Labrador Iron Mines : Management's Discussion and Analysis of Financial Condition and Results of Operations for the Year Ended March 31, 2023

LABRADOR IRON MINES HOLDINGS LIMITED

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE YEAR ENDED MARCH 31, 2023

Dated: June 27, 2023

GENERAL

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the consolidated financial statements and notes thereto of Labrador Iron Mines Holdings Limited (collectively, with its subsidiaries, the "Company") for the year ended March 31, 2023.

Labrador Iron Mines Holdings Limited ("LIMH"), through its majority owned subsidiaries Labrador Iron Mines Limited ("LIM") and Schefferville Mines Inc. ("SMI"), is engaged in the exploration and development of iron ore projects, situated in the Menihek area of western Newfoundland and Labrador and northeastern Quebec, near the town of Schefferville, in the central part of the Labrador Trough region of eastern Canada, one of the major iron ore producing regions in the world.

All currency amounts in this discussion are expressed in Canadian dollars, unless otherwise indicated. All references to tonnes are dry metric tonnes ("dmt"), unless otherwise indicated. All numerical references to years are "calendar" years, unless otherwise indicated.

This MD&A contains forward-looking statements.

OVERVIEW

The Company's current focus is planning and financing activities related to advancing the Houston Project, LIM's flagship property. The Houston Project is an open pit direct shipping iron ore project located near the town of Schefferville, on which an updated, independent Preliminary Economic Assessment ("PEA") was completed in February 2021 and demonstrated production of 2 million dmt of DSO per year, with an initial 12-year mine life, for total production of 23.4 million dmt of product at 62.2% Fe over the life of the mine.

The Houston Project offers low technical risk, with only building a short gravel road and rail siding as the principal construction components. The Houston Project's deposits 1 and 2 have undergone extensive regulatory review and approval and are considered ready for construction with a one-year construction period to production. Planned operations will involve conventional open pit truck and shovel activities and simple dry crushing and screening for processing.

Similar to recent years, the iron ore market was very volatile in the year ended March 31, 2023. While averaging US$117 per tonne (62% Fe Sinter Fines CFR China) for the full twelve month period, the price ranged between US$160 and US$82 per tonne, with the price falling significantly during the summer of 2022, before rebounding later in the year. By year end March 31, 2023, the price had improved to US$127 per tonne. The market negativity in the summer of 2022 was attributed to a slowdown in Chinese homebuilding resulting from Beijing's zero-Covid lockdown measures that dampened demand for the steelmaking raw material. Chinese authorities abandoned the zero-Covid measures late fall, unleashing pent-up demand for residential construction and other infrastructure development. Demand for iron ore imports immediately increased, with an associated rise in price that continued into 2023.

Many analysts believe a surge in industrial and real estate activity in China combined with the potential for continued interruption in supply from Ukraine and limited supply growth elsewhere may lead to a strong iron ore market throughout calendar 2023.

LIM is advancing development of the Houston Project through a number of initiatives, including: discussing an off- take agreement, including construction financing and product sale components with a potential off-take partner; advancing commercial negotiations with construction contractors, equipment vendors, rail, port and logistics counterparties; and planning metallurgical test work of drill core collected from the Houston Project in a 2013 bulk sample, to refine the product characterization and specifications which will be helpful in marketing the iron ore.

The independent PEA prepared by Roscoe Postle Associates Inc ("RPA"), now part of SLR Consulting Ltd., supports LIM's plan to resume iron ore production from its next phase Houston Project with low re-start capital and robust economics at a time when the global iron ore markets are strong. The PEA estimates initial direct capital costs of $51.3 million, and along with indirect costs, engineering, procurement and construction management (EPCM) costs, owner's costs and contingency, total initial capital expenditures of $86.8 million. The initial capital intensity at only US$33 per annual tonne of production is considered low by industry standards.

Based on the assumptions used, the PEA estimates the Houston Project will generate an undiscounted net cash flow of $234 million and an after-tax net present value at an 8% discount rate ("NPV8%") of $109 million and an after-tax internal rate of return ("IRR") of 39%, under the base case US$90/dmt (62% Fe Sinter Fines CFR China basis) benchmark pricing model.

To finance the capital cost of the Houston project various future construction financing alternatives are being considered including an advance payment component of an off-take agreement; equipment leasing arrangements; potential project partners; potential government development agencies participation; and potential debt and equity financing.

The Company has been exploring various financing alternatives to secure near term working capital. On July 5, 2022, the Company entered into an agreement for a US$4,000,000 strategic investment by Scully Royalty Ltd. ("Scully"). Closing of this investment was scheduled to occur by the outside date of September 14, 2022, however the transaction was not completed by the parties. The Company continues to explore various short term financing alternatives.

LIM completed the reclamation of its former James Mine and Silver Yards processing facility during the summer of 2021. LIM has now successfully completed all its environmental regulatory requirements relating to rehabilitation of the former James Mine and Silver Yards processing site and related infrastructure, and in February 2022 obtained release of the final remaining $1 million of financial assurance related to the rehabilitation.

The Company also continues to maintain its principal mineral claims in good standing, while allowing some peripheral claims to expire.

ACQUISITION OF MINORITY INTEREST IN SUBSIDIARY LABRADOR IRON MINES LIMITED

At a Special Meeting of Shareholders of the Company's 52% subsidiary Labrador Iron Mines Limited ("LIM") held on March 30, 2023, a requisite two-thirds majority of votes cast by LIM shareholders at the meeting approved a special resolution authorizing the amalgamation of LIM with a wholly owned subsidiary of the Company, involving the issue of shares of the Company to LIM shareholders, such that LIM will, once again, become a wholly owned subsidiary of the Company.

The transaction is to be effected by way of a statutory amalgamation of LIM with a wholly owned subsidiary of the Company, under Section 174 of the Business Corporations Act (Ontario).

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The number of shares of the Company to be issued in exchange for the LIM shares was calculated to equate to the relative percentage interest of each company in the underlying assets. That is, the shareholders of LIM, other than the Company, will continue to hold, indirectly, the same percentage interest in the assets of LIM upon completion of the amalgamation as they hold, directly, before the amalgamation.

Under the amalgamation all LIM shares, other than LIM shares held by the Company, will be exchanged for shares of the Company on the basis of 3.1136546 shares of the Company for each LIM share held, resulting in the issuance of an aggregate of approximately 148,362,500 shares of the Company to LIM shareholders.

As at the date of this MD&A, the Company is authorized to complete the amalgamation, but has not yet completed the amalgamation. The amalgamation is expected to close shortly, subject to customary closing conditions.

LIM's HOUSTON DSO PROJECT

The Houston Project consists of the Houston 1, 2 and 3 deposits located in Newfoundland and Labrador and the adjacent Malcolm deposit located just over the provincial border in Quebec, collectively about 15 kilometres from Schefferville and about 10 kilometres south of LIM's former James Mine.

The Houston 1 and 2 deposits have been permitted and are considered ready for construction. The Houston 3 and Malcolm deposits are planned to come on stream in the second half of the mine life, following permitting.

In 2012, following the submission of a project registration to the Government of Newfoundland and Labrador for the development of the Houston 1 and 2 deposits, including a haul road and a new railway siding, the Minister of Environment and Conservation informed the Company that, in accordance with the Environmental Protection Act, the Houston 1 and 2 Deposits Mining Project was released from further environmental assessment, subject to a number of conditions.

The Closure and Rehabilitation Plan for the Houston 1 and Houston 2 deposits has been approved to allow for initial development. In order to fully develop the Houston Project, the Closure and Rehabilitation Plan for the Houston 3 deposit must be approved by the Newfoundland Department of Natural Resources. The Malcolm deposit, included in the Houston project, has not been permitted by the Province of Quebec and is proposed to be developed in the second half of the project mine life.

The Company's Schefferville Projects are connected by a direct rail line to the Port of Sept-Iles on the Atlantic Ocean and benefit from established infrastructure, including the town of Schefferville, an airport, roads, hydro power and rail service.

LIM has existing life-of-mine rail agreements with Tshiuetin ("TSH") railway and Quebec North Shore and Labrador Railway ("QNS&L") for the transport of iron ore across the 235 km TSH railway and the 350 km QNS&L railway to the Port of Sept-Iles. These agreements are currently suspended until LIM's mining operations resume. LIM will be seeking additional amendments to be effective when the suspended contracts are reactivated. There are no assurances that LIM will be successful in negotiating such additional amendments to the commercial terms of its major contracts on reasonable or acceptable terms, or at all.

The port handling arrangements for the future shipment of LIM's iron ore production remain subject to ongoing evaluation and finalization. LIM continues to evaluate different options for the unloading, stockpiling and ship loading of its iron ore products at the Port of Sept-Iles. These potential options include renewal of a port access agreement with IOC, use of the Société Ferrovaire et Portuaire de Pointe Noire ("SFPPN", a public private partnership) port assets (which include the Wabush yard, dumper and loader, the Bloom Lake dumper and loader and the Arnaud Railway which connects that part of the Port to the QNS&L railroad) and/or use of the Port's new multi-user deep

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water dock and/or other facilities in the Port of Sept-Iles. Use of such facilities would require negotiation of a new agreement(s) with IOC, SFPPN and/or the Port.

Construction of the Houston Project is subject to the availability of construction financing. There are no assurances that the Company will be successful in obtaining the required financing and if it is unable to obtain such financing, the development of Houston will be delayed.

PRELIMINARY ECONOMIC ASSESSMENT - HOUSTON PROJECT

LIM engaged Roscoe Postle Associates Inc., now part of SLR Consulting Ltd. (collectively, "RPA/SLR"), to complete a National Instrument 43-101("NI43-101") compliant technical report and preliminary economic assessment (collectively, the "PEA") of the Houston Project.

The PEA was issued in February 2021 with an effective date of December 31, 2020 and is filed on the Company's website and under the Company's profile on www.sedar.com.

Updated Mineral Resource Estimate

As part of the PEA, RPA/SLR completed an updated NI 43-101 mineral resource estimate and undertook a detailed optimization of Houston's open pit mining strategy and fully updated the proposed production schedule. This expanded scope of work focused on maximizing the component of the mineral resource that can benefit from the dry crushing and screening processing strategy and thereby increased the expected production life of the project from 10 years to 12 years.

As reported in the Technical Report, the updated NI 43-101 mineral resource estimate for the Houston Project, effective December 31, 2020, is as follows.

Houston Project: Mineral Resource Estimate

Category	Tonnes (Mdmt)	Fe	SiO2	Mn	P	Al2O3
%	%	%	%	%
Measured	11.4	62.7	6.8	0.52	0.07	0.68
Indicated	9.1	62.7	7.3	0.41	0.06	0.54
M + I	20.5	62.7	7.0	0.47	0.06	0.62
Inferred	14.3	59.4	13.7	1.02	0.07	0.83

Updated Production Schedule

The strategy set out in the PEA aims to maximize the quantity of higher-grade mineralization and minimize the waste mined in the plan, thus lowering the strip ratio, with the objective of reducing overall costs. The revised mine plan is now scheduling distinct phases of mining in multiple smaller pits within the already permitted project footprint and is likely to result in a smaller overall disturbance area.

The PEA establishes an updated Houston mining schedule of 2 Mtpa (62.2% Fe) for total production of 23.4 Mt over a 12 year mine life. Mining and processing (consisting of dry crushing and screening only) will be undertaken 12 months of the year at a planned rate of 5,500 tpd, with an expected 100% mass yield. Train loading is planned to be undertaken from May to November (approximately 200 days per year) at a rate of 10,000 tpd. The product mix is expected to be 30% lump and 70% sinter fines DSO product.

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The following table summarizes planned mine production from the four deposits which comprise the Houston Project, as set out in the PEA.

Houston Project: Production Summary

	High Grade	Fe	SiO2	P	Mn	Al2O3	Strip	Total
Pit	Iron Domain	Mined
(%)	(%)	(%)	(%)	(%)	Ratio
	(Mdmt)	(Mdmt)
Houston 1	6.1	62.3	7.1	0.08	0.60	0.64	1.4:1	14.6
Houston 2	4.5	62.7	7.2	0.05	0.44	0.72	2.2:1	14.3
Houston 3	8.1	61.8	8.5	0.06	0.50	0.61	2.9:1	31.3
Malcolm	4.7	62.2	6.3	0.06	0.53	0.51	2.4:1	15.8
Total	23.4	62.2	7.4	0.06	0.52	0.62	2.2:1	76.7

Mining dilution of 5% at model grade is assumed, together with 99% mining recovery. Mass yield with dry crushing and screening is assumed at 100%.

Nearly 100% of production for the first five years of operations and nearly 100% of Houston 1 and Houston 2 production are derived from Measured and Indicated Resources. Overall, Measured and Indicated Mineral Resources represent approximately 80% of the planned production total.

Capital Costs

The PEA estimates initial direct capital costs of $51.3 million, and along with indirect costs, engineering, procurement and construction management (EPCM) costs, owner's costs and contingency, total initial capital expenditures of $86.8 million. Sustaining capital is estimated at $67.7 million.

Initial capital costs and sustaining capital costs include an 18% contingency on direct and indirect costs. Major mining equipment is included in the financial analysis under a capital lease arrangement.

Cost escalation, exploration costs, corporate costs, project financing (except major mine equipment leasing) and working capital are excluded from the estimates. Restricted cash accounts are assumed to cover the closure and reclamation obligations.

A table summarizing the various components of Houston Project capital costs according to the PEA is as follows.

Houston Project: Capital Costs

Area	Initial Capital	Sustaining Capital	LOM Capital
($ millions)	($ millions)	($ millions)
Direct Costs:
Equipment	15.5	36.7	52.2
Infrastructure:
Dry Sizing Plant	6.4	0.6	7.0
Power and Site Distribution	1.7	3.0	4.7
Product Haul Road	14.9	2.5	17.4
Rail Siding	5.8	-	5.8
Site Buildings and Other Facilities	3.3	1.8	5.1
Site General	1.3	-	1.3
Development	2.3	11.6	13.9

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