitations, CSA Global has identified what it considers to be comparative transactions that have been used in assessing the values to be attributed to the Mineral Assets. Valuation Methods for Exploration Projects The choice of valuation methodology applied to Mineral Assets, including exploration licences, will depend on the amount of data available and the reliability of that data. The VALMIN Code classifies Mineral Assets into categories that represent a spectrum from areas in which mineralisation may or may not have been found through to Operating Mines which have well-defined Ore Reserves, as listed below: Early-stage Exploration Projects tenure holdings where mineralisation may or may not have been identified, but where Mineral Resources have not been identified. Advanced Exploration Projects tenure holdings where considerable exploration has been undertaken and specific targets identified that warrant further detailed evaluation, usually by drill testing, trenching or some other form of detailed geological sampling. A Mineral Resource estimate may or may not have been made but sufficient work will have been undertaken on at least one prospect to provide both a good understanding of the type of mineralisation present and encouragement that further work will elevate one or more of the prospects to the Mineral Resources category. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

316 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Pre-Development Projects tenure holdings where Mineral Resources have been identified and their extent estimated (possibly incompletely) but where a decision to proceed with development has not been made. Development Projects tenure holdings for which a decision has been made to proceed with construction or production or both, but which are not yet commissioned or operating at design levels. Economic viability of Development Projects will be proven by at least a Prefeasibility Study. Production Projects tenure holdings particularly mines, wellfields and processing plants that have been commissioned and are in production. Each of these different categories will require different valuation methodologies, but regardless of the technique employed, consideration must be given to the perceived market valuation. The Market Value of Exploration Properties and Undeveloped Mineral Resources can be determined by four general approaches: Cost; Market; Geoscience Factor or Income. Cost Appraised Value or Exploration Expenditure Method considers the costs and results of historical exploration. The Appraised Value Method utilises a Multiple of Exploration Expenditure (MEE), which involves the allocation of a premium or discount to past expenditure through the use of the Prospectivity Enhancement Multiplier (PEM). This involves a factor which is directly related to the success (or failure) of the exploration completed to date, during the life of the current tenements. Guidelines for the selection of a PEM factor have been proposed by several authors in the field of mineral asset valuation (Onley, 1994). Table 52 lists the PEM factors and criteria used in the Report. Table 52: Prospectivity Enhancement Multiplier (PEM) factors PEM range Criteria Exploration (past and present) has downgraded the tenement prospectivity, no mineralisation identified Exploration potential has been maintained (rather than enhanced) by past and present activity from regional mapping Exploration has maintained, or slightly enhanced (but not downgraded) the prospectivity Exploration has considerably increased the prospectivity (geological mapping, geochemical or geophysical activities) Scout drilling (rotary air blast, air-core, RCP) has identified interesting intersections of mineralisation Detailed drilling has defined targets with potential economic interest A Mineral Resource has been estimated at Inferred JORC category, no concept or scoping study has been completed Indicated Mineral Resources have been estimated that are likely to form the basis of a prefeasibility study Indicated and Measured Resources have been estimated and economic parameters are available for assessment Market Market Approach Method or Comparative Transactions looks at prior transactions for the property and recent arm s length transactions for comparative properties. The Comparative Transaction method provides a useful guide where a mineral asset that is comparable in location and commodity has in the recent past been the subject of an arm s length transaction, for either cash or shares. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

317 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets In an exploration joint venture or farm-in, an equity interest in a tenement or group of tenements is usually earned in exchange for spending on exploration, rather than a simple cash payment to the tenement holder. The joint venture or farm-in terms, of themselves, do not represent the Value of the tenements concerned. To determine a Value, the expenditure commitments should be discounted for time and the probability that the commitment will be met. Whilst some practitioners invoke complex assessments of the likelihood that commitments will be met, these are difficult to justify at the outset of a joint venture, and it seems more reasonable to assume a 50:50 chance that a joint venture agreement will run its term. Therefore, in analysing joint venture terms, a 50% discount may be applied to future committed exploration, which is then grossed up according to the interest to be earned to derive an estimate of the Value of the tenements at the time that the agreement was entered into. Where a progressively increasing interest is to be earned in stages, it is likely that a commitment to the second or subsequent stages of expenditure will be so heavily contingent upon the results achieved during the earlier phases of exploration that assigning a probability to the subsequent stages proceeding will in most cases be meaningless. A commitment to a minimum level of expenditure before an incoming party can withdraw must reflect that party s perception of minimum value and should not be discounted. Similarly, any upfront cash payments should not be discounted. The terms of a sale or joint venture agreement should reflect the agreed value of the tenements at the time, irrespective of transactions or historical exploration expenditure prior to that date. Hence the current Value of a tenement or tenements will be the Value implied from the terms of the most recent transaction involving it/them, plus any change in Value as a result of subsequent exploration. Where the tenements comprise applications over previously open ground, little to no exploration work has been completed and they are not subject to any dealings, it is thought reasonable to assume that they have minimal, if any Value, except perhaps, the cost to apply for, and therefore secure a prior right to the ground, unless of course there is competition for the ground and it was keenly sought after. Such tenements are unlikely to have any Value until some exploration has been completed, or a deal has been struck to sell or joint venture them, implying that a market for them exists. High quality Mineral Assets are likely to trade at a premium over the general market. On the other hand, exploration tenements that have no defined attributes apart from interesting geology or a good address may well trade at a discount to the general market. Market Values for exploration tenements may also be impacted by the size of the land holding, with a large, consolidated holding in an area with good exploration potential attracting a premium due to its appeal to large companies. Geoscience Factor The Geoscience Factor method seeks to rank and weight geological aspects, including proximity to mines, deposits and the significance of the camp and the commodity sought. The Geoscience Factor (or Kilburn) method, as described by Kilburn (1990) and expanded on by Goulevitch and Eupene (1994), provides an approach for the technical valuation of the exploration potential of mineral properties, on which there are no defined resources. Valuation is based upon a calculation in which the geological prospectivity, commodity markets, and mineral property markets are assessed independently. The Geoscientific Factor method is essentially a technique to define a Value based upon geological prospectivity. The method appraises a variety of mineral property characteristics: Location with respect to any off-property mineral occurrence of value, or favourable geological, geochemical or geophysical anomalies Location and nature of any mineralisation, geochemical, geological or geophysical anomaly within the property and the tenor of any mineralisation known to exist on the property being valued Number and relative position of anomalies on the property being valued CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

318 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Geological models appropriate to the property being valued. The Geoscientific Factor method systematically assesses and grades these four key technical attributes of a tenement to arrive at a series of multiplier factors (Table 53). Table 53: Geoscience Factor ranking Address/Off-property factor On-property factor Anomaly factor Geological factor 0.5 Very little chance of mineralisation; Concept unsuitable to the environment Very little chance of mineralisation; Concept unsuitable to the environment Extensive previous exploration with poor results Generally unfavourable lithology; No alteration of interest 1 Exploration model support; Indications of prospectivity; Concept validated Exploration model support; Indications of Prospectivity; Concept validated Extensive previous exploration with encouraging results; Regional targets Deep cover; Generally favourable lithology/alteration (70%) 1.5 Reconnaissance (rotary air blast/air-core) drilling with some scattered favourable results; Minor workings Exploratory sampling with encouragement Several early stage targets outlined from geochemistry and geophysics Shallow cover; Generally favourable lithology/alteration (50% to 60%) 2 Several old workings; Significant RCP drilling leading to advanced project Several old workings; reconnaissance drilling or RCP drilling with encouraging intersections Several well-defined targets supported by recon drilling data Exposed favourable; Lithology/alteration 2.5 Abundant workings; Grid drilling with encouraging results on adjacent sections Abundant workings; Core drilling after RCP with encouragement Several well-defined targets with encouraging drilling results Strongly favourable lithology, alteration 3 Mineral Resource areas defined Advanced resource definition drilling (early stages) Several significant subeconomic targets; No indication of size Generally favourable lithology with structures along strike of a major mine; Very prospective geology 3.5 Abundant workings/mines with significant historical production; Adjacent to known mineralisation at Prefeasibility Study stage Abundant workings/mines with significant historical production; Mineral Resource areas defined Several significant subeconomic targets; Potential for significant size ; Early stage drilling 4 Along strike or adjacent to Resources at Definitive Feasibility Study stage Adjacent to known mineralisation at Prefeasibility Study stage Marginally economic targets of significant size advanced drilling 4.5 Adjacent to development stage project Along strike or adjacent to Resources at Definitive Feasibility Study stage Marginal economic targets of significant size with well drilled Inferred Resources 5 Along strike from operating major mine(s) Adjacent to development stage project Several significant ore grade co-relatable intersections Rating CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

319 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets The Basic Acquisition Cost (BAC) is an important input to the Geoscientific Factor method and it is calculated by summing the application fees, annual rent, work required to facilitate granting (e.g. native title, environmental etc.) and statutory expenditure for a period of 12 months. Each factor is then multiplied serially by the BAC to establish the overall technical value of each mineral property. A fifth factor, the market factor, is then multiplied by the technical value to arrive at the fair market value. Yardstick The Rule-of-Thumb (Yardstick) method is relevant to exploration properties where some data on tonnage and grade exist may be valued by methods that employ the concept of an arbitrarily ascribed current in situ net value to any Ore Reserves (or Mineral Resources) outlined within the tenement (Lawrence 2001, 2012). Rules-of-Thumb (Yardstick) methods are commonly used where a Mineral Resource remains is in the Inferred category and available technical/economic information is limited. This approach ascribes a heavily discounted in situ value to the Resources, based upon a subjective estimate of the future profit or net value (say per tonne of ore) to derive a rule-of-thumb. This Yardstick multiplier factor applied to the Resources delineated (depending upon category) varies depending on the commodity. Typically, a range from 0.4% to 3% is used for base metals and PGM, whereas for gold and diamonds a range of 2% to 4.5% is used. The method estimates the in situ gross metal content value of the mineralisation delineated (using the spot metal price and appropriate metal equivalents for polymetallic mineralisation as at the valuation date). The chosen percentage is based upon the valuer s risk assessment of the assigned JORC Code s Mineral Resource category, the commodity s likely extraction and treatment costs, availability/proximity of transport and other infrastructure (particularly a suitable processing facility), physiography and maturity of the mineral field, as well as the depth of the potential mining operation. Income The Income Approach is relevant to exploration properties on which undeveloped Mineral Resources have been identified by drilling. Value can be derived with a reasonable degree of confidence by forecasting the cash flows that would accrue from mining the deposit, discounting to the present day and determining a net present value (NPV). The Income Approach is not appropriate for properties without Mineral Resources. Valuation Approaches by Asset Stage Regardless of the technical application of various valuation methods and guidelines, the valuer should strive to adequately reflect the carefully considered risks and potentials of the various projects in the valuation ranges and the preferred values, with the overriding objective of determining the fair market value. Table 54 below shows the valuation approaches that are generally considered appropriate to apply to each type of mineral property. Table 54: Valuation approaches for different types of mineral properties (VALMIN, 2015) Exploration properties Mineral Resource properties Development properties Production properties Income No In some cases Yes Yes Market Yes Yes Yes Yes Cost Yes In some cases No No Valuation approach Valuation Bibliography AusIMM (1998): "VALMIN 94 Mineral Valuation Methodologies". Conference Proceedings. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

320 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets AusIMM (2012): VALMIN Seminar Series Conference Proceedings, 161pp. CIMVAL (2003). Standards and Guidelines for Valuation of Mineral Properties. Goulevitch, J and Eupene, G. (1994): Geoscience Rating for Valuation of Exploration Properties - Applicability of the Kilburn Method in Australia and Examples of its Use in the NT. Mineral Valuation Methodologies Conference, Sydney October AusIMM. pp Gregg, L. T. and Pickering, S.M. Jr (2007). Methods for Valuing Previous Exploration Programs During Consideration of Prospective Mineral Ventures in 42nd Industrial Minerals Forum in Asheville, NC. Kilburn, L.C. (1990) Valuation of Mineral Properties which do not contain Exploitable Reserves CIM Bulletin, August Lawrence, R.D. (2000). Valuation of Mineral Properties Without Mineral Resources: A Review of Market-Based Approaches in Special Session on Valuation of Mineral Properties, Mining Millennium 2000, Toronto, Canada. Lawrence, M. (2001). An Outline of Market-based Approaches for Mineral Asset Valuation Best Practice. Proceedings VAMIN 2001 Mineral Asset Valuation Issues for the Next Millennium. Pp AusIMM. Lawrence, M. (2011). Considerations in Valuing Inferred Resources. VALMIN Seminar Series AusIMM. P Onley, P.G. (2004). Multiples of Exploration Expenditure as a Basis for Mineral Property Valuation. In Mineral Valuation Methodologies Conference. AusIMM. pp Thompson, I.S. (2000) A critique of Valuation Methods for Exploration Properties and Undeveloped Mineral Resources in Special Session on Valuation of Mineral Properties, Mining Millennium 2000, Toronto, Canada. VALMIN Committee, 2015, Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, 2015 edition. CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

321 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Appendix 2: Summary Tenement Schedule Table 55: Company Codes used in tenement schedule Code Company Code Company Code Company ATLA Atlas Iron Limited BEGL Beckton Gledhill Pty Ltd VENT Venture Minerals Ltd PIML Pilbara Mines Limited BBIG BBI Group Pty Ltd PROM Prometheus Mining Pty Ltd GSAN Great Sandy Pty Ltd NRAN Novarange Pty Ltd MRES Mineral Resources Ltd KALA Kalamazoo Resources Ltd EMPR Empire Resources Limited Atlas Iron Limited TARGET'S STATEMENT Page 320

322 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets ATLAS IRON LIMITED - TENEMENT SCHEDULE AS AT 30/06/2018 MANAGED LIVE TENEMENTS Tenement ID Status Jurisdiction Manager Project Holder1 Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment E08/1712 LIVE WA *ATLA ANTHIBY WELL GIRA SB 8/10/ /09/2006 7/10/2019 $0 $8,505 IRON ORE; SIPA CAVEAT; RETENTION STATUS GRANTED E45/2363 LIVE WA *ALTL PILGANGOORA ALTL SB 1/05/ /11/ /04/2019 $72,000 $13,608 OLD ACT; IRON ORE; EXCESS TONNAGE; E45/2612 LIVE WA *ATLA ABYDOS GIRA SB 22/02/ /03/ /02/2022 $20,000 $1,632 OLD ACT;Iron Ore Rights Granted - 26/6/17 E45/2728 LIVE WA *ATLA ABYDOS DYNA SB 24/04/2006 2/03/ /04/2018 $198,000 $37,422 OLD ACT; IRON ORE; ATLAS CAVEAT; EXCESS TONNAGE; ATLA HAVE FE RIGHTS; FMG Application for Forfeiture; NT AD CLOSE AMALG 4/2/18 EoT has been lodged E45/2922 LIVE WA *ATLA MT WEBBER GIRA 75 HAOM SB 10/07/ /06/2006 9/07/2018 $70,000 $10,773 IRON ORE; Extension of Term applied for E45/3298 LIVE WA *ATLA ABYDOS ATLA SB 20/08/ /08/ /08/2019 $50,000 $1,134 IRON ORE; E45/3320 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 21/01/ /10/ /01/2021 $70,000 $5,103 IRON ORE; ADELAIDE PROSPECTING CONSENT CAVEAT; E45/3321 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 21/01/ /10/ /01/2021 $70,000 $12,474 IRON ORE; ADELAIDE PROSPECTING CONSENT CAVEAT; E45/3511 LIVE WA *ATLA FARRELL'S WELL ATLA SB 4/06/2013 9/09/2009 3/06/2018 $30,000 $2,400 IRON ORE; Extension of Term applied for E45/3601 LIVE WA *ATLA FARRELL'S WELL ATLA SB 30/03/ /12/ /03/2021 $0 $1,134 IRON ORE RIGHTS; RETENTION STATUS E45/3619 LIVE WA *ATLA ABYDOS ATLA SB 26/10/2010 5/02/ /10/2020 $50,000 $2,268 IRON ORE; E45/3662 LIVE WA *ATLA ABYDOS IBRI SB 6/04/ /04/2010 5/04/2021 $20,000 $341 IRON ORE E45/3858 LIVE WA *ATLA FARRELL'S WELL ATLA SB 29/10/ /02/ /10/2022 $50,000 $4,800 UNSURE OF INTEREST E45/4029 LIVE WA *ATLA HILLSIDE SHEF SB 31/10/2012 2/03/ /10/2022 $50,000 $2,700 NA Rent Amount Comments E45/4269 LIVE WA *ATLA MT WEBBER ATLA SB 9/04/ /09/2013 8/04/2019 $20,000 $600 IRON ORE E45/4311 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 6/10/2014 8/11/2013 5/10/2019 $99,000 $14,520 IRON ORE E45/4351 LIVE WA *ATLA FARRELL'S WELL ATLA SB 14/08/ /01/ /08/2019 $10,000 $341 IRON ORE RIGHTS E45/4386 LIVE WA *ATLA MT WEBBER ATLA SB 17/11/ /04/ /11/2019 $30,000 $3,520 VPS COMPLIED; E45/4393 LIVE WA *ATLA MCPHEE CREEK ATLA SB 2/12/2014 7/05/2014 1/12/2019 $10,000 $220 E45/4517 LIVE WA *ATLA WODGINA ATLA SB 7/09/ /01/2015 6/09/2020 $15,000 $660 NA E45/4540 LIVE WA *ATLA BLACK RANGE ATLA SB 19/10/ /03/ /10/2020 $42,000 $9,240 iron ore E45/4572 LIVE WA *ATLA PANORAMA ATLA SB 21/01/ /05/ /01/2021 $20,000 $1,760 NA E45/4593 LIVE WA *ATLA HILLSIDE ATLA SB 17/02/ /06/ /02/2021 $49,000 $10,780 NA E45/4595 LIVE WA *ATLA HILLSIDE ATLA SB 24/02/ /06/ /02/2021 $25,000 $5,500 E45/4596 LIVE WA *ATLA HILLSIDE ATLA SB 24/02/ /06/ /02/2021 $20,000 $1,980 NA E45/4639 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 20/10/ /10/ /10/2021 $20,000 $952 HILL 50 CONSENT CAVEAT E45/4643 LIVE WA *ATLA COONGAN ATLA SB 1/07/ /10/ /06/2021 $15,000 $1,100 E45/4658 LIVE WA *ATLA HILLSIDE ATLA SB 15/07/2016 7/12/ /07/2021 $62,000 $8,432 E45/4670 LIVE WA *ATLA PANORAMA ATLA SB 20/10/ /12/ /10/2021 $10,000 $341 NA E45/4672 LIVE WA *ATLA PANORAMA ATLA SB 20/10/ /12/ /10/2021 $20,000 $1,496 NA E45/4696 LIVE WA *ATLA MT WEBBER ATLA SB 24/10/2016 5/02/ /10/2021 $20,000 $2,312 NA Atlas Iron Limited TARGET'S STATEMENT Page 321 E45/4734 LIVE WA *ATLA MT WEBBER ATLA SB 30/11/2016 6/04/ /11/2021 $31,000 $4,216 E45/4774 LIVE WA *ATLA MARBLE BAR ATLA SB 2/05/ /05/2016 1/05/2023 $10,000 $341 E45/4841 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 3/07/ /10/2016 2/07/2022 $15,000 $408 E45/4875 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 11/10/ /02/ /10/2022 $20,000 $2,176 E45/4888 LIVE WA *ATLA EGINBAH ATLA SB 18/10/ /02/ /10/2022 $70,000 $9,520 Amalg lodged 9/11/17; NT AD CLOSE AMALG 24/5/18 E45/4889 LIVE WA *ATLA EGINBAH ATLA SB 18/10/ /02/ /10/2022 $36,000 $4,896 E45/4900 LIVE WA *ATLA EGINBAH ATLA SB 6/11/ /03/2017 5/11/2022 $15,000 $408 E45/4950 LIVE WA *ATLA PANORAMA ATLA SB 8/02/ /06/2017 7/02/2023 $20,000 $1,088 E45/4952 LIVE WA *ATLA PANORAMA ATLA SB 8/02/ /06/2017 7/02/2023 $15,000 $408 E46/0802 LIVE WA *ATLA MCPHEE CREEK GIRA SB 15/02/2010 3/10/ /02/2020 $70,000 $3,969 NA E46/0803 LIVE WA *ATLA MCPHEE CREEK ATLA SB 20/01/ /10/ /01/2021 $102,000 $19,278 VPS COMPLIED; IRON ORE; ADELAIDE PROSPECTING CONSENT CAVEAT E46/1065 LIVE WA *ATLA MCPHEE CREEK ATLA SB 7/09/ /01/2015 6/09/2020 $15,000 $1,100 NA E46/1094 LIVE WA *ATLA CORUNNA DOWNS ATLA SB 1/07/ /11/ /06/2021 $20,000 $3,080 E46/1129 LIVE WA *ATLA MT WEBBER ATLA SB 21/10/2016 6/04/ /10/2021 $15,000 $408 E47/2052 LIVE WA *ATLA HICKMAN ATLA SB 3/02/2010 3/04/2009 2/02/2020 $0 $5,103 IRON ORE; EXCESS TONNAGE; RETENTION STATUS GRANTED E47/2053 LIVE WA *ATLA HICKMAN ATLA SB 3/02/2010 3/04/2009 2/02/2020 $50,000 $1,701 IRON ORE; E47/2054 LIVE WA *ATLA HICKMAN ATLA SB 3/02/2010 3/04/2009 2/02/2020 $0 $1,134 IRON ORE; RETENTION STATUS GRANTED E52/1658 LIVE WA *ATLA JIGALONG AMAN SB 25/08/ /08/ /08/2018 $70,000 $11,907 OLD ACT; PT CONV TO M52/1055; OVER U & B RESERVE; EXCESS TONNAGE; IRON ORE RIGHTS; KEY TENEMENT; GLOBAL LOAN AGENCY CONSENT CAVEAT & MORTGAGE E52/1772 LIVE WA *ATLA JIMBLEBAR WARW SB 29/09/2005 6/05/ /09/2018 $50,000 $1,134 OLD ACT; IRON ORE; NA NA

323 E52/2303 LIVE WA *ATLA JIMBLEBAR WARW SB 2/11/ /11/2008 1/11/2019 $0 $1,701 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE; RETENTION STATUS CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Tenement ID Status Jurisdiction Manager Project Holder1 Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment E52/2160 LIVE WA *ATLA WESTERN CREEK WARW SB 13/10/ /10/ /10/2018 $0 $2,268 E52/2300 LIVE WA *ATLA WESTERN CREEK WARW SB 4/08/ /11/2008 3/08/2019 $0 $341 IRON ORE; RETENTION STATUS Rent Amount Comments IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY CONSENT CAVEAT & MORTGAGE; RETENTION STATUS GRANTED E52/3306 LIVE WA *ATLA JIMBLEBAR EAST WARW SB 6/04/ /06/2015 5/04/2021 $0 $1,320 RETENTION STATUS E52/3480 LIVE WA *ATLA NEDS CREEK ATLA SB 12/03/ /10/ /03/2023 $20,000 $1,088 E52/3524 LIVE WA *ATLA KOONDRA ATLA SB 18/10/ /02/ /10/2022 $20,000 $1,496 G45/0273 LIVE WA *ATLA PARDOO ATLA HA 12/10/2007 6/02/ /10/2028 $0 $1,304 SV HA; OVER E45/2330 G45/0315 LIVE WA *ATLA PARDOO ATLA HA 9/07/ /10/2009 8/07/2031 $0 $1,568 SV 94.99HA; OVER PT E45/2330 G45/0339 LIVE WA *ATLA CORUNNA DOWNS ATLA HA 16/11/ /07/ /11/2037 $0 $809 NA G52/0281 LIVE WA *ATLA JIGALONG AMAN HA 23/04/ /12/ /04/2030 $0 $1,007 NA L45/0154 LIVE WA *ATLA PARDOO ATLA HA 24/11/ /09/ /11/2027 $0 $8,679 KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE L45/0175 LIVE WA *ATLA PARDOO ATLA HA 13/06/ /11/ /06/2029 $0 $330 NA L45/0176 LIVE WA *ATLA PARDOO ATLA HA 13/06/ /11/ /06/2029 $0 $363 NA L45/0202 LIVE WA *ATLA PARDOO ATLA HA 15/05/ /10/ /05/2030 $0 $3,069 KEY TENEMENT; GLOBAL LOAN AGENCY SERVICES MORTGAGE L45/0204 LIVE WA *ATLA ABYDOS ATLO HA 30/10/ /11/ /10/2030 $0 $9,257 NA L45/0207 LIVE WA *ATLA ABYDOS ATLA HA 27/11/ /02/ /11/2030 $0 $759 GLOBAL LOAN AGENCY SERVICES MORTGAGE L45/0209 LIVE WA *ATLA PARDOO ATLA HA 18/12/ /05/ /12/2030 $0 $429 NA L45/0210 LIVE WA *ATLA PARDOO ATLA HA 18/12/ /05/ /12/2030 $0 $248 NA L45/0248 LIVE WA *ATLA MT DOVE ATLA HA 1/02/ /11/ /01/2033 $0 $6,320 KEY TENEMENT; GLOBAL LOAN AGENCY SERVICES MORTGAGE L45/0280 LIVE WA *ATLA MT WEBBER ATLO HA 13/11/ /02/ /11/2033 $0 $5,214 NA L45/0284 LIVE WA *ATLA ABYDOS ATLO HA 5/12/ /04/2012 4/12/2033 $0 $13,019 NA L45/0285 LIVE WA *ATLA ABYDOS ATLO HA 13/11/ /04/ /11/2033 $0 $13,827 NA L45/0369 LIVE WA *ATLA ABYDOS ATLA HA 20/02/ /10/ /02/2036 $0 $974 NA L45/0371 LIVE WA *ATLA MT WEBBER ATLO HA 8/07/ /11/2014 7/07/2036 $0 $2,096 NA L45/0372 LIVE WA *ATLA MT WEBBER ATLO HA 9/07/ /11/2014 8/07/2036 $0 $545 NA L45/0394 LIVE WA *ATLA MT WEBBER ATLO HA 21/04/ /10/ /04/2037 $0 $248 NA L45/0395 LIVE WA *ATLA MT WEBBER ATLO HA 18/07/ /10/ /07/2037 $0 $182 NA L45/0405 LIVE WA *ATLA SHAW RIVER ATLA HA 9/11/ /07/2016 8/11/2037 $0 $2,376 L45/0406 LIVE WA *ATLA CORUNNA DOWNS WEST ATLA HA 9/11/ /07/2016 8/11/2037 $0 $7,013 NA L45/0407 LIVE WA *ATLA CORUNNA DOWNS EAST ATLA HA 9/11/ /07/2016 8/11/2037 $0 $1,898 NA L45/0408 LIVE WA *ATLA CORUNNA DOWNS EAST ATLA HA 9/11/ /07/2016 8/11/2037 $0 $2,310 NA L45/0410 LIVE WA *ATLA CHECK ATLA HA 9/11/ /07/2016 8/11/2037 $0 $11,583 NA L45/0418 LIVE WA *ATLA CORUNNA DOWNS ATLA HA 23/01/ /10/ /01/2038 $0 $1,122 NA L45/0427 LIVE WA *ATLA MT WEBBER ATLO HA 2/08/2017 9/02/2017 1/08/2038 $0 $1,353 L52/0103 LIVE WA *ATLA JIGALONG AMAN HA 11/11/ /12/ /11/2029 $0 $1,188 NA L52/0105 LIVE WA *ATLA JIGALONG AMAN HA 11/11/ /12/ /11/2029 $0 $2,690 NA Atlas Iron Limited TARGET'S STATEMENT Page 322 L52/0131 LIVE WA *ATLA JIGALONG AMAN HA 12/08/2011 9/03/ /08/2032 $0 $10,940 NA M45/0932 LIVE WA *ATLA WODGINA ATLA HA 18/09/ /06/ /09/2033 $10,000 $561 IRON ORE RIGHTS; KARIYARRA CAVEAT M45/1157 LIVE WA *ATLA PARDOO ATLA HA 2/10/2007 6/02/2006 1/10/2028 $22,500 $4,208 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE; WANPARTA SUBJECT TO CLAIM CAVEAT; M45/1158 LIVE WA *ATLA PARDOO ATLA HA 2/10/2007 6/02/2006 1/10/2028 $73,100 $13,670 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE; WANPARTA SUBJECT TO CLAIM CAVEAT; M45/1159 LIVE WA *ATLA PARDOO ATLA HA 2/10/2007 6/02/2006 1/10/2028 $10,000 $804 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE; WANPARTA SUBJECT TO CLAIM CAVEAT; M45/1170 LIVE WA *ATLA PARDOO ATLA HA 28/08/ /09/ /08/2029 $15,300 $2,861 IRON ORE; SHAW RIVER CAVEAT M45/1179 LIVE WA *ATLA ABYDOS ATLO HA 9/07/ /11/2008 8/07/2031 $172,700 $32,295 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE; NJAMAL CONSENT CAVEAT; M45/1190 LIVE WA *ATLA PARDOO ATLA HA 25/11/ /05/ /11/2030 $10,000 $243 SV HA; IRON ORE; M45/1191 LIVE WA *ATLA PARDOO ATLA HA 25/11/ /05/ /11/2030 $10,000 $131 SV 6.48HA; IRON ORE; M45/1194 LIVE WA *ATLA PARDOO ATLA HA 9/07/ /10/2009 8/07/2031 $16,900 $3,160 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE M45/1197 LIVE WA *ATLA MT WEBBER GIRA HA 26/06/ /04/ /06/2033 $159,400 $29,808 IRON ORE; KEY TENEMENT; NJAMAL CONSENT CAVEAT; 2 GLOBAL LOAN AGENCY MORTGAGEs M45/1209 LIVE WA *ATLA MT WEBBER ATLO HA 14/08/2012 7/07/ /08/2033 $191,200 $35,754 IRON ORE; KEY TENEMENT; 2 GLOBAL LOAN AGENCY MORTGAGES; NJAMAL CAVEAT M45/1231 LIVE WA *ALTL PILGANGOORA ALTL HA 26/08/2016 1/11/ /08/2037 $10,000 $823 ATLAS CAVEAT M45/1241 LIVE WA *ATLA ABYDOS ATLA HA 29/10/2013 1/05/ /10/2034 $10,000 $598 NJAMAL CAVEAT; GAMW CAVEAT; ; GLOBAL LOAN AGENCY CAVEAT; MRES CAVEAT M45/1243 LIVE WA *ATLA MCPHEE CREEK GIRA HA 28/04/ /08/ /04/2035 $637,900 $119,287 IRON ORE; GLOBAL LOAN AGENCY MORTGAGE; NJAMAL CAVEAT M45/1257 LIVE WA *ATLA CORUNNA DOWNS ATLA HA 27/05/ /09/ /05/2037 $1,644,300 $307,484 4 ADELAIDE PROSPECTING CAVEATS; GLOBAL LOAN AGENCY CAVEAT M47/1449 LIVE WA *ATLA MT DOVE ATLO HA 9/08/2011 6/07/2010 8/08/2032 $294,500 $55,072 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE

324 M52/1034 LIVE WA *ATLA JIGALONG AMAN HA 23/04/2009 7/02/ /04/2030 $99,900 $18,681 IRON ORE RIGHTS; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Tenement ID Status Jurisdiction Manager Project Holder1 Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment M52/0211 LIVE WA *ATLA JIMBLEBAR WARW HA 11/09/ /04/ /09/2032 $14,900 $2,786 NA M52/0790 LIVE WA *ATLA JIMBLEBAR WARW HA 26/03/2004 5/06/ /03/2025 $41,300 $7,723 SV 412.2HA; Rent Amount Comments M52/1043 LIVE WA *ATLA JIGALONG AMAN HA 22/09/ /04/ /09/2031 $99,900 $18,681 IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCY MORTGAGE P45/2822 LIVE WA *ATLA MT WEBBER ATLA HA 23/11/ /01/ /11/2020 $4,040 $278 NA P45/2972 LIVE WA *ATLA MT WEBBER ATLO HA 24/09/ /02/ /09/2019 $2,000 $135 NA R45/0003 LIVE WA *ATLA PARDOO ATLA HA 18/07/2017 5/06/ /07/2022 $0 $23,509 CONV E45/2330; R45/0005 LIVE WA *ATLA PINCUNAH HILL DYNA HA 28/07/ /11/ /07/2019 $0 $4,977 Atlas caveat R51/0002 LIVE WA *ATLA BEEBYN GIRA HA 19/05/ /01/ /05/2019 $0 $28,142 R52/0002 LIVE WA *ATLA WESTERN CREEK GIRA HA 2/08/2016 5/05/2015 1/08/2021 $0 $7,790 GLOBAL LOAN AGENCY MORTGAGE R52/0003 LIVE WA *ATLA JIGALONG SEPA HA 9/12/ /06/2015 8/12/2021 $0 $49,011 NA R52/0004 LIVE WA *ATLA WESTERN CREEK GIRA HA 2/08/ /07/2015 1/08/2021 $0 $4,043 conv of e52/1912; R52/0005 LIVE WA *ATLA JIMBLEBAR WARW HA 1/11/2016 4/08/ /10/2018 $0 $30,980 NA R52/0006 LIVE WA *ATLA WARRAWANDA WARW HA 1/11/ /08/ /10/2018 $0 $28,347 NA R52/0008 LIVE WA *ATLA JIGALONG AMAN HA 28/07/ /11/ /07/2020 $0 $50,832 GLOBAL LOAN AGENCY MORTGAGE Atlas Iron Limited TARGET'S STATEMENT Page 323 MANAGED APPLICATIONS Tenement Status Jurisdiction Manager Project Holder1 Id Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment Rent Amount Comments E08/2928 PENDING WA *ATLA CHEELA PLAINS ATLA SB 14/06/2017 $20,000 $1,360 NT AD CLOSE 18/12/17 E45/4877 PENDING WA *ATLA CORUNNA DOWNS ATLA SB 15/02/2017 $27,000 $3,672 2nd in time to Sayona; NT AD CLOSE 27/10/2018 E45/4974 PENDING WA *ATLA STRELLEY ATLA SB 10/08/2017 $20,000 $1,088 E45/4979 PENDING WA *ATLA MT WEBBER ATLA SB 22/08/2017 $20,000 $1,496 over Mt Webber M45/1197 & 1209, insurance due to High Court decision E45/4987 PENDING WA *ATLA FARRELL'S WELL ATLA SB 23/08/2017 $35,000 $4,760 E45/5010 PENDING WA *ATLA PARDOO ATLA SB 13/09/2017 $15,000 $680 over M45/1190, 1191, High court protection E45/5011 PENDING WA *ATLA ABYDOS ATLA SB 13/09/2017 $20,000 $1,088 E45/5048 PENDING WA *ATLA PANORAMA ATLA SB 16/10/2017 $58,000 $7,888 E45/5113 PENDING WA *ATLA PANORAMA ATLA SB 28/11/2017 $10,000 $341 NT AD CLOSE 21/7/18 E45/5114 PENDING WA *ATLA PANORAMA ATLA SB 28/11/2017 $10,000 $341 NT AD CLOSE 21/7/18 E45/5163 PENDING WA *ATLA DE GREY SGMA SB 17/01/2018 $15,000 $544 NT AD CLOSE 29/7/18 E45/5164 PENDING WA *ATLA DE GREY SGMA SB 17/01/2018 $20,000 $952 E45/5165 PENDING WA *ATLA DE GREY SGMA SB 17/01/2018 $20,000 $952 NT AD CLOSE 11/9/18 E45/5169 PENDING WA *ATLA STRELLEY ATLA SB 19/01/2018 $15,000 $544 E45/5174 PENDING WA *ATLA MT TINSTONE ATLA SB 14/02/2018 $15,000 $272 E45/5202 PENDING WA *ATLA DE GREY ATLA SB 3/04/2018 $15,000 $544 Ballot of 2 E45/5203 PENDING WA *ATLA DE GREY ATLA SB 3/04/2018 $10,000 $341 E45/5204 PENDING WA *ATLA DE GREY ATLA SB 3/04/2018 $10,000 $341 E45/5205 PENDING WA *ATLA DE GREY ATLA SB 3/04/2018 $10,000 $341 E45/5232 PENDING WA *ATLA MT WEBBER ATLA SB 4/05/2018 $20,000 $952 E47/3785 PENDING WA *ATLA MT DOVE ATLA SB 22/08/2017 $20,000 $816 over M47/1449; insurance in relation to High Court decision P45/3043 PENDING WA *ATLA MT WEBBER ATLA HA 22/08/2017 $2,000 $138 Over Mt Webber as insurance from High Court decision P45/3044 PENDING WA *ATLA FARRELL'S WELL ATLA HA 23/08/2017 $2,000 $72 GDA GAP; NT AD CLOSE 21/6/18 P45/3048 PENDING WA *ATLA MT DOVE ATLA HA 8/09/2017 $2,000 $96 OVER M47/1449 due to High Court decision P45/3059 PENDING WA *ATLA EGINBAH ATLA HA 10/11/2017 $2,000 $74 NT AD CLOSE 30/9/18 NON-MANAGED GRANTED TENEMENTS Tenement Status Jurisdiction Manager Project Holder1 Id Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment Rent Amount Comments E45/4270 LIVE WA PIML WODGINA ATLA 49 PIML SB 17/06/ /09/ /06/2019 $33,000 $6,600 IRON ORE; NO MINING ON RESERVE E45/4704 LIVE WA BEGL MCPHEE CREEK ROYALTY BEGL SB 5/07/ /02/2016 4/07/2022 $25,000 $3,400 NA E45/4706 LIVE WA BEGL MCPHEE CREEK ROYALTY BEGL SB 2/08/ /02/2016 1/08/2022 $20,000 $2,312 NA E46/0732 LIVE WA GSAN MCPHEE CREEK GIRA SB 1/02/ /09/ /01/2020 $75,000 $14,175 IRON ORE; E46/1066 LIVE WA GSAN MCPHEE CREEK ATLA SB 7/09/ /01/2015 6/09/2020 $20,000 $2,860 NA E47/1743 LIVE WA *BBIG BALLA BALLA FRSW SB 24/02/ /07/ /02/2019 $10,000 $341 PRIORITY 1; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT E47/1744 LIVE WA *BBIG BALLA BALLA FRSW SB 24/02/ /07/ /02/2019 $39,000 $7,800 COVERED BY L47/57 (GRANTED FERR); BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT E47/1829 LIVE WA *BBIG BALLA BALLA FRSW SB 30/03/ /08/ /03/2022 $30,000 $2,268 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT E47/2225 LIVE WA *BBIG BALLA BALLA FRSW SB 27/12/ /12/ /12/2022 $30,000 $900 REC FOR SURRENDER; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT E47/2251 LIVE WA *BBIG BALLA BALLA FRSW SB 2/04/ /01/2010 1/04/2019 $30,000 $5,100 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT; AMALG 23/5/16 E47/2382 LIVE WA *BBIG BALLA BALLA FRSW SB 2/04/ /06/2010 1/04/2019 $78,000 $15,600 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT

325 G45/0290 LIVE WA #ATLA WODGINA WODL HA 22/01/ /07/ /01/2031 $0 $165 SV 9.945HA; OVER E45/2175; GAMW CONSENT CAVEAT; ACN CAVEAT G45/0291 LIVE WA #ATLA WODGINA WODL HA 22/01/ /07/ /01/2031 $0 $165 SV 9.945HA; OVER E45/2175; GAMW CONSENT CAVEAT; ACN CAVEAT G47/1229 LIVE WA *BBIG BALLA BALLA FRSW HA 29/01/ /12/ /01/2028 $0 $17,094 SV 1036HA; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; L47/0057 LIVE WA *BBIG BALLA BALLA FRSW HA 3/03/ /01/1999 2/03/2021 $0 $4,159 SEARCH FOR GROUNDWATER; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; L47/0175 LIVE WA *BBIG BALLA BALLA FRSW HA 1/11/ /09/ /10/2028 $0 $231 OVER FERRO M47/804; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0325 LIVE WA *BBIG BALLA BALLA FRSW HA 13/02/ /07/ /02/2033 $0 $68,703 SEARCH FOR GROUNDWATER; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0385 LIVE WA *BBIG BALLA BALLA FRSW HA 16/12/ /08/ /12/2032 $0 $198 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT' REC FOR SURRENDER CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Tenement Id Status Jurisdiction Manager Project Holder1 Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment Rent Amount Comments E52/2056 LIVE WA KALA CORKTREE GIRA SB 19/09/2008 2/02/ /09/2018 $70,000 $11,340 KALAMAZOO CAVEAT E52/2057 LIVE WA KALA CORKTREE GIRA SB 19/09/2008 2/02/ /09/2018 $70,000 $11,340 KALAMAZOO CAVEAT E57/0681 LIVE WA EMPR YUINMERY GIRA SB 5/06/ /12/2006 4/06/2020 $70,000 $4,536 NA E70/2733 LIVE WA #NRAN YERECOIN NRAN SB 5/12/ /11/2004 4/12/2018 $70,000 $6,237 OLD ACT; IRON ORE; PRIVATE PROPERTY INCLUDED; GIRALIA CAVEAT; EOT REC FOR REFUSAL 27/3/17 E70/2784 LIVE WA #NRAN YERECOIN NRAN SB 15/11/2006 2/05/ /11/2018 $75,000 $14,175 OLD ACT; IRON ORE; PRIVATE PROPERTY INCLUDED; GIRALIA CAVEAT; G45/0321 LIVE WA #ATLA WODGINA WODL HA 5/10/2011 7/07/2010 4/10/2032 $0 $4,901 sv HA; ; GAMW CONSENT CAVEAT; ACN CAVEAT G47/1230 LIVE WA *BBIG BALLA BALLA FRSW HA 15/09/ /09/ /09/2035 $0 $248 PRIORITY 1; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT G47/1231 LIVE WA *BBIG BALLA BALLA FRSW HA 24/09/ /09/ /09/2035 $0 $165 PRIORITY 1; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT G47/1234 LIVE WA *BBIG BALLA BALLA FRSW HA 15/09/ /04/ /09/2035 $0 $627 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT G47/1238 LIVE WA *BBIG BALLA BALLA FRSW HA 20/05/2010 4/09/ /05/2031 $0 $660 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L45/0188 LIVE WA VENT ABYDOS VENT HA 20/11/2009 5/03/ /11/2030 $0 $941 ATLAS CAVEAT; L45/0189 LIVE WA VENT ABYDOS VENT HA 20/11/2009 5/03/ /11/2030 $0 $29,832 ATLAS CAVEAT; L45/0287 LIVE WA VENT ABYDOS VENT HA 28/09/ /04/ /09/2033 $0 $1,931 ATLAS CAVEAT; L47/0168 LIVE WA *BBIG BALLA BALLA FRSW HA 31/07/ /12/ /07/2027 $0 $875 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0171 LIVE WA *BBIG BALLA BALLA FRSW HA 31/07/ /01/ /07/2027 $0 $297 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0174 LIVE WA *BBIG BALLA BALLA FRSW HA 1/11/ /09/ /10/2028 $0 $83 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0229 LIVE WA *BBIG BALLA BALLA FRSW HA 20/03/ /12/ /03/2035 $0 $891 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0242 LIVE WA *BBIG BALLA BALLA FRSW HA 28/10/ /04/ /10/2029 $0 $528 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0243 LIVE WA *BBIG BALLA BALLA FRSW HA 19/03/ /04/ /03/2035 $0 $66 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0244 LIVE WA *BBIG BALLA BALLA FRSW HA 28/10/ /04/ /10/2029 $0 $677 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0245 LIVE WA *BBIG BALLA BALLA FRSW HA 28/10/ /04/ /10/2029 $0 $479 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0384 LIVE WA *BBIG BALLA BALLA FRSW HA 16/12/ /08/ /12/2032 $0 $396 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT L47/0386 LIVE WA *BBIG BALLA BALLA FRSW HA 16/12/ /08/ /12/2032 $0 $99 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT M20/0118 LIVE WA PROM WELD RANGE WRIO HA 27/10/ /11/ /10/2030 $11,000 $2,057 SV HA; IRON ORE; UNIMIN AUSTRALIA CAVEAT M36/0162 LIVE WA DRAI KATHLEEN VALLEY LRLA HA 6/11/1989 4/08/1989 5/11/2031 $10,000 $1,552 RAMELIUS CAVEAT M36/0176 LIVE WA DRAI KATHLEEN VALLEY LRLA HA 4/04/ /12/1989 3/04/2032 $20,400 $3,815 M36/0264 LIVE WA *LIOT KATHLEEN VALLEY LRLA HA 28/06/ /02/ /06/2035 $10,000 $1,608 RAMELIUS CAVEAT RAMELIUS CAVEAT Atlas Iron Limited TARGET'S STATEMENT Page 324 M36/0265 LIVE WA *LIOT KATHLEEN VALLEY LRLA HA 28/06/ /02/ /06/2035 $10,400 $1,945 RAMELIUS CAVEAT M36/0266 LIVE WA DRAI KATHLEEN VALLEY LRLA HA 28/06/ /02/ /06/2035 $54,700 $10,229 RAMELIUS CAVEAT M36/0328 LIVE WA DRAI KATHLEEN VALLEY LRLA HA 4/05/ /09/1994 3/05/2020 $28,500 $5,330 RAMELIUS CAVEAT M36/0365 LIVE WA RAMR KATHLEEN VALLEY LRLA HA 4/05/ /10/1995 3/05/2020 $10,000 $411 RAMELIUS CAVEAT M36/0376 LIVE WA RAMR KATHLEEN VALLEY LRLA HA 4/05/ /02/1996 3/05/2020 $12,200 $2,281 RAMELIUS CAVEAT M36/0441 LIVE WA RAMR KATHLEEN VALLEY LRLA HA 4/05/ /04/1997 3/05/2020 $68,000 $12,716 RAMELIUS CAVEAT M36/0459 LIVE WA *LIOT KATHLEEN VALLEY LRLA HA 4/05/ /09/1997 3/05/2020 $32,700 $6,115 RAMELIUS CAVEAT M36/0460 LIVE WA *LIOT KATHLEEN VALLEY LRLA HA 4/05/ /09/1997 3/05/2020 $94,800 $17,728 RAMELIUS CAVEAT M45/1188 LIVE WA #ATLA WODGINA ATLA HA 12/11/ /02/ /11/2030 $10,000 $972 M45/1252 LIVE WA #ATLA WODGINA GAMW HA 23/03/ /02/ /03/2037 $19,400 $3,628 M47/0297 LIVE WA *BBIG BALLA BALLA FRSW HA 12/08/ /04/ /08/2034 $34,900 $6,526 IRON ORE; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; M47/0298 LIVE WA *BBIG BALLA BALLA FRSW HA 12/08/ /04/ /08/2034 $39,400 $7,368 IRON ORE; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; M47/0311 LIVE WA *BBIG BALLA BALLA FRSW HA 2/02/1993 3/09/1992 1/02/2035 $27,400 $5,124 IRON ORE; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; M47/0312 LIVE WA *BBIG BALLA BALLA FRSW HA 10/02/1993 3/09/1992 9/02/2035 $15,500 $2,899 IRON ORE; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; M47/0360 LIVE WA *BBIG BALLA BALLA FRSW HA 14/06/ /11/ /06/2037 $53,100 $9,930 IRON ORE; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT; IRON ORE; KEY TENEMENT; GLOBAL LOAN AGENCy MORTGAGE; KARIYARRA CONSENT CAVEAT; MRES CAVEAT; Seeking clarification from Legal. Atlas undertaking rehab obligations and then handing over to MinRes. Unclear on reporting requirements, currently assuming MinRes. GLOBAL LOAN AGENCY CAVEAT; MRES CAVEAT; Seeking clarification from Legal. Atlas undertaking rehab obligations and then handing over to MinRes. Unclear on reporting requirements, currently assuming MinRes. M47/0361 LIVE WA *BBIG BALLA BALLA FRSW HA 14/06/ /11/ /06/2037 $13,500 $2,525 IRON ORE; BUTLER CAVEAT; ASHBRIDGE CAVEAT; BALLA 2 CAVEAT;

326 M59/0476 LIVE WA KALA SNAKE WELL KALA HA 19/01/ /08/ /01/2036 $100,000 $18,700 AP 19/8/97;CONV OF P59/ ; STATE DEED WITH MULLEWA WADJARI LODGED 6/3/14; stat deed with wajarri Yamatji lodged 29/12/14; ATLAS ROYALTY M59/0477 LIVE WA KALA SNAKE WELL KALA HA 19/01/ /08/ /01/2036 $100,000 $18,700 AP 19/8/97;CONV OF P59/ ; STATE DEED WITH MULLEWA WADJARI LODGED 6/3/14; stat deed with wajarri Yamatji lodged 29/12/14; ATLAS ROYALTY L47/0406 PENDING WA *BBIG BALLA BALLA FERR HA 19/11/2010 $0 $21,549 AP 18/11/10; 7 MINING ACT OBJECTIONS; NT AD CLOSE 9/8/11 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Tenement Id Status Jurisdiction Manager Project Holder1 Holder1 Shares Holder2 Holder2 Shares Current Area Area Unit Grant Date Application Date Expiry Date Expenditure Commitment Rent Amount Comments M47/0541 LIVE WA *BBIG BALLA BALLA FRSW HA 30/01/ /07/ /01/2035 $18,000 $3,366 NA M47/0804 LIVE WA *BBIG BALLA BALLA FRSW HA 24/09/ /12/ /09/2028 $33,500 $6,265 BUTLER CAVEAT; ASHBRIDGE CAVEAT; M51/0338 LIVE WA WANB BEEBYN WANB HA 31/01/ /08/ /01/2032 $43,800 $8,191 NA M59/0041 LIVE WA KALA SNAKE WELL KALA HA 15/09/1986 6/06/ /09/2028 $55,800 $10,435 SV HA; ATLAS ROYALTY M59/0474 LIVE WA KALA SNAKE WELL KALA HA 19/01/ /08/ /01/2036 $100,000 $18,700 ATLAS ROYALTY M59/0565 LIVE WA KALA SNAKE WELL KALA HA 19/01/ /05/ /01/2036 $61,000 $11,407 AP 20/5/02; PT CONV OF E59/467; STATE DEED WITH MULLEWA WADJARI LODGED 6/3/14; stat deed with wajarri Yamatji lodged 29/12/14; ATLAS ROYALTY P47/1300 LIVE WA *BBIG BALLA BALLA FRSW HA 17/03/2014 6/09/ /03/2022 $5,160 $355 GDA GAP; BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT P47/1437 LIVE WA *BBIG BALLA BALLA FRSW HA 29/06/2012 4/06/ /06/2020 $2,000 $105 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT P47/1521 LIVE WA *BBIG BALLA BALLA FRSW HA 29/06/ /07/ /06/2020 $4,360 $300 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT P47/1522 LIVE WA *BBIG BALLA BALLA FRSW HA 29/06/ /07/ /06/2020 $2,960 $204 BALLA 2 CAVEAT; FORGE RESOURCES SWAN CAVEAT R45/0006 LIVE WA #MRES ABYDOS WODL HA 10/11/ /02/2016 9/11/2019 $0 $2,476 CONV OF E45/2308 NON-MANAGED APPLICATIONS TenementId Status Jurisdiction Manager Project Holder1 Holder1Shares Holder2 Holder2Shares CurrentArea AreaUnit GrantDate ApplicationDate ExpiryDate F5Date ExpenditureCommitment RentAmount Comments QUARTERLY MOVEMENTS SCHEDULE APRIL - JUNE 2018 Application ClientName Manager Project TenementId AppDate CurrentArea AreaUnit Comments ATLA *ATLA DE GREY E45/5202 3/04/ SB Ballot of 2 ATLA *ATLA DE GREY E45/5203 3/04/ SB ATLA *ATLA DE GREY E45/5204 3/04/ SB ATLA *ATLA DE GREY E45/5205 3/04/ SB ATLA *ATLA MT WEBBER E45/5232 4/05/ SB Death ClientName Manager TenementId Project GrantDate Death DeathReason Comments Remarks Status ATLA *ATLA P45/2775 FARRELL'S WELL 8/04/ /04/2018 Outright_Surrender NA NA DEAD Atlas Iron Limited TARGET'S STATEMENT Page 325 ATLA *ATLA P45/2776 FARRELL'S WELL 8/04/ /04/2018 Outright_Surrender NA NA DEAD ATLA *ATLA E45/4340 WESTERN SHAW 27/05/ /05/2018 Outright_Surrender NA NA DEAD ATLA *ATLA E45/4438 MCPHEE CREEK 27/05/ /05/2018 Outright_Surrender NA NA DEAD ATLA *ATLA P45/2901 MT WEBBER 30/05/ /05/2018 Outright_Surrender GDA GAP NA DEAD ATLA *ATLA P45/2902 MT WEBBER 30/05/ /05/2018 Outright_Surrender GDA GAP NA DEAD ATLA *ATLA P45/2903 MT WEBBER 30/05/ /05/2018 Outright_Surrender GDA GAP NA DEAD ATLA *ATLA P45/2904 MT WEBBER 30/05/ /05/2018 Outright_Surrender GDA GAP NA DEAD ATLA *ATLA E46/0565 MCPHEE CREEK 24/06/ /06/2018 Outright_Surrender OLD ACT NA DEAD Grant ClientName Manager Jurisdiction Project TenementId GrantDate ExpiryDate ExpCom CurrentArea AreaUnit Comments ATLA *ATLA WA MARBLE BAR E45/4774 2/05/2018 1/05/2023 $10,000 1 SB

327 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets 10 May 2018 Atlas Iron Limited Level 17, 300 Murray Street Perth WA 6000 Attention: Cara Librizzi Dear Cara ATLAS IRON LIMITED - TENURE REVIEW On 24 April 2018 and 10 May 2018, McMahon Mining Title Services (MMTS) reviewed the Tenements on the enclosed Tenure List (Tenements), by reference to publicly available government databases. MMTS confirms that based on publicly available information: Atlas Iron Limited or a subsidiary of Atlas Iron Ltd is the registered holder or joint holder of each of the Tenements; The Tenements are current; The Tenements are in good standing, with the exception of E45/4517-I which is in Fair standing The enclosed Tenure List outlines: Tenement Details (Tenement, Status and Holder) Tenure area Expiry and renewal dates Expenditure commitments, rents and rates and security bonds Registered encumbrances (caveats, mortgages and tax memorials) Expenditure reporting status, rent payment status, expenditure history and standing This letter and the information in the enclosed schedule is accurate as at 10 May Yours sincerely Shannon McMahon Principal McMahon Mining Title Services Pty Ltd CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

328 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Appendix 3: Comparative Transactions Atlas Iron Limited TARGET'S STATEMENT Page 327 Table 56: Comparative WA DSO iron ore transactions Transaction Project Todd acquisition of Flinders Mount Gibson acquisition of Shine Todd option to purchase Pilbara Iron Ore Project Cullen divestment of Wyloo Helix divestment of Yalleen Todd farm-in to Marillana Pilbara Iron Ore Date announced Iron ore price (US$/t) Mar Shine Dec Pilbara Iron Ore Wyloo Iron Ore Rights Joint Venture Mar Aug Yalleen Dec Marillana Nov Buyer Seller Transaction details Comment Todd Corporation Limited Mount Gibson Iron Limited Todd Corporation Limited Fortescue Metals Group API Management Proprietary Limited Todd Corporation Limited Flinders Mines Limited Gindalbie Metals Ltd Flinders Mines Limited Cullen Resources Limited Helix Resources Limited Brockman Mining Limited In March 2016, Todd made an unconditional cash offer of A$0.013/share to acquire all the ordinary shares in Flinders. The offer applied to the 81.59% interest in Flinders that Todd did not already control, and was valued at A$31 million. Todd increased the offer to A$0.025/share in May 2016, valuing Flinders at A$73.8 million. The Flinders Board unanimously supported the improved offer. In December 2013, Mount Gibson announced an agreement to acquire the iron ore rights to the Shine project for A$15 million in cash and trailing royalty. An initial payment of A$12 million followed by the remaining A$3 million at commencement of mining. The Royalty provides that Gindalbie will receive 20c in the dollar for every dollar above A$115 for Platts 62% Fe, per tonne sold. Todd paid an option payment of A$10 million to secure the exclusive option to acquire 100% of the project, valid until 31 December On electing to exercise the option to purchase, Todd would need to pay a further A$55 million, as well as a production royalty. In August 2015, Cullen agreed to sell its 49% interest in the group of licences to FMG for: A$50,000 cash at completion, A$900,000 cash on any decision to extract iron ore on a commercial basis on any part of the land the subject of the Royalty Tenements, and a Royalty of 1.5% of Gross Revenue on up to 15 Mt of any iron ore produced from the land the subject of the Royalty Tenements. In December 2017, Helix announced the sale of its diluting 14% interest in the Yalleen Iron Ore Project to joint venture partner, API Management for A$0.5 million cash and an uncapped 1% FOB royalty on any iron ore produced from the Yalleen Tenement Area. In November 2017, Brockman announced a non-binding agreement whereby Todd Corporation subsidiary BBIG could earn a 50% interest in the Marillana Project by sole funding a DFS within three years, with BBIG to sole fund up to A$10 million. Deal completed when iron ore price was very high. Contingent payments not considered.

329 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 328 Transaction Project WA Iron acquisition of Pilbara Cullen divestment of Mount Stuart Emergent acquisition of Iron Ridge Ascot acquisition of Wonmunna Maiden acquisition of North Marillana Pilbara Iron Project - Rocklea Mount Stuart Date announced Iron ore price (US$/t) Aug Nov Iron Ridge May Wonmunna Mar North Marillana Sep Buyer Seller Transaction details Comment WA Iron Ore Pty Ltd API Management Proprietary Limited Emergent Resources Limited Ascot Resources Limited Maiden Iron Pty Ltd Riva Resources Limited Cullen Resources Limited Prometheus Mining Pty Ltd Ochre Group Holdings Limited Iron Ore Holdings Ltd In August 2017, Riva announced that it had sold the Pilbara Iron Project-Rocklea to WA Iron Ore Pty Ltd for A$150,000 cash and a 1% royalty on the FOB revenue of any iron ore mined from the project and sold or otherwise disposed of by the buyer. In November 2016, Cullen announced the sale of its remaining 30% interest in Mount Stuart to API, the holder of the remaining 70% interest. Consideration included a lump sum cash payment of A$1 million on completion of the sale, with contingent payment of A$1 million on an unconditional final investment decision to proceed with development of an iron ore mine on the tenements, and an uncapped 1% FOB royalty on all iron ore extracted from the tenements. In May 2018, Emergent announced that it had signed a binding term sheet to acquire the Iron Ridge project from Prometheus by issuing 25 million shares of its post-consolidated stock, and will issue a further million shares of its post-consolidated stock subject to satisfaction of certain performance milestones. In March 2014, Ascot announced an agreement to acquire the Wonmunna project from Ochre for A$2 million in cash, 88 million shares and deferred payment of A$29.75 million after five years. In July 2014, Ascot and Ochre agreed to change the consideration to A$2 million in cash, 50 million shares and deferred payment of A$19.95 million after five years. In September 2013, IOH announced the sale of its North Marillana project to Maiden for an upfront payment of A$2.5 million in cash, with deferred contingent payments totalling up to A$5.25 million, as well as a 2.5% FOB royalty for iron ore produced from the tenements. Contingent payment not considered. Entirely share-based Deferred payment included without discounting. Contingent payments not considered.

330 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 57: Comparative WA DSO iron ore transactions analysed Transaction Project Date announced Iron ore price (US$/t) Asset details Resource class A$/t Fe Normalised to Jun 2018 Comment Atlas Iron Limited TARGET'S STATEMENT Page 329 Todd acquisition of Flinders Mount Gibson acquisition of Shine Todd option to purchase Pilbara Iron Ore Project Cullen divestment of Wyloo Helix divestment of Yalleen Todd farm-in to Marillana WA Iron acquisition of Pilbara Pilbara Iron Ore Mar Shine Dec Pilbara Iron Ore Wyloo Iron Ore Rights Joint Venture Mar Aug Yalleen Dec Marillana Nov Pilbara Iron Project - Rocklea Aug The Pilbara Iron Ore Project (PIOP) comprises two 100% Flinders owned tenements located approximately 70 km northwest of Tom Price. Flinders announced an upgraded total Inferred and Indicated Resource of 1,042 Mt at 55.6% Fe for the PIOP. The Shine Project has hæmatite resources (Measured, Indicated and Inferred) of 6.1 Mt at 59.8% Fe, with high silica (7.8%) and moderate phos (0.08%), low alumina (1.71%). The projects are located in the Yilgarn region 250 km east of Geraldton in WA and occupy three granted mining leases held by a third party. The PIOP comprises two 100% Flinders owned tenements located approximately 70 km northwest of Tom Price. Flinders announced an upgraded total Inferred and Indicated Resource of 1,042 Mt at 55.6% Fe for the PIOP. The Wyloo Iron Ore Rights Joint Venture consists of a group of eight contiguous licences in the Pilbara region of WA. FMG had earned 51% interest in the package and was earning up to 80% from joint venture partner, Cullen Resources. FMG announced an Inferred Resource of 16.9 Mt at 57.1% Fe (JORC 2004) for the Wyloo South bedded iron deposit. The Yalleen Iron Ore Project hosts Indicated and Inferred Resources of 84.3 Mt at 57.2% Fe (JORC 2004). The Marillana Project hosts 1.63 Bt of hæmatite detrital and CID mineralisation, comprising beneficiation feed of 1,528 Mt at 42.6% Fe and CID Mineral Resource of Mt at 55.6% Fe. The Pilbara Iron Project - Rocklea had a total resource base of Mt at 52.68% Fe. Measured, Indicated, Inferred Measured, Indicated, Inferred Measured, Indicated, Inferred Deal completed when iron ore price was very high. Inferred Contingent payments not considered. Indicated, Inferred Reserves, Measured, Indicated, Inferred Indicated, Inferred

331 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 330 Transaction Project Cullen divestment of Mount Stuart Emergent acquisition of Iron Ridge Ascot acquisition of Wonmunna Maiden acquisition of North Marillana Mount Stuart Date announced Iron ore price (US$/t) Nov Iron Ridge May Wonmunna Mar North Marillana Sep Asset details Mount Stuart had a total resource of Mt at 54.4% Fe, including Reserves of 83 Mt at 55.1% Fe. The Iron Ridge Project contained an Inferred Resource of 5 Mt at 64.1% Fe. The Wonmunna Project had a total resource of 84.3 Mt at 56.5% Fe. The North Marillana Project had an Indicated Resource of 15.6 Mt at 54% Fe. Resource class Reserves, Measured, Indicated, Inferred A$/t Fe Normalised to Jun Inferred Indicated, Inferred Comment Contingent payment not considered. Entirely share-based. Deferred payment included without discounting. Indicated Contingent payments not considered.

332 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 331 Table 58: Comparative Australian magnetite iron ore transactions Transaction Project Developed acquisition of Mount Phillips GIM acquisition of Ularring Padbury acquisition of Yogi IMX divestment of Mount Woods Radar acquisition of Yerecoin Formosa earn-in to Ironbridge Mount Phillips Date announced Iron ore price (US$/t) Dec Ularring Oct Yogi Dec Mount Woods Sep Yerecoin Apr Ironbridge Aug Buyer Seller Transaction details Comment Developed Iron Ore Pty Ltd GIM Australia Pty Ltd Padbury Mining Limited Cu-River Mining Australia Pty Limited Radar Iron Limited Formosa Plastics Group Midas Resources Limited Macarthur Minerals Limited Ferrowest Limited IMX Resources Cliffs Natural Resources, Nippon Steel, Sojitz Mineral Development Fortescue Metals Group, Baosteel Group Corporation In December 2013, Midas was offered A$1.5 million in cash in two payments and a 0.5% royalty. An initial A$500,000 payment due 60 days after due diligence is completed and A$1 million six months after the initial transfer. The deal was for iron ore rights only Midas retained the other mineral rights on the tenement. The deal was not finalised and appears to have been abandoned in August In October 2013, Macarthur announced an agreement to sell its WA iron ore projects to GIM for A$6 million. The transaction was not finalised. In December 2014, Padbury agreed to acquire the Yogi Project from Ferrowest for A$750,000. The transaction was terminated prior to closing. In September 2014, Cu-River agreed to purchase the Mount Woods tenements in South Australia from IMX Resources for A$3.68 million cash. In April 2014, Radar announced the acquisition of a large iron ore tenement holding in the south west region of WA, including the Yerecoin deposit, for A$3.74 million, with a A$1/t production royalty. In August 2013, Formosa agreed to acquire 31% of the project for US$123 million. In addition, Formosa agreed to fund the first US$527 million of capital expenditure. Transaction abandoned prior to finalisation of deal. Deal for iron ore rights only and included a 0.5% royalty on gross proceeds of the sale of iron extracted from the Mount Phillip asset. Midas acquired Mount Phillips in September 2013 as it was included in an acquisition of the Kalman Copper-Moly Project. Transaction terminated. Resource of similar size and grade to Ridley. Transaction terminated. Appears to have been valued as exploration ground seven licences cover 3,200 km 2. Very large resource base in the Pilbara region of WA.

333 Transaction abandoned prior to finalisation of deal. Deal for iron ore rights only and included a 0.5% royalty on gross proceeds of the sale of iron extracted from the Mount Phillip asset. Midas acquired Mount Phillips in September 2013 as it was included in an acquisition of the Kalman Copper-Moly Project. CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 59: Comparative Australian magnetite iron ore transactions analysed Transaction Project Date announced Iron ore price (US$/t) Asset details Resource class A$/t Fe Normalised to Jun 2018 Comment Developed acquisition of Mount Phillips Mount Phillips Dec Midas Resources was 100% owner of MDL471, 54 km southeast of Mount Isa in Queensland. The tenement contained known iron ore resources an Indicated Resource of 19.1 Mt grading 41.42% Fe and Inferred Resources of 11.4 Mt at 33.82% Fe Indicated, Inferred Atlas Iron Limited TARGET'S STATEMENT Page 332 GIM acquisition of Ularring Padbury acquisition of Yogi IMX divestment of Mount Woods Radar acquisition of Yerecoin Formosa earn-in to Ironbridge Ularring Oct Yogi Dec Mount Woods Sep Yerecoin Apr Ironbridge Aug The Ularring deposit had a total resource of 1.4 Bt at 31% Fe. The Yogi deposit had an Inferred resource of 572.5Mt at 27.5% Fe. The Mount Woods Project had an Inferred Resource of Mt at 27.11% Fe. The Yerecoin deposit had an Inferred Resource of 404 Mt at 28.3% Fe. The Iron Bridge Project consisted of the North Star and Glacier Valley deposits, with a combined resource base of 5.2 Bt at 30% Fe. It is located about 100 km south of Port Hedland in WA. Probable, Indicated, Inferred Inferred Transaction terminated. Inferred Inferred Indicated, Inferred Transaction terminated. Resource of similar size and grade to Ridley. Appears to have been valued as exploration ground seven licences cover 3,200 km Very large resource base in the Pilbara region of WA.

334 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 333 Table 60: Comparative Australian copper exploration asset transactions analysed Transaction Project Date announced Copper price Equity Price 100% price Intrepid acquisition of Doolgunna Station Magmatic acquisition of Mt Venn Independence earn-in to Fraser Range projects Auris acquisition of Doolgunna MRDC acquisition of Ashburton Downs Cassini acquisition of West Arunta Hamilton Hill earn-in to Millenium Australian Mines acquisition of Marymia Area $/km 2 Normalised Comment Doolgunna Station Jun-18 8,761 80% 2,150,000 2,687, ,270 14,795 Mt Venn Mar-18 8, % 1,175,000 1,175, ,705 19,407 Fraser Range Projects Oct-17 8,859 70% 1,585,000 2,264, ,279 4,099 Doolgunna Feb-16 6, % 1,600,000 1,600, ,801 94,321 Numerous well-defined drill-ready targets, next to DeGrussa mine Ashburton Downs Sep-15 7,356 75% 500, , West Arunta Jul-15 6,812 75% 75, , Millenium Apr-15 8,353 25% 2,000,000 8,000, ,358 59,302 Well-defined target Marymia Apr-14 7,203 51% 1,300,000 2,549, ,998 7,068 Numerous well-defined drill-ready targets, along strike of DeGrussa mine Analysis: There are only limited transactions available with a wide range of normalised implied values, ranging from A$139/km 2 to A$94,321/km 2. The range reflects the maturity and prospectivity of the assets transacted. The area weighted average (normalised) implied value is A$6,562/km, and the average is A$25,012. The Copper Range Project is more advanced than Walker, so higher value factors were selected: Based on the technical assessment of the projects, CSA Global relied in professional judgement and experience to select appropriate valuation factors from the compiled transactions as discussed below; factors have been rounded to reflect the uncertainty of the process. Copper Range: Low A$5,000 (selected to be less than the weighted average but well above the minimum); High A$50,000/km 2 (selected to be about halfway between the weighted average and the maximum, and reflecting the maturity of the project and the interpreted remaining prospectivity); Preferred A$35,000/km 2 chosen to be approximately two-thirds of the range, and reflected the geology and identified mineralisation at the project. Walker is still a very early stage project, with a limited number of holes encountering copper mineralisation of interest. The implied value factors for this project were chosen to recognise the identified positive exploration components of the project but also the very early stage of the project; hence a low factor of A$1,000/km 2 was chosen near the bottom of the range; the maximum was A$10,000/km 2 selected to be somewhat greater than the weighted average, and the preferred value A$7,500 /km 2 was chosen at the near 75% percentile of the low-high range.

335 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 334 Table 61: Comparative Western Australian lithium exploration asset transactions analysed Project Date Li price Synopsis Asset description Mt Cattlin Jun-18 22,013 In Jun 2018, Kingston announced the sale of its Mt Cattlin lithium tenements to Galaxy for A$600,000, paid 50% in cash and 50% in shares. Moolyella Apr-18 24,383 In April 2018, Lithium Australia announced the acquisition of a 100% interest in the Moolyella tenement from Anova for A$25,000 in cash and A$25,000 in shares. Kathleen Valley Nov-17 20,890 In November 2017, Draig announced the acquisition of seven granted mining licences from Liontown for A$25,000 in cash and 1 million shares Kathleen Valley Aug-16 15,213 In August 2016, Liontown announced an agreement to acquire 100% of the rare mineral rights (including lithium, tantalum and associated elements) for the Kathleen Valley Project from Ramelius. Consideration was 25 million Liontown shares, and an agreement to pay Ramelius 1% of gross sales of resulting concentrate produced from pegmatite-hosted ores processed and A$0.50/t of rare metal pegmatite-hosted ore mined and milled. Ramelius will retain exclusive gold rights and uninhibited access for goldmining related activities. Lake Cowan Oct-17 20,479 In October 2017, Tawana announced the acquisition of the Lake Cowan lithium project from Metalicity for A$50,000 and 769,230 Tawana shares. The 3 granted exploration licences covered approximately 85.7km 2. EL45/4766 is a granted tenement located within the Moolyella tin field in the Pilbara region. It covers targets in the Gig Tree Gneiss, with outcropping pegmatites noted, locally containing abundant lithium micas. The seven granted mining licences covered a total of approximately 22 km 2. LTR considered this ground non-core, and of low prospectivity for lithium. The Kathleen Valley Project consisted of 15 granted mining leases and one exploration licence application, covering a total area of 75 km 2. The property contains a spodumene-bearing pegmatite swarm and includes several walk-up drill targets. The Lake Cowan Project comprises two approved exploration licences and one Application. The licences border to the south of Tawana s 100% owned Cowan Lithium Project and 50% owned Bald Hill Lithium and Tantalum Project. Area (km 2 ) Implied A$/km ,001 7,001 Normalised Comments ,659 14,590 Very small tenement ,289 12,950 Acquired by Draig for gold potential. Strategic to Draig, as it is adjacent to Draig s gold exploration project. 75 6,000 8,682 Covers rare metals rights only. Exclude gold and base metals rights. Tenure held in name of Ramelius Tawana considers the acquisition to be highly strategic as the Mount Belches-Bald Hill pegmatite belt may extend into the tenements.

336 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 335 Project Date Marble Bar, Pippingarra Li price Synopsis Asset description May-17 16,591 In May 2017, Macarthur announced a conditional agreement, in partnership with Southern Hemisphere, to acquire the Marble Bar and Pippingarra projects from Great Sandy. In August 2017, Macarthur announced that following due diligence, the partners decided not to acquire these projects. Mount Edwards Nov-16 15,420 In September 2016, Estrella announced the acquisition of Mount Edwards Lithium Pty Ltd, which held a 75% of the lithium (and associated minerals) rights to a group of 17 licences. Consideration was 106 million Estrella shares to be issued to the vendors, with an additional facilitator transaction fee of 13,333,333 shares to the facilitator. Cowan, Yallari Mar-17 16,081 In March 2017, Tawana announced that it would exercise its option to acquire a 100% interest in four tenements, comprising the Cowan and Yallari projects, and would pay A$2 million in either cash or shares to the unnamed vendors. Cisco Mar-17 16,081 PLS to acquire 51% in e45/4270 for A$2.3M PLS may then then spend a further $1M on exploration in the first year to increase interest to 70% PLS to free carry AGO to completion of DFS and progress to a decision to mine to increase interest to 80% Greenbushes Nov-16 15,420 In November 2016, Lithium Australia acquired the remaining 20% interest in the Greenbushes Project by paying A$50,000 and 283,039 shares. The Marble Bar lithium project consists of four granted exploration licences covering 368 km 2, and the Pippingarra lithium tantalite project consists of two exploration licence applications covering 181 km 2. Pegmatites with spodumene and lepidolite have been identified on the Marble Bar tenements. The project consists of a 75% interest in the rights to lithium and associated minerals over 17 tenements covering 129 km 2. Numerous outcropping pegmatites have been identified, with grab sampling confirming lithium mineralisation in some pegmatites. The Cowan Project comprises three tenements totalling 159 km 2, adjacent to the Tawana s Bald Hill Mine. It contains a large number of LCT pegmatites, some of which contain spodumene. The Yallari Project consists of one licence application covering 41.2 km 2. It contains numerous pegmatites, with no exploration for lithium having been conducted. E45/4270 sits in zone of known Li deposits; the area has past Ta & Sn workings; historical RCP drilling intersected significant Li2) The Greenbushes Project comprises four granted exploration licences covering km 2, adjacent to the Talison-owned Greenbushes lithium pegmatite mine. Area (km 2 ) Implied A$/km 2 Normalised Comments 549 1,421 1,885 Terminated prior to completion ,870 66,909 All-scrip transaction ,990 13,675 Strategic acquisition of ground adjacent to Tawana s Bald Hill Mine, which Tawana was developing at the time ,426 88,192 Likely strategic component led to this very high implied value ,252 1,787 Strategic acquisition consolidating ownership.

337 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 336 Project Date Li price Synopsis Asset description Mortimer Hills Apr-16 12,856 In April 2016, Segue announced a joint venture with Zeus Resources, whereby Segue could earn in to a 50% interest in granted exploration licence E09/1618. Segue agreed to an initial exploration expenditure of A$30,000 prior to 15 May 2016, with the ability to earn an initial 35% interest through exploration expenditure of a further A$125,000 within 12 months. A further 15% interest could then be earned by spending a further A$125,000 within 12 months. Moriarty Aug-17 19,566 In August 2017, Lepidico announced an agreement whereby it could earn a 75% interest in the Moriarty Lithium Project, by paying Maximus A$80,000 in Lepidico shares on execution of the Term Sheet, A$120,000 in cash or shares six months after execution, and A$150,000 in cash or shares 12 months after execution. Mallina, Dorringtons, White Springs, Mount Edgar Dec-16 16,208 In December 2016, Sayona announced an option to acquire an 80% interest in a Pilbara lithium portfolio from Great Sandy. Consideration includes a A$30,000 non-refundable deposit, with a 24-month Option granted for payments of A$300,000 after 12 months and A$300,000 after 24 months, with the option to acquire the 80% at any time for A$500,000 within the first 18 months. Sayona must incur a minimum expenditure of A$100,000 within the first 12 months and may withdraw from the agreement at any time after meeting the A$100,000 expenditure requirement. E09/1618 covers an area of approximately km 2 and contains both the Mortimer Hills and Camel Hill pegmatite fields. The Moriarty project covers 70 km 2 of lithium prospective ground, including the Lefroy, Landor and Larkinville lithium prospects. The portfolio consisted of two granted and six pending licences covering a total of 871 km 2. The most advanced project was the Mallina project, where spodumene-bearing lithium pegmatite had been identified in outcrop. Area (km 2 ) Implied A$/km ,834 6, ,667 7, ,228 Normalised Comments

338 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 337 Project Date Lynas Find, Farrell Well, Murphies Gap, Cookes Creek Li price Synopsis Asset description Dec-16 16,208 In December 2016, Metalicity announced the acquisition of a Pilbara portfolio of lithium tenements from FMG. Terms of the agreement included a A$250,000 cash payment, 5 million fully paid ordinary shares and 5 million unlisted Options at 8c, issued to FMG on settlement. In addition, 10 million fully paid ordinary shares are to be issued to FMG upon the definition of a total JORC Inferred Resource estimate of a minimum 20 1% Li 2O across any of the tenements. Yalgoo Aug-16 15,213 In August 2016, Macarthur agreed to purchase two tenements. Consideration was to be A$30,000 upon satisfaction of conditions precedent and A$50,000 on the first anniversary of the commencement date. Additional contingent consideration of A$250,000 upon defining a 5 million tonne JORC resource of >1.2% LiO 2 and A$500,000 upon defining a 15 Mt JORC resource of >1.2%Li 2O, was also agreed. In addition, the agreement called for a 2.5% NSR for lithium concentrate produced on the Yalgoo Acreage, and 50% of the Western Australian Department of Minerals and Petroleum royalty rate for other rare earth minerals produced on the Yalgoo Acreage. Pyramid Lake, Mount Cattlin Central, Big Galaxy, Greenbushes North, Pilgangoora Central Jul-16 14,945 In July 2016, Cohiba announced the acquisition of five lithium projects from Charge Lithium. Consideration included an upfront payment of A$78,000 cash and a share payment of 17.5 million Cohiba shares. Further share payments totalling 17.5 million Cohiba shares would be paid as the ungranted licence applications were granted, which was expected to occur within three months. Share payments for the grant of each individual licence would be 3.5 million Cohiba shares. Widgiemooltha Jul-16 14,945 In July 2016, Cazaly, along with Lithium Australia NL, entered into a Sale Agreement with Buckland The portfolio consists of four individual projects, covering a total of 579 km 2. The most advanced project was the Lynas Find North project, covering 51 km 2 over the northern extension of the highly prospective Pilgangoora Greenstone Belt. The project encompassed two granted exploration licences (E59/2140 and E59/2077) covering an area of 191 km 2. Previous drilling by other companies has resulted in the identification of buried pegmatites on the property. The portfolio included five lithium projects, consisting of five exploration licence applications and one granted exploration licence. The granted explration licence was for the Pyramid Lake Lithium Brine project, with the five licence applications covering four areas prospective for hard rock (pegmatite-hosted) lithium. The Widgiemooltha Project consists of the Pegmatite Minerals rights over an 81 km 2 Area (km 2 ) Implied A$/km ,036 1,407 Normalised Comments Contingent payment not considered ,541 2, ,920 4,301

339 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 338 Project Date Li price Synopsis Asset description Capital Pty Ltd for the purchase of a 100% interest in the Pegmatite minerals in Exploration Licence 15/1410 ( Widgiemooltha Project ). Cazaly and Lithium Australia NL would each hold a 50% interest in the Widgiemooltha Project. The total consideration for Cazaly s 50% interest in the Widgiemooltha Project was A$7,500 cash plus the issue of 1,538,462 shares. Lake Johnston Jun-16 14,748 In June 2016, Lithium Australia announced an agreement to acquire 100% of the lithium rights to two granted exploration licences from Lefroy. Consideration for the lithium rights was 9 million Lithium Australia shares, half of which would be escrowed for three months. As part of the deal, Lithium Australia granted Lefroy the nickel and gold rights to an adjoining licence held by Lithium Australia, for 3 million Lefroy shares. The partiese were granted reciprocal first right of refusal for sale of the underlying tenure. Wodgina East Mar-16 13,148 In March 2016, Kairos (then MPJ) announced an agreement to acquire the Wodgina East lithium project from an undisclosed seller for 60 million shares, with 40 million shares to be issued on signing, and 20 million shares to be issued when the tenements area is granted and completion takes place.in addition, Kairos will issue 15 million shares upon delineation of a Mineral Resource of no less than 1.2% contained lithium within the tenement area, and a further 15 million shares upon delineation of a resource of no less than 10 Mt of lithium oxide at a minimum grade of no less than 1.2% contained lithium. area in the Goldfields region of WA, with known outcropping pegmatite mapped on the licences by the GSWA. The two tenements are adjacent to Lithium Australia s 100% owned tenement, with a swarm of pegmatites identified on the tenements. Drill testing of pegmatites in the swarm just off the tenement package confirmed lithium mineralisation. The project consisted of one licence application, covering an area of known pegmatite outcrop, with demonstrated lithium mineralisation from rock chip sampling. Situated adjacent to Wodgina Tantalum Mine. Area (km 2 ) Implied A$/km ,624 11, ,742 19,659 Normalised Comments

340 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 339 Project Date Li price Synopsis Asset description Wodgina East Nov-16 15,420 In November 2016, Altura announced an agreement to earn in to a 75% interest in Kairos Wodgina East lithium project. Consideration was an upfront cash payment of A$100,000, and exploration expenditure of A$1.25 million over five years, or cash payment of A$1.25 million less exploration expenditure already incurred at any time within the five years. Gem Pegmatite, Giant Pegmatite Sep-16 15,155 In September 2016, Marindi announced that an option to acquire up to a 70% interest in Mining Lease 77/549, with the ability to purchase 100%. Consideration included cash payment of A$50,000 for a six-month option; A$50,000 in cash, A$100,000 in shares and A$300,000 in exploration over 24 months to earn a 51% interest. Marindi had the right, but not the obligation, to earn up to a 70% interest by issuing a further A$40,000 in shares and spending a further A$150,000 on exploration within 30 months of exercising the option. Once Marindi has earned a 70% interest, it can purchase the remaining 30% on terms to be mutually agreed. The project consisted of two licence applications, covering an area of known pegmatite outcrop, with demonstrated lithium mineralisation. Contains two known LCT pegmatites, which have been previously mined, the Giant pegmatite and the Gem Pegmatite. Area (km 2 ) Implied A$/km ,523 35,008 Normalised Comments ,333,323 1,936,694 Exclude small, highly focused tenure (mining lease) containing two known large LCT pegmatites. Analysis: There are a wide range of normalised implied values from the compiled transactions, ranging from A$606/km 2 to A$88,192/km 2. The range reflects the maturity and prospectivity of the assets transacted, as well as likely strategic influences on prices paid. The area weighted average (normalised) implied value is A$6,732/km 2, and the average is A$15,311/km 2. Both projects are close geographically, have known lithium pegmatites and other positive exploration and geological aspects, so the same valuation factors are suitable for these projects. Based on the technical assessment of the projects, CSA Global relied on professional judgement and experience to select appropriate valuation factors from the compiled transactions as discussed below; factors have been rounded to reflect the uncertainty of the process. The Cisco Project was involved in a transaction less than 12 months ago, so this value, despite being the highest implied value, and an outlier, was considered highly significant. The low end of the values was chosen to be A$7,000/km 2 (selected to be near the weighted average); High A$35,000/km 2 (selected to be well above the average values given the positive exploration factors, but still well below the high of the transactions, due the relatively early stage of the exploration on the projects, and CSA Global s view that the market appetite for Li projects has receded to a degree); Preferred A$25,000/km 2 chosen to be approximately the average of the high and low factors, and reflected the geology and identified mineralisation at the project.

341 Transaction value (100%) A$k CSA Global Report Nº R Implied value A$/km 2 Normalised value # A$/km 2 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 62: Comparative transactions of exploration ground prospective for gold in Australia Date Project Buyer Seller Prospective commodities Transaction type Area (km 2 ) Atlas Iron Limited TARGET'S STATEMENT Page Jun-18 Ruby Plains Dampier Gold Private Seller Au Acquisition 100% Jun-18 Lefroy St Ives Gold Mining Lefroy Exploration Au Joint Venture 51% ,688 45, May-18 South Darlot Kingswest Resources Central Iron Au Acquisition 100% 289 2,007 1, May-18 Drummond East Pacton Gold Impact Minerals Au Acquisition 100% 1,126 1,694,196 1,505 1, Apr-18 Slate Dam Aruma Resources Ltd Rare Earth Contracting Pty Ltd Au Acquisition 100% , Apr-18 Ockerby Hill Red 5 Ltd AngloGold Ashanti Ltd Au Acquisition 100% Feb-18 Queen Lapage Riversgold Ltd Alloy Resources Ltd Au Joint Venture 70% ,392 1, Jan-18 Mary River Pantoro Ltd Private Seller Au Acquisition 100% ,246 1, Dec-17 Hacks Well Matsa Resources Ltd Australian Potash Ltd Au Acquisition 100% Dec-17 Mt Roe NXGold Ltd Roe Gold Ltd Au Acquisition 80% 12 8, , , Dec-17 Omni Projects Gateway Mining Ltd OMNI GeoX Pty Ltd Au-BM Acquisition 100% 1,339 1,500 1,120 1, Dec-17 Pilbara Region Tando Resources Ltd Geko-Co Pty Ltd Au Option to Acquire 100% , Dec-17 Dalgaranga Gascoyne Resources Ltd Private Seller Au Acquisition 100% ,868 4, Nov-17 Eastman Peako Ltd Sandrib Pty Ltd Au-BM Joint Venture ,160 4,166 8-Nov-17 Croydon Top Camp Coziron Resources Ltd Creasy Group Companies Au Joint Venture 70% 317 1,829 5,768 5-Sep-17 Yandal East Overland Resources Ltd Zabina Minerals Pty Ltd Au Option to acquire - 75% 327 1,030 3, Aug-17 Pilbara De Grey Mining Ltd Private Seller Au Joint Venture ,081 13,633 14,273 6-Jun-17 Dumbleyung Ausgold Ltd Chalice Gold Mines Ltd Au Acquisition 100% Jul-16 Monument Syndicated Metals Ltd 31-May-16 Mt Gill & Mt Howe 11-Mar-16 Doolgunna DGO Gold Ltd Monument Exploration Pty Ltd Au Acquisition 100% ,190 Gold Road Resources Ltd Breaker Resources Ltd Au Acquisition 100% Tasex Geological Services Pty Ltd Au-Cu Joint Venture 51% ,499 4-Nov-15 Duffy Well Doray Minerals Ltd Mithril Resources Ltd Au Joint Venture 51% ,910 6,459 3,201 10,325 5,864 3,216 1, ,555

342 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Atlas Iron Limited TARGET'S STATEMENT Page 341 Date Project Buyer Seller Prospective commodities Transaction type Area (km 2 ) Transaction value (100%) A$k 8-Sep-15 Jillewarra Timpetra Resources Ltd Zebina Minerals Pty Ltd Au Joint Venture 80% ,275 3,478 1-Sep-15 Combaning, Barellan Faraday Resources Pty Ltd Carpentaria Exploration Ltd Au Joint Venture 90% Jul-15 Prospect Creek Cape Clear Minerals Pty Ltd ActiveEX Ltd Au Joint Venture 50% ,598 5, Jul-15 Duketon Regis Resources Ltd Duketon Mining Ltd Au Joint Venture 75% 373 1,345 3,607 3, May-15 Lyndon Shine Resources Pty Ltd Latitude Consolidated Ltd Au-BM Acquisition 45% , Apr-15 Mt Windsor Red River Resources Ltd NRE Exploration Pty Ltd Au-Cu Joint Venture 51% , Sep-14 Supplejack ABM Resources NL Ord River Resources Au Option to Joint Venture 70% Implied value A$/km , Sep-14 Cape Clear Cape Clear Minerals Pty Ltd Predictive Discovery Ltd Au Joint Venture 51% ,912 3, Jul-14 Gnaweeda Doray Minerals Ltd 23-Jun-14 Fraser Range South MRG Metals Ltd Archean Star Resources Australia Pty Ltd Tasex Geological Services Pty Ltd Au Acquisition 88% ,190 Ni-Au Option to Acquire 100% , May-14 Highland Rocks Ramelius Resources Ltd Tychean Resources Ltd Au Joint Venture 85% 1, , May-14 (Near Twin Bonanza) ABM Resources NL Toro Energy Ltd Au Acquisition 100% Apr-14 Marymia Riedel Resources Ltd Australian Mines Ltd Cu-Au Joint Venture 51% 425 2,628 6, Mar-14 Plumridge Segue Resources Ltd Fraser Range Metals Group Ltd Ni-Cu-Au Joint Venture 51% 641 2,176 3, Mar-14 Telfer Area Newcrest Operations Ltd Ram Resources Ltd Au-Cu Acquisition 100% ,418 4,088 7-Mar-14 Mystique Gold Parmelia Resoures Ltd Black Fire Minerals Ltd & Entree Gold Inc. Au Acquisition 100% , Feb-14 Zanthus Rumble Resources Ltd Blackham Resources Ltd Ni-Cu-Au Joint Venture 20% , Jan-14 Charteris Creek Fortescue Metals Group Riedel Resources Ltd Au-BM-Fe Joint Venture 51% , Notes: Transaction highlighted in orange are Pilbara? conglomerate transactions # Normalised to 2 July 2018 gold price os US$1,246.32/oz (A$1,702.72/oz) Analysis Normalised value # A$/km 2 CSA Global identified 39 transactions of projects comprising of exploration licences prospective for gold in Australia, these support CSA Global s valuation experience of gold projects in Australia, where, early exploration projects were found to range from A$100/km 2 to A$1,000/km 2, average or mature exploration projects ranged from A$1,000/km 2 to A$5,000/km 2, 384 3,685 3,625 3, ,541 9,642

343 advanced projects with good prospectivity ranged from A$5,000/km 2 to A$10,000/km 2, with projects with excellent prospectivity or having a strategic significance to the buyer having values >A$10,000/km 2. In general, as the area transacted gets larger the lower the price paid per square kilometre. Implied value factors for conventional gold valuation of 500, 3,000, and 2,000($/km 2, low, high, preferred) were selected based on CSA Global s professional judgment. The low end being on the middle of the range for early stage tenure, the top end chosen from the middle of the more mature exploration project range, and the preferred value closer to the top end due the heightened interest in Pilbara gold at present. Implied values were then estimated by multiplying the area of gold ground (1,569km 2 ) by these factors. CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Four transactions for Pilbara conglomerate gold range from 1,500/km 2 to $724,000/km 2 CSA Global identified 1,569km 2 of AGO tenure prospective for gold; 1,117km 2 of this potentially was of interest for conglomerate gold Atlas Iron Limited TARGET'S STATEMENT Page 342 Implied value factors for Pilbara conglomerate gold valuation of 1,500, 15,000, and 5,000 ($/km 2, low, high, preferred) were selected based on CSA Global s professional judgment. Only four relevant transactions have been identified. A highly relevant transaction is the Pacton deal. This covers a similar area at similar state of maturity to the Atlas ground, and was chosen as the lower end of the range. The highest value in the dataset is clearly an outlier and skewed by a very small area, but nonetheless is considered symptomatic of the interest in Pilbara conglomerate gold ground at the time. Because of this value a high end factor of 15,000 slightly above the two other transactions was chosen despite the early stage of the exploration being a number higher than the normal advanced project value reflecting the the three highest conglomerate transactions. The preferred value for the conglomerate ground was chosen to be somewhat less than the average of the high and low to recognise the limited work completed for gold on the Atlas ground thus far, but still recognising the high level of interest in the conglomerate model. The low end being on the middle of the range for early stage tenure, the top end chosen from the middle of the more mature exploration project range, and the preferred value closer to the top end due the heightened interest in Pilbara gold at present. Implied values were then estimated by multiplying the area of gold ground (1,569km2) by these factors. The final values were an average of the conventional and conglomerate gold values Area LO Hi Pref LO Hi Pref AGO Pilbara Au tenements 1, ,000 2, AGO Congl maybe areas 1, ,000 5, Average

344 CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Appendix 4: Detailed Yardstick Valuation Atlas Iron Limited TARGET'S STATEMENT Page 343 Table 63: Yardstick crosscheck on total Resources Project Measured (Mt Fe) Contained Fe (Mt) Measured Indicated Inferred TOTAL Indicated (Mt Fe) Inferred (Mt Fe) Low (A$M) High (A$M) Preferred (A$M) Low (A$M) Pardoo Abydos Mount Webber High (A$M) Preferred (A$M) Low (A$M) High (A$M) Preferred (A$M) McPhee Creek Miralga Creek Corunna Downs Mid West Hickman Western Creek Jimblebar Warrawanda Davidson Creek Hub # West Pilbara Ridley # Davidson Creek contained Fe based on high-grade portion only Table 64: Yardstick crosscheck for remaining Resources outside of current mine plans Project Measured (Mt Fe) Contained Fe (Mt) Measured Indicated Inferred TOTAL Indicated (Mt Fe) Inferred (Mt Fe) Low (A$M) High (A$M) Preferred Measured (Mt Fe) Indicated (Mt Fe) Inferred (Mt Fe) Low (A$M) High (A$M) Mount Webber Corunna Downs Preferred (A$M) Low (A$M) Measured (Mt Fe) High (A$M) Indicated (Mt Fe) Preferred (A$M) Inferred (Mt Fe)

345 Appendix 5: Geoscientific Factor Method data for Other Projects CSA Global Report Nº R ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 65: Weightings for Key Copper and Lithium Projects Project Licence Status Area (km 2 ) BAC Off-property On-property Anomaly Geology Market Value (A$M) 100% basis Low High Low High Low High Low High Low High Preferred Pancho e45/4270 Live , Cisco e45/4517 Live , Copper Range e52/1772 Live , Walker e45/3511 Live , Atlas Iron Limited TARGET'S STATEMENT Page 344

346 ATLAS IRON LIMITED Independent Technical Assessment, review of inputs to DCF models, and Valuation of Mineral Assets Table 66: BAC for WA, April 2018 Exploration licence (graticular) Average area (blocks) /04/2018 Initial term (years) 5 Average age (years) /04/2018 Application fee $1,362 Rent Year 1 3 (A$/block/year) $134 $44.67 Rent Year 4 5 (A$/block/year) $208 $69.33 Rent Year 6 (A$/block/year) $283 $94.33 Minimum annual expenditure Y1 3 per block $1,000 $ Minimum annual expenditure Y4 5 per block $1,500 $ Minimum annual expenditure Y6 per block $2,000 $ Cost to identify $10,000 Costs of landowner notices, negotiations, legal costs and compensation $20,000 Costs of Local Government rates per year $8,000 Total cost in blocks (excluding application) $291,236 Total cost in km 2 + application $875,071 Average area (km 2 ) /04/2018 BAC/km 2 $12,449 BAC/year $2,150 CSA Global Report Nº R Atlas Iron Limited TARGET'S STATEMENT Page

347 Atlas Iron Limited TARGET'S STATEMENT Page 346