Labrador Iron Mines

Holdings Limited

TSX: LIM

Corporate Information

Common Shares

Company Overview

Labrador Iron Mines Holdings Limited (LIM) is a Toronto, Canada based public company whose shares are listed on the TSX Exchange (TSX: "LIM"). LIM completed an Initial Public Offering (IPO) on December 3, 2007. The Company's primary focus is to enhance shareholder value by developing its direct shipping iron ore projects in western Labrador and the Schefferville area of North-Eastern Quebec.

Through its wholly-owned subsidiaries, Labrador Iron Mines Limited and Schefferville Mines Inc., LIM has acquired interests in mineral claims and mineral licenses containing approximately 150 million tons of iron ore resource in the western central part of the Labrador Trough iron range of Western Labrador, one of the major iron ore producing regions in the world. The project is divided into two separate areas, one within the Province of Newfoundland and Labrador, and the other within the Province of Quebec, both located near the town of Schefferville, Quebec.

The iron ore deposits are predominantly hematite ore. The in situ ore is estimated to contain around 56% to 58% iron and it is expected that the beneficiation process will enhance the product grade to around 65% iron and remove unwanted material. Two products will be produced, namely coarse lump ore and a finer sinter feed. Approximately one-quarter of the product will be lump ore. These products will be transported by the existing railroad systems to the port of Sept-Iles on the St. Lawrence River for onward shipping, most likely to steel mills in Europe or Asia. The whole operation will utilize well proven, relatively basic technology similar to that previously carried out by the Iron Ore Company of Canada in the same general location for almost thirty years from 1954 to 1982. These iron deposits are part of the original IOC direct shipping Schefferville operations conducted from 1954 to 1982 and formed part of the 250 million tons of reserves and resources previously identified by IOC.

The Company's plans for the Schefferville Projects envision the development and mining of the deposits in five separate stages. Stage 1 incorporates the James and Redmond deposits at the Silver Yards plant which is now operating largely to specification.

James Mine Operations

It is expected that a total of about 1.6 million tonnes will have been mined by the end of December 2011 with about 3 million tonnes of waste mined in the same period.

Silver Yards Processing

Following commissioning and start-up in June 2011 the Silver Yards processing plant gradually improved its performance and frequently achieved over 8,000 tonnes per day in September and October. During the quarter ended September 30, 2011, 310,000 tonnes of material were fed to the plant, yielding approximately 165,000 tonnes of high grade lump and sinter fine product.

First and Second Shipments to China

Subsequent to the end of the quarter the first shipment carrying LIM iron ore departed the Port of Sept-Iles on October 3, 2011 bound for China. This shipment contained 167,167 wet tonnes of direct railable ore (DRO) at a grade of 64.8% Fe. The second shipment departed Sept-Iles on November 2, carrying 172,743 wet tonnes of sinter fines at a grade of 64.9% Fe, also destined for China. LIM expects a third similar sized shipment to depart at the end of November, and possibly another smaller shipment to depart in December.

It is estimated that, subject to weather conditions, approximately 600,000 tonnes of saleable product will be railed to the Port of Sept-Iles for calendar 2011 and will all be sold to IOC. In addition to these shipments, it is expected that a further 600,000 tonnes of iron ore will be held in inventory at Silver Yards and be available for treatment and shipping in 2012, including about 200,000 tonnes of DRO.

2011 Exploration Program

The 2011 exploration program has progressed successfully and is now winding down. Three rigs were in operation and by the end of September about 8,200 metres had been drilled on a number of deposits with the Houston deposit being the main focus. It is expected that about 11,500 metres of reverse circulation drilling will be completed before the onset of winter. Ongoing exploration support programs, including 650 metres of trenching, 65 test pits and air-borne geophysics, will also be completed during the 2011 season.

LIM’s exploration work has demonstrated good correlation between the resources estimated by LIM’s recent drilling programs and the historical IOC resources. It can be expected that with further exploration the historical resources will be upgraded such that operations can be continued for a number of years thereafter.

LIM has now defined over 39 million tonnes of current NI 43‐101 compliant direct shipping hematite iron ore resources at the first four deposits that it intends to develop, which is considered sufficient to continue production for approximately the first 10 years. In addition a further 125 million tons of historical resources exist on LIM’s other properties that were defined by IOC during their historical operations in the area. The Company plans to bring the historical resources on these other deposits into NI 43-101 compliant status sequentially in line with their intended phases of production, commencing with the deposits in the second phase of Stage 1.

Historic Milestones

On June 29, 2011, LIM reached a historic milestone with its first ore train loaded with direct shipping ore having departed Silver Yards for Sept-Iles. This train represents the first commercial iron ore train movement from the Schefferville area in almost 30 years.

The following transportation arrangements were achieved during 2011:

In February 2011, the Company signed a memorandum of understanding (“MOU”) with Tshiuetin Rail Transportation Inc. (“TSH”) for the transportation of iron ore from LIM’s Schefferville Area DSO Project over the 235 kilometre TSH Railway, which connects Schefferville to the Emeril Junction, for the calendar year 2011. It is contemplated that a separate agreement between the parties will be concluded for calendar 2012 and subsequent years.

In March 2011, LIM entered into a life of mine, confidential rail transportation contract with Quebec North Shore and Labrador Railway (“QNS&L”) for the transportation of LIM’s products from the end of the Menihek Division to Sept-Iles. This contract provides for a confidential tariff, with various capacity and volume commitments on the part of each party.

LIM also signed a rail services agreement with Western Labrador Rail Services (“WLRS”), a wholly owned subsidiary of Genesee & Wyoming Inc., to provide, operate and maintain up to five SD 40-3 locomotives which will be used to haul LIM’s iron ore from Silver Yards, over the TSH Railway, to Emeril Junction. The first three SD 40-3 locomotives have arrived and have been positioned at Silver Yards.

LIM has purchased a fleet of 400 previously used railcars of which the first consignment has been delivered to Sept-Iles.

Plant Upgrade and Expansion Plans

The Silver Yards plant as initially built has the equipment to crush, wash and screen to recover about 65% of the contained iron. In addition the Company is planning to install a new separate processing line in the Silver Yards plant. Subject to a planned metallurgical test program, this expansion will include equipment to produce sinter feed, sinter fines and pellet feed products. When installed, this line will be used to process the ore with the higher silica grades. This new line is expected to have a recovery of approximately 67% and will increase the total Silver Yards treatment capacity by an additional one million tonnes per year. This new line is expected to be commissioned in 2012.

The second phase expansion of the Silver Yards plant was completed during the second quarter. This second phase expansion was designed specifically for fine material, and has resulted in an improved throughput and recovery rate. A total of about 500,000 tonnes of iron ore has been fed to the Silver Yards plant during 2011, yielding around 260,000 tonnes of high grade saleable products.

The Company plans to install additional processing equipment in the Silver Yards plant to beneficiate the lower grade and the ultra-fines ore and to increase product grades. This would include installation of an additional circuit to further process the overflow of the hydrosizer and the underflow of the secondary desliming cyclone. Installation of this additional equipment would improve the grade of the lump and coarse sinter feed products, while at the same time improving recoveries to about 80% while increasing the capacity of the plant by approximately 6%.

The plans for the expansion of the Silver Yards plant should add about one million tonnes per annum to annual production capacity. The Company is in a strong financial position that will allow it to fund its working capital requirements for the 2011 production ramp-up and enable it to fund its exploration and expansion plans.

Other buildings at the Silver Yards include a 71 person accommodation camp, site offices, laboratory, maintenance shed, and warehouse facilities.

Port

LIM has signed a MOU with the Sept-Iles Port Authority for the use of the Pointe aux Basques terminal for handling and ship loading of LIM’s iron ore for the 2011 season and potentially beyond. LIM has also signed an agreement with a port terminal operator for the unloading, stacking and ship loading of iron ore at Pointe aux Basques. LIM will have exclusive use of the Pointe aux Basques terminal for iron ore shipments.

Use of the Pointe aux Basques facilities will require train shunting and unloading in the adjacent rail yard and loading the iron ore onto barges or lakers and trans-shipping to larger vessels within the deeper waters of the bay or to another port. These port handling arrangements are currently been finalized and are expected to be concluded in time for the first shipments of iron ore expected in August 2011.

Some work is still on-going to complete infrastructure facilities at the port. Iron ore will continue to be railed to the port in increasing volumes, and inventory stockpiles will be built to sufficient size to enable efficient shipping of this ore to the ultimate customers.

2012 Outlook

Detailed planning for 2012 is now underway and utilizing the operating experience gained in 2011. Mining will continue at the James North and James South deposits in the year 2012, with planned total ore mined of between 2.0 and 2.5 million tonnes, together with about 3.5 million tonnes of waste. Subject to final operating plan and budget approval, it is now expected that between 1.8 and 2.0 million tonnes of ore, including material from stockpiles, will be treated in 2012, expected to yield up to 1.5 million tonnes of saleable product. In addition, it is expected that about 500,000 tonnes of direct railable ore from both the 2011 stockpile and from 2012 mining operations will also be available in 2012, for a total production target of over 2.0 million tonnes of iron ore to be shipped and sold in 2012. A third train will be introduced in 2012 to enable this production of iron ore to be railed to the port of Sept-Iles.

LIM has signed a MOU with the Sept-Iles Port Authority for the use of the Pointe-aux-Basques terminal for handling and ship loading of LIM’s iron ore. Use of the Pointe-aux-Basques facilities will require train shunting and unloading in the adjacent rail yard and loading the iron ore onto barges or bulkers and trans-shipping to larger vessels within the deeper waters of the bay or to another port. Some work is still on-going to complete infrastructure facilities at the Pointe-aux-Basques dock. The port handling arrangements for 2012 and future years remain subject to ongoing evaluation and finalization.

Marketing and Iron Ore Pricing

Iron ore produced in 2011 is being sold to IOC and delivered to Asian markets and re-sold by IOC’s marketing organization on the spot market. The Company continues to review its options for marketing its iron ore production for 2012 and subsequent years and is evaluating the optimum route to achieve these sales, while still maintaining maximum flexibility and independence.

Marketing discussions are continuing with potential customers in both Europe and Asia. The Company is also continuing discussions with a number of internationally recognized commodity traders with specialist knowledge of the iron and steel industry. The Company has not yet concluded any agreements for the sale of its iron ore beyond 2011.

As of the end of the second week of November, some price recovery to the $135 per tonne CFR China range has occurred with year-end futures trading nearer to $140 per tonne CFR China. The pricing forecast for 2012 and beyond remains somewhat mixed. Over the medium term however, the consensus supports a fairly tight iron ore market as China continues to be heavily reliant on seaborne product for steel production, as its marginal cost to domestically produce an additional tonne of iron ore is comparatively high. With Chinese domestic production constrained and the acceptance of iron ore product from the Labrador Trough established, current producers in the Trough are favourably positioned to benefit from more robust iron ore prices over the next few years before a number of major projects come online.

Environment and Permitting

All necessary environmental permits, approvals and licenses were received during 2010 including the Mining Leases for the first stage James and Redmond deposits and Surface Use Leases over the Silver Yards beneficiation area, the camp, Redmond roads and pipeline.

Only the James and Redmond Deposits and the Silver Yards plant have completed environmental assessment and permitting. Further environmental assessment and permitting will be required for all the other deposits. Detailed mine design and metallurgical testwork has been carried out on those deposits that will form the basis of production for the initial years but further exploration, testwork and design is required for all the remaining resources. A Feasibility Study has not been completed on any of these Projects.

First Nations

In June 2011 the Company signed an Impact Benefits Agreement with the Nation Innu Matimekush–Lac John of Schefferville, Quebec. The historic life-of-mine Agreement is a significant step for LIM and for the Innu Community of Matimekush-Lac John, paving the way for the development of a project that will provide opportunities for the local community at Schefferville, and particularly its youth, and will at the same time protect the environment and Innu traditional and cultural activities.

In December 2010, the Company signed an Agreement in Principle (“AIP”) with the Innu Takuaikan Uashat Mak Mani–Utenam (Sept-Iles), which stipulates the principal terms to be included in an IBA. Negotiations with the Innu Takuaikan Uashat Mak Mani–Utenam Quebec towards the completion of an IBA have been concluded, and it is expected that the agreement will be submitted to the community of Takuaikan Uashat Mak Mani–Utenam for ratification later in the year.

In September 2010 LIM entered into an Impact Benefits Agreement with the Naskapi Nation of Kawawachikamach with respect to the development and operation of that part of the Schefferville Project in Labrador.

LIM previously in 2008 entered into an Impact and Benefit Agreement with the Innu Nation of Labrador.

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