MARCH 2009 QUARTERLY REPORT 30 April 2009
ATLAS IRON LIMITED HIGHLIGHTS FOR THE QUARTER
ASX SYMBOL: AGO Three long term off-take agreements executed for the remaining ABN 63 110 396 168 70% of Pardoo DSO Project product.
Ground Floor Increased Pilbara DSO Resources by 45% to 56.7 million tonnes. 10 Richardson Street WEST PERTH WA 6005 225,923 ore tonnes mined for the quarter.
PO Box 223 200,771 dry tonnes shipped for the quarter, with production WEST PERTH WA 6872 ramping up to the planned 1 million tonnes per annum. Phone +61 8 9476 7900 Further drill results from Wodgina Fax +61 8 9476 7988 o 46 metres at 58.3% Fe; www.atlasiron.com.au
o 38 metres at 59.1% Fe; and CONTACTS o 26 metres at 60.8% Fe. David Flanagan Entered into a binding Heads of Agreement with Talison for the Managing Director use of infrastructure at the Wodgina mine. Mark Hancock High grade drill intercepts announced in exploration at Pardoo Chief Financial Officer (Alice East) Ken Brinsden 96 metres at 63.3% Fe; Operations Manager o
Andrew Paterson o 66 metres at 62.6% Fe; and Geology Manager o 44 metres at 64.1% Fe.
Tony Walsh Port Hedland Port Authority commenced construction of the new Company Secretary Utah Point export facility, due for completion in the second quarter
of 2010. About Atlas Iron Limited Atlas is a rapidly growing iron ore explorer and miner Subsequent to end of March Quarter in the Pilbara of Western Australia. Announced outstanding drill results from Wodgina The Company commenced o 68 metres at 60% Fe, and export of iron ore from Pardoo in December 2008 o 46 metres at 60.6% Fe. and is on target to grow Reported Ridley Magnetite Reserve - 970 million tonnes at 36% production to 3Mtpa by Fe, DTR grade of 68.3% Fe and 3.8% SiO . 2010. 2 With ongoing success from Delivered Ridley Magnetite PFS results for expanded concentrate the Abydos project, the production of 15 million tonnes per annum at 68.3%Fe. Company is targeting total export tonnage of 6Mtpa Secured six million tonnes of annual iron ore port capacity at the from 2010 and 12Mtpa by Utah Berth public assess port facility. 2012. Atlas has $67.1m cash and no debt as at 29 April.
QUARTERLY REPORT ATLAS IRON LIMITED March 2009
INTRODUCTION Atlas Iron Limited (Atlas or Company) is exporting iron ore through the port of Port Hedland and actively exploring for Direct Shipping Ore (DSO) in the Pilbara of Western Australia. With a growing number of high quality iron ore projects and one of the largest exploration landholdings in the Pilbara (over 8,900 kilometres2 located close to existing infrastructure), the Company is effectively defining resources and reserves capable of being mined with relatively low capital expenditure. The Company is targeting a total of 170 to 220 million tonnes of iron ore at between 57% Fe and 60% Fe from its combined Pilbara projects.
Figure 1: Pilbara Project Location Plan While exporting iron ore from the Pardoo mine (Atlas’ first mine development), Atlas is also active in feasibility assessment, new acquisitions, target generation and grass roots exploration. Ongoing project definition through acquisition, exploration and feasibility projects has delivered a strong project pipeline which the Company considers has the potential for production rates up to 12 million tonnes per annum of Direct Shipping Ore (DSO) by 2012. As the Company demonstrates its capacity to discover, assess and execute, it is well positioned to advance a number of projects concurrently with the intention to both expand the Company’s production base and extend mine life.
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
PARDOO PROJECT Atlas’ Pardoo Project is located 75 kilometres by road from the Public Access Port of Port Hedland, in the Pilbara of Western Australia. Mining and the export of iron ore shipments has now commenced and the Company is targeting exports of 1 million tonnes of DSO iron ore during its first 12 months of operations. Production at Pardoo is anticipated to grow to 3 million tonnes on an annualised basis by 2010.
Exploration, Resources and Mine Development – Pardoo DSO
Exploration and Resource Development Drilling During the March quarter the Company completed 190 RC holes for 8,218 metres and 3 diamond holes for 190 metres at Pardoo. The drilling consisted of follow-up resource definition and exploration work around existing resources at Isobel, Olivia and Willy, as well as some additional drilling at Alice and Alice East. Further infill and extensional drilling is planned at Pardoo in the latter half of the June Quarter.
Figure 2: Pardoo Project: Site location plan
Pardoo DSO Mine Development and Production Construction of Stage 1 at the mine was essentially complete at the end of the March quarter, with only minor works outstanding including water bore commissioning, minor road works and
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
office/admin facilities completion. Stage 1 comprises the works required to establish mine production at the targeted 1 million tonne per annum production rate. Full working faces are now established within the Bobby and Connie pits, with pit development works in progress at Alice East and West. Ore tonnes mined and processed during February and March were consistent or higher than the targeted 1Mtpa initial mine production rate. Table 1 below outlines the March 2009 quarter production in comparison to the previous quarter (December 2008).
Table 1: Pardoo Mine Production March December Variance Variance Quarter 09 Quarter 08 Quarter (%) (t) (t) (t) Ore Tonnes Mined 225,923 167,190 58,773 +35% Ore Tonnes Processed 234,329 143,400 90,929 +63% Ore Tonnes Shipped (Dry) 200,771 56,653 144,148 +254% During the quarter the Port Hedland Port Authority announced that the required approvals for the proposed Utah Point export facilities were granted, and that construction of the facility had commenced. Atlas looks forward to the commissioning of Utah during the second quarter of 2010 to facilitate the first 3Mtpa allocation Atlas secured as a foundation customer for the facility. Subsequent to the end of the quarter the Company was pleased to announce that it had also secured a further 3Mtpa annualised capacity until February 2012, taking the Company’s total capacity at Utah to 6Mtpa until February 2012, providing an opportunity for the Company to secure initial capacity for its Abydos/Wodgina project development. Consistent with Company’s objective of growing the Pardoo Mine production to 3Mtpa during 2010 work is underway to expand the mines production base, including consideration for the installation of a larger crushing and screening plant (via contract arrangements) to handle the increased throughput. Mine approval submissions for the expanded mine capacity are well progressed. In parallel, discussions are continuing with Fortescue Metals Group to facilitate higher export volumes for the Pardoo Project through the Anderson Point facility in Port Hedland Harbour whilst the Utah Point Facility is under construction. ABYDOS DIRECT SHIPPING ORE (DSO) PROJECT The Abydos Project is located 100 kilometres south of the Public Access Port of Port Hedland in the Pilbara of Western Australia. Similar to Pardoo, the project area contains potential for hosting significant bedded supergene iron ore deposits (BID) and channel infill deposits (CID). The project area contains prospective Archaean banded iron formation host rocks abutting BHP-Billiton State Agreement tenements, known to host iron ore mineralisation.
Exploration, Resources and Mine Development
Resource Development During the March quarter, with Wodgina becoming the main focus of the Company’s exploration effort, there was no RC drilling completed at Abydos. A small team of Resource Development personnel remained at Abydos conducting regional reconnaissance and rock chip sampling, prospect mapping and drill pad rehabilitation.
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
Figure 3: Lalla Rookh Mineralised Trend
Abydos DSO Mine Development The Company has completed a Preliminary Feasibility Study (PFS) for its proposed 3Mtpa DSO project (based on its core Abydos tenement package) and subject to achieving approvals in line with statutory guidelines Atlas is targeting mine production from late 2009. Upon the successful completion of the PFS during July 2008, the Company embarked on the Definitive Feasibility Study (DFS), which is now well underway. The Abydos DFS is scheduled for completion in June 2009, at which time the Atlas Board will consider mine development. Atlas has previously announced that it had entered into a binding Heads of Agreement which contemplates infrastructure sharing with Talison Pty Ltd, the owners of the Wodgina Tantalum mine. The ability of the Company to access the Wodgina mine infrastructure provides significant advantages in the Abydos projects development through reduced up-front capital expenditure, improved environmental approvals processes and reduced operating expenditure. Infrastructure sharing opportunities are enhanced further with the ongoing exploration success Atlas is generating in its Wodgina exploration activities (see following).
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
Figure 4: Abydos DSO Project – Pre Feasibility Study Mine Layout Engineering assessment contributing to the Abydos Project DFS is ongoing and includes detailed road designs, rail crossing assessments, disturbance footprints and infrastructure layouts. These elements will contribute to the submission of the Company’s formal approvals documentation for submission to government prior to the end of the June quarter. All studies contributing to the proposed Abydos mines approvals process are either completed or nearing completion. Upon completion of the aforementioned surveys and studies, the data will then be compiled for inclusion within the ‘Environmental and Social Impact Assessment’ that will form the basis for the ongoing project approvals in line with government requirements. WODGINA DSO PROJECT The Wodgina DSO Project is located approximately 100 kilometres south of Port Hedland, and immediately adjacent to the existing Wodgina Tantalum mine, owned by Talison.
Exploration, Resources and Mine Development
Exploration and Resources During the quarter 438 RC holes and 6 diamond holes were completed for a total of 24,751.2 metres. Drilling resumed at Wodgina in January with one RC rig completing a wide-spaced reconnaissance pattern over several prospects at Wodgina South, approximately 2 kilometres south of Anson. Upon receipt of drilling approvals for Talison’s Wodgina mining lease later in the month the rig returned to Anson to start drilling extensions to the resource, as well as the other untested prospects in the area. Exploration activity peaked in March, with three RC rigs and one diamond rig drilling simultaneously to complete all first-pass drilling by the end of the quarter. The six diamond holes were drilled to provide samples for metallurgical test work, which is now underway.
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
Figure 5: Recent drilling intersections at Wodgina At the end of March the Anson deposit was handed over to the Resource Development team, who are now in the process of drilling it out to 20 x 40 metre spacing. This will enable the estimation of a JORC Indicated resource in May 2009. Assay results from Anson, received subsequent to the end of the quarter, indicate excellent potential for expansion to the east, towards Talison’s mining operation (please refer to the announcement of 16/4/09). The Company is confident that the resource will grow significantly, underpinning the establishment of a low-capex mining operation at Wodgina.
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
A number of targets remain to be tested throughout 2009 and the Company remains optimistic of further discoveries in the area. A Wodgina Project Scoping Study is scheduled for release in the coming weeks, with the Feasibility Study proposed for completion by July 2009. MT WEBBER DSO PROJECT Mt Webber, approximately 150kilometres southeast of Port Hedland forms another important link in the Company’s objective of growing a substantial production base from the ‘Greater Abydos Project’ area south of Port Hedland. There are also a number of prospects under the Greater Abydos banner which are yet to be drilled.
Exploration Subsequent to the end of the quarter the Company has commenced drilling at Mt Webber. Additional close-spaced mapping at Mt Webber has reinforced the Company’s opinion that the project will provide a major increase to the resource inventory in the coming year. RIDLEY MAGNETITE PROJECT
Pre-feasibility Study Subsequent to the end of the quarter the Company’s project engineers, Engenium, completed a pre-feasibility study (PFS) into the Ridley Magnetite Project. This study assessed the viability of a 48Mtpa mining operation, feeding ore to a concentrator via in-pit crushing and conveyor belts, to produce 15Mtpa of concentrate at a grade of 68.3% Fe. The study envisaged delivery of the concentrate via pipeline to an offshore trans-shipping facility, to be loaded onto Capesize vessels for export. The project requires a 330MW power station, and an approximate workforce of 744 people. The PFS concluded that the project would have an establishment cost of A$2,722 million plus $250 million in contingencies, and would operate at an average cost of A$36.22/t concentrate FOB, with a conceptual mine life of over 30 years. For full details of the PFS outcomes please refer to the Company’s announcement of 14 April 2009.
Initial Ore Reserve statement Also subsequent to the end of the quarter, the Company released an initial JORC-compliant ore reserve for the Ridley Magnetite Project. The ore reserve was calculated by AMC Consultants, based on the mineral resource estimated by CSA Global which was announced in 2008. Mineral resources were converted to ore reserves recognising the confidence level of the mineral resource, and reflecting modifying factors in accordance with the JORC code. The details of the ore reserve estimate are contained in the table below.
Ridley Ore Reserve Estimate
Reserve Tonnes Fe Concentrate Fe in SiO2 in Classification (Mt) (%) Product (Mt) Concentrate (%) Concentrate (%) Probable Ore Reserve 970 36.0 330 68.3 3.8 Total Ore Reserve 970 36.0 330 68.3 3.8 Table 2: Ridley Ore Reserves
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
For additional detail and Competent Persons’ statements relevant to the Ridley Ore Reserve, please refer to the Company’s announcement of 14 April 2009. PILBARA INFRASTRUCTURE DEVELOPMENTS
Port Hedland Port Authority – Utah Berth Facility During the quarter, the Company secured additional berth capacity at the Utah Point public access port facility in Port Hedland. Atlas is a foundation customer of the Utah Point facility and has previously secured 3Mtpa of annual capacity to underpin delivery of product from its Pardoo mine. Atlas has been allocated an additional 3Mtpa of capacity for the period from May 2010 to February 2012, increasing its total allocation to 6Mtpa. The agreement with Port Hedland Port Authority is subject to completion of formal documentation and prepayment by Atlas of the future stockyard and load- out charges at a rate of $1.79 per tonne. Utah Point is currently under construction and is expected to be ready for first export of Atlas’ Pardoo product by 1 April 2010, with full commissioning expected later that quarter.
North West Iron Ore Alliance Atlas Iron is a founding member of the North West Iron Ore Alliance (NWIOA), a group of independent iron ore producers and explorers progressing projects in the Pilbara of Western Australia. During the quarter the NWIOA concluded its own Scoping Study to assess project development options for the proposed berth and associated infrastructure. The study concluded development plans are viable and capable of accommodating NWIOA members 50MTpa of projected iron ore exports by 2013. OFFTAKE CONTRACTS - PARDOO During the period Atlas entered into three new long term off-take agreements with Chinese steel mills. The execution of these new off-take agreements follows Atlas’ other off-take agreement in respect of 30% of Pardoo DSO, announced in December 2008. As a result, Atlas has now entered into four off-take agreements for 100% of its Pardoo DSO product for the next 3 years. Key terms of these three new off-take agreements are as follows: Price referenced to the long term benchmark, with pricing relativity achieved reflecting the strong competition to secure access to Atlas DSO tonnage; An adjustment mechanism which applies only in the event that spot prices and benchmark prices materially diverge. Once activated this mechanism serves to adjust the sales price mid-way to the spot price, in order to maintain the fairness of contract pricing to both parties; and Ore sold on a delivered basis, with freight to be arranged by Atlas at spot rates and reimbursable by the customers at cost and covered under the terms of the Letter of Credit.
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
The first shipment under these three off-take agreements is expected to be completed in late May 2009. Ore for the initial shipments under this off-take agreement will be sourced from the Bobby and Alice deposits at the Pardoo Project, where mining is underway. These off-take agreements were executed after careful evaluation of the extremely competitive bids received from trading groups and steel mills. CORPORATE At the end of the March 2009 quarter Atlas Iron Limited had 299,305,822 shares on issue. The top 20 shareholders hold approximately 54.5% of the issued capital. As at 31 March 2009 the Company had $65.1 million of cash on hand, which had increased to $67.1 million as at 29 April 2009. Major inflows for the quarter included; Connie sale proceeds of $4.3 million (note March cargo proceeds were received in cash during April) Interest income of $1.7 million Major outflows for the quarter included: Development and pre-stripcosts at Pardoo of $4.8 million Operating and selling costs (including those relating to the building of inventory on hand) at Pardoo of $8.6 million Exploration and evaluation costs of $8.4 million, including: Wodgina exploration drilling Prefeasibility Study for the Ridley magnetite deposit Abydos exploration/evaluation drilling and definitive feasibility studies Since the last quarterly report the Company has issued 465,000 shares following the exercise of 80 cent options.
SHAW RIVER RESOURCES LIMITED At the date of this report Atlas holds a 42.7% interest in Shaw River Resources Limited (Shaw) (ASX Code: SRR). Shaw holds non iron ore mineral rights over the majority of Atlas’ Pilbara tenements. For further details on Shaw River’s activities, please refer to Shaw River’s Quarterly Reports or its website (www.shawriver.com.au).
WARWICK RESOURCES LIMITED Atlas holds a 19.5% interest in Pilbara based iron ore explorer, Warwick Resources Ltd (Warwick) (ASX Code: WRK) acquired via a placement and off-market purchases. For further details on Warwick’s activities please refer to Warwick’s Quarterly Reports or its website (www.warwickresources.com.au). PLANNED WORK JUNE 2009 QUARTER Complete first-pass exploration on the main prospects at Mt Webber. Complete infill drilling at Anson for resource update and scoping study. Complete Wodgina DSO project scoping study. Complete Wodgina project feasibility study. Award new Pardoo Crushing and Screening contract.
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QUARTERLY REPORT ATLAS IRON LIMITED March 2009
COMPETENT PERSONS AND JORC COMPLIANCE STATEMENTS
Geological Data, Interpretation and Resource Estimation – Pardoo, Abydos and Wodgina project areas For details on Atlas Iron Limited’s current DSO resources, please refer to the December 2008 resource update announced on 29 January, 2009.
Exploration Results – Pardoo and Wodgina The information in this report that relates to exploration results at Pardoo and Abydos is based on information compiled by Mr. Hamish Pescini who is a member of the Australian Institute of Geoscientists and is an employee of Atlas Iron Limited. Hamish Pescini 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. Hamish Pescini consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Geological Data, Interpretation and Resource Estimation – Trigg Resource The information in this Report that relates to in-situ Mineral Resources is based on information compiled by Hamish Pescini. Hamish Pescini is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person in terms of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’(JORC Code 2004 Edition). Hamish Pescini consents to the inclusion of such information in this Report in the form and context in which it appears.
Atlas Iron Limited – Statement on Global Exploration Target Atlas has reported a total resource inventory of 56.7 million tonnes at 56.5% Fe consisting of resources at Pardoo, Abydos and Wodgina. While the Company intends to do further exploration on its tenements and remains optimistic it will report additional resources and reserves in the future, any discussion in relation to targets, resources, reserves or ‘ore’ over and above the resource of 56.7 million tonnes at 56.5% Fe is only conceptual in nature. There has been insufficient exploration to define a Mineral Resource over and above the resource of 56.7 million tonnes at 56.5% Fe, and it is uncertain if further exploration will result in the determination of a Mineral Resource over and above the resource of 56.7 million tonnes at 56.5% Fe.
Greater Abydos Project Atlas has reported a resource of 8.1 million tonnes at 57.5% Fe at Wodgina, which is part of the Greater Abydos exploration project. While the Company intends to do further exploration in the Greater Abydos area and remains optimistic it will report additional resources and reserves in the future, any discussion in relation to targets, resources, reserves or ‘ore’ over and above the resource of 8.1 million tonnes at 57.5% Fe is only conceptual in nature. There has been insufficient exploration to define a Mineral Resource over and above the resource of 8.1 million tonnes at 57.5% Fe, and it is uncertain if further exploration will result in the determination of a Mineral Resource over and above the resource of 8.1 million tonnes at 57.5% Fe.
Mineral Resource Estimation - Ridley Deposit The information in this report that relates to mineral resources results is based on information compiled by Mr Malcolm Titley who is a member of the Australasian Institute of Mining and Metallurgy. Malcolm Titley is a full time employee of CSA Global Pty Ltd. Malcolm Titley has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which they have undertaken 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 the report of the matters based on their information in the form and context in which it appears.
Ore Reserve Estimation Ridley Deposit The sections in this report that relate to the Ridley Ore Reserves are based on information compiled under the direction of Mr Bruce Gregory. Mr Gregory is a Member of the Australasian Institute of Mining and Metallurgy and is a full time employee of AMC Consultants Pty Ltd. Mr Gregory has sufficient experience relevant to the style of mineralization and type of deposit under consideration 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’. Mr Gregory consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.
Dollars means Australian dollars
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