Labrador Iron Mines Holdings Limited

1 Labrador iron Mines Holdings Limited Labrador iron Mines Holdings Limited condensed interim consolidated financial Statements For the Three and Nine Months Ended December 31, 2016 and 2015 (Unaudited, expressed in Canadian dollars) The Company s auditors have not reviewed the unaudited condensed interim consolidated financial statements for the three and nine months ended December 31 2016 and 2015. 55 University Avenue, Suite 1805, Toronto, Ontario M5J 2H7 Tel: (647) 728-4125 Fax: (416) 368-5344 Email: Website.

2 Labrador iron Mines Holdings Limited condensed interim consolidated Statements of financial Position (Unaudited, expressed in Canadian dollars) December 31, 2016 March 31, 2016 ASSETS Current assets Cash and cash equivalents $ 607,393 $ 3,409,529 Accounts receivable and prepaid expenses (Notes 5 and 25) 366,189 289,829 Total current assets 973,582 3,699,358 Non-current assets Restricted cash (Note 6) 2,879,016 2,888,053 Mineral property interests (Note 7) 20,000,000 1 Property, plant and equipment (Note 8)

3 645,698 2,170,855 Total non-current assets 23,542,714 5,058,909 Total assets $ 24,498,296 $ 8,758,267 LIABILITIES Current Liabilities Accounts payable and accrued liabilities (Notes 9, 15 and 25) $ 390,480 $ 406,306 Finance lease obligation (Note 11) - 518,769 Rehabilitation provision (Note 13) 18,000 18,000 Other liabilities (Note 14) 21,548 21,548 Current liabilities, before the undernoted 430,028 964,623 Liabilities subject to compromise (Notes 9, 10, 11,15, 20 and 21) - 66,474,551 Total current liabilities 430,028 67,439,174 Non-current liabilities Rehabilitation provision (Note 13)

4 2,773,925 2,754,421 Total liabilities 3,203,953 70,193,595 SHAREHOLDERS' EQUITY Share capital (Note 17) 395,687,172 393,524,694 Reserves (Note 18) 4,402,779 6,031,379 Deficit (388,595,608) (460,991,401) Non-controlling interest (Note 16) 9,800,000 - Total shareholders equity 21,294,343 (61,435,328)

5 Total liabilities and shareholders equity $ 24,498,296 $ 8,758,267 Going concern (Note 1) Commitments and contingencies (Note 21) The financial statements were approved by the Board of Directors on February 21, 2017, and signed on its behalf by: Signed John F. Kearney Signed Hooley Director Director The accompanying notes form an integral part of these condensed interim consolidated financial statements.

6 Labrador iron Mines Holdings Limited condensed interim consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited, expressed in Canadian dollars) Three months ended Nine months ended December 31, 2016 $ December31, 2015 $ December 31, 2016 $ December 31, 2015 $ Operating expenses Site activities (333,437) (210,677) (1,099,974) (407,654) Depletion and depreciation (8,386) (8,827) (25,157) (26,481) (Loss) before the undernoted (341,823) (219,504) (1,125,131) (434,135) Corporate and administrative costs (429,088) (418,567) (1,195,333) (1,410,604) Finance lease (Note 11) - (24,616) - (87,298) Accretion (Note 13) (6,523) (4,914) (19,504) (19,094) Unrealized foreign exchange (loss) - (1,285,157) - (3,467,623)

7 Gain on sale of equipment (Note 22) 266,617 - 376,555 590,000 Rail construction advance settlement - - - 5,000,000 Impairments, net (Notes 7, 8 and 23) 25,499,999 - 25,499,999 (5,000,000) Interest earned 9,021 13,981 28,300 39,929 25,340,026 (1,719,273) 24,690,017 (4,354,690) Net income (loss) before the undernoted 24,998,203 (1,938,777) 23,564,886 (4,788,825) Restructuring recovery (expense) (Note 24) 47,068,758 (105,419) 47,202,307 (336,919) Net comprehensive income (loss) for the period 72,066,961 (2,044,196) 70,767,193 (5,125,744) Earnings (loss) per share Basic and diluted ( ) ( )

8 Weighted average number of shares outstanding Basic and diluted 131,415,916 126,323,123 128,026,894 126,323,123 The accompanying notes form an integral part of these condensed interim consolidated financial statements. Labrador iron Mines Holdings Limited condensed interim consolidated Statements of Cash Flows (Unaudited, expressed in Canadian dollars) Three months ended Nine months ended December 31, 2016 $ December 31 2015 $ December 31, 2016 $ December 31, 2015 $ Cash (used in) operating activities Net income (loss) for the period 72,066,961 (2,044,196) 70,767,193 (5,125,744) Items not involving cash.

9 Depletion and depreciation 8,386 8,827 25,157 26,481 Accretion on rehabilitation provision 6,523 4,914 19,504 19,094 Interest on finance lease obligation - 24,616 - 87,298 Interest receivable (6,198) (7,079) 9,037 23,843 Unrealized foreign exchange loss - 1,285,157 - 3,467,623 Gain on sale of equipment (Note 22) (266,617) - (376,555) (590,000) Rail construction advance settlement - - - (5,000,000) Impairments, net (Notes 7, 8 and 23) (25,499,999) - (25,499,999) 5,000,000 Restructuring recovery (Note 24) (47,440,358) - (48,123,891) Changes in working capital (249,922) (26,078) 863 (750,811) Cash (used in) operating activities (1,381,224) (753,839) (3,178,691) (2,842,216)

10 Cash provided by investing activities Proceeds from sale of equipment (Note 22) 266,617 - 376,555 590,000 Cash provided by investing activities 266,617 - 376,555 590,000 Cash (used in) financing activities Repayment of finance lease obligation - (46,758) - (527,306) Cash (used in) financing activities - (46,758) - (527,306) Changes in cash and cash equivalents (1,114,607) (800,597) (2,802,136) (2,779,522) Cash and cash equivalents, beginning of period 1,722,000 4,442,668 3,409,529 6,421,593 Cash and cash equivalents.