2021 Annual Results

24 March, 2022

Achieved new record production, EBITDA and cash flow as well as enhancing asset portfolio

 Atalaya Mining Plc (AIM: ATYM, TSX: AYM) is pleased to announce its audited consolidated results for the year ended 31 December 2021 (“FY2021” or the “Period”) and the publication of its Annual Report for the Period.

The Audited Consolidated Financial Statements and Annual Report for FY2021 are also available under the Company’s profile on SEDAR at www.sedar.com and on Atalaya’s website at www.atalayamining.com.

FY2021 Highlights

  • Record annual copper production of 56,097 tonnes
  • Record financial performance, including EBITDA of €199.1 million and cash flows from operating activities of €148.8 million
  • Asset portfolio enhanced – Cerro Colorado reserves, optioned Riotinto East, acquired Ossa Morena, approved E-LIX Phase I and 50MW solar plant, Masa Valverde exploration
  • Paid inaugural dividend of US$0.395 per ordinary share (~US$54.6 million) and announced future dividend policy
  • Ended the Period with robust balance sheet including net cash of €60.1 million

FY2021 Financial Results Summary

Year ended 31 December   2021 2020 Var. (%)
Revenues from operations €k 405,717 252,784 60.5
Operating costs €k (206,603) (185,341) 11.1
EBITDA €k 199,114  67,444 195.2
Profit after tax for the period €k 132,226 30,390 335.1
Basics earnings per share € cents/share 96.7 22.9 322.3
Dividend per share $/share 0.395
 
Cash flows from operating activities €k 148,841 62,916 136.6
Cash flows used in investing activities (1) €k (87,531) (30,160) 190.2
Cash flows from in financing activities €k 1,851 760 143.6
 
Net cash / (debt) position (2) €k 60,073 (15,233) n.a.
Working capital surplus €k 102,430 (17,904) n.a.
 
Average realised copper price $/lb 4.14 2.70 53.3
 
Cu concentrate produced (tonnes) 270,713 256,001 5.7
Cu production (tonnes) 56,097 55,890 0.4
Cash costs $/lb payable 2.18 1.95 11.8
All-In Sustaining Cost (“AISC”) $/lb payable 2.48 2.21 12.2
  • Includes €53 million early payment of the Deferred Consideration to Astor.
  • Includes restricted cash and bank borrowings at 31 December 2021 and 2020.

FY2021 Operating Results Summary

Units expressed in accordance with the international system of units (SI)  

Unit

 

2021

 

2020

Ore mined Mt 13.5 13.6
Ore processed Mt 15.8 14.8
Copper ore grade % 0.41 0.45
Copper concentrate grade % 20.72 21.83
Copper recovery rate % 85.97 84.53
Copper concentrate t 270,713 256,001
Copper contained in concentrate t 56,097 55,890
Payable copper contained in concentrate t 53,390 53,330

 Mining

Mining operations have continued normally despite COVID-19, with sufficient equipment on site to maintain the higher production levels required for the full operation of the expanded plant. Ore mined in 2021 was 13.5 million tonnes, in line with the previous year (13.6 million tonnes).

Processing

During FY2021, the plant continued to operate above nameplate capacity of 15 Mtpa and processed 15.8 million tonnes of ore with an average copper head grade of 0.41% and a recovery rate of 85.97%. In comparison to FY2020, the increased throughput and metallurgical recoveries more than offset the lower copper grades. In Q4 2021, 3.9 million tonnes of ore were processed, reporting a consistent quarterly throughput.

On-site concentrate inventories as at 31 December 2021 were approximately 5,254 tonnes (12,180 tonnes at 31 December 2020) which were fully sold in January 2022. All concentrate in stock was delivered to the port at Huelva.

Production

Concentrate production for FY2021 was 270,713 tonnes compared to 256,001 tonnes in FY2020. Contained copper was 56,097 tonnes compared to 55,890 tonnes in FY2020. Payable copper amounted to 53,390 tonnes from 53,330 tonnes in FY2020.

FY2021 Financial Results Highlights

Income Statement

Revenues for FY2021 increased to €405.7 million compared with €252.8 million for FY2020. Higher revenues were the result of increased realised copper prices and slightly larger volumes of concentrate sold.

The realised copper price for FY2021 was $4.14/lb compared to $2.70/lb in FY2020. Concentrates were sold under the offtake agreements in place and spot sales during the year. The Company did not enter into any hedging agreements in either 2021 or 2020.

Operating costs for FY2021 amounted to €206.6 million, compared to €185.3 million in FY2020. Higher costs in FY2021 were mainly attributable to the increase in production volumes plus more tonnes of waste extracted resulting in higher unit costs.

EBITDA increased 195% year on year to reach €199.1 million in FY2021, compared to EBITDA of €67.4 million for FY2020. The increase is mainly attributed to higher copper prices and larger volumes of concentrate sold, offset by higher cash costs.

Cash costs for FY2021 were $2.18/lb payable copper, above FY2020 of $1.95/lb payable copper. Higher cash costs in FY2021 are mainly attributable to higher mining costs that resulted from a higher strip ratio compared to 2020, longer distances and, to a lower extent, higher freight rates. AISC for FY2021 were $2.48/lb payable copper compared to $2.21/lb payable copper in FY2020. Higher AISC mainly related to higher underlying cash costs as well as higher stripping costs and sustaining capex. Consistent with the calculation used in previous reportings, AISC excludes one-off investments in the tailings dam expansion that amounted to €14.1 million during the Period.

Balance Sheet

Unrestricted cash and cash equivalents as at 31 December 2021 increased to €95.7 million from €37.8 million at 31 December 2020. The increase in cash balances is due to the strong cash flows generated during FY2021. Unrestricted cash balances include balances at the operational and corporate level. Restricted cash of €15.4 million is related to the amount that the Company transferred to a trust account and represents the full amount of interest claimed by Astor Management AG (“Astor”) to 30 June 2022, as detailed below and in note 29 of the Financial Statements (Deferred Consideration).

As of 31 December 2021, Atalaya reported a working capital surplus of €102.4 million, compared with a working capital deficit of €17.9 million as at 31 December 2020. The main liability of the working capital is trade payables related to Proyecto Riotinto suppliers and, to a lesser extent, payments due to Astor and short-term loans following the drawdown of credit facilities during Q1 2021. The increase in working capital resulted from higher cash balances as well as payment of the Deferred Consideration, which was included in current liabilities at the end of 2020, by utilising long-term credit facilities to fund the early payment of the Deferred Consideration. At 31 December 2021, trade payables have been decreased by 21% compared with the same period last year.

Cash Flow Statement

Cash and cash equivalents increased by €69.8 million in the twelve-month period ended 31 December 2021. This increase was due to cash from operating activities amounting to €148.8 million, cash used in investing activities amounting to €87.5 million and cash generated by financing activities totalling €1.9 million, and net foreign exchange of €6.6 million.

Cash generated from operating activities before working capital changes was €200.3 million in line with EBITDA of €199.1 million. Atalaya increased its trade receivables by €8.8 million and its inventory levels by €1.2 million and trade payables decreased in the period by €14.4 million. Corporate tax paid during the period was €25.8 million.

Investing activities in FY2021 amounted to €87.5 million, relating mainly to the €53 million early payment of the Deferred Consideration to Astor and the capitalised expenditures relating to the tailings dam project and continuous enhancements to the processing systems of the plant.

Financing activities in FY2021 amounted to €1.9 million. The Company increased its external financing by €49.4 million due to the use of existing unsecured credit facilities to pay the Deferred Consideration. The payment was financed by unsecured credit lines provided by four major Spanish banks having a three-year tenure and an average annual interest rate of approximately two per cent. This was offset by the payment of dividends of €47.3 million.

Inaugural Dividend and Future Dividend Policy

In October 2021, the Company declared its inaugural dividend and announced a future dividend policy (the “Dividend Policy”) that will take effect during FY2022.

The inaugural dividend of approximately $0.395 per share was paid on 1 December 2021 to Atalaya shareholders on record at the close of business on 5 November 2021.

The Dividend Policy will make an annual pay-out of 30 – 50% of free cash flow generated during the applicable financial year, and be paid in two half-yearly instalments that will be announced in conjunction with future interim and full year results.

Sustainability Reporting

Atalaya continues to focus on enhancing its disclosure around its sustainability practices.

Following the announcement made on 25 January 2022 where the Company published its “Approach to Sustainability” summary document, Atalaya expects to release its inaugural sustainability report for 2021 in the coming weeks.

Energy Market Developments in Spain

Current Situation

As described in the Company’s announcement on 13 January 2022, Atalaya has been closely monitoring developments in Spain’s energy market, which experienced elevated and volatile prices in late 2021 and early 2022.

Since the start of Russia’s military invasion of Ukraine, the electricity prices in Spain have shown further increases in volatility and price spikes that recently reached unprecedented levels. The electricity price is now below prior peaks and has averaged above €200/MWh so far in 2022. For reference, in 2021, the Company’s fixed price contract supplied electricity at a rate of €65/MWh including tolls and taxes and accounted for approximately 10% of cash costs.

Atalaya believes that current energy market dynamics are unusual and temporary, and notes media reports on discussions between Spain and the EU regarding potential changes to the current electricity pricing mechanism, which could reduce the influence of record high gas prices on the overall electricity price in Spain.

50MW Solar Plant and New Power Purchase Agreement (“PPA”)

In line with its strategy to reduce its energy costs and exposure to market pricing, the Company has continued to progress the development of its 50MW solar plant and has secured long term pricing contract with national utilities.

Construction is now underway at the Company’s 50MW solar plant project, with civil works being advanced and equipment orders in place. The solar plant is expected to come online in H1 2023 and will provide approximately 22% of the Company’s power requirements going forward.

The Company has also entered into a new long-term PPA for approximately 31% of the Company’s current electricity requirements. Under the 10-year agreement, deliveries will begin in 2023 and pricing is fixed at approximately 80% of the rate realised in 2021.

Other Initiatives Under Evaluation

In order to reduce the Company’s long-term exposure to the spot electricity market, Atalaya continues to evaluate several other energy supply initiatives. These include the potential development of a local wind farm, the addition of solar capacity beyond the 50MW facility already under construction and establishing energy storage facilities. Each initiative, if implemented, would also serve to reduce Atalaya’s overall carbon footprint.

As a result of the Company’s balance sheet strength, its relationships with lenders in Spain, and the current and expected incentive structure for renewable energy project development, Atalaya expects that any future initiatives would be financed by a combination of own cash generation and limited recourse debt at competitive terms.

Outlook for 2022

Production

As previously announced, production guidance for FY2022 is 54,000 to 56,000 tonnes of copper, which is consistent with Atalaya’s record production in FY2021.

Whilst the Company maintains the production guidance, it expects that first quarter 2022 production will be lower than the remaining quarters of 2022, mainly due to the need to bring forward of certain plant maintenance to earlier in the year coupled with supply chain strikes in Spain.

The Company will continue to monitor the electricity market environment and may make temporary changes to its operating plan if prices were to increase materially from current levels and remain elevated for a sustained period.

Operating Costs

In line with our global mining sector peers, the Company is experiencing inflationary cost pressures in a number of key inputs, most notably those linked to natural gas and oil prices, which influence the cost of diesel, tyres, explosives, grinding media, lime and freight. In order to moderate some impact of these cost increases, the Company continues to identify opportunities to reduce consumption and source inputs from new suppliers.

As a result of actual electricity costs in early 2022, the Company is providing cash cost and AISC guidance that reflects a range of outcomes of potential energy costs for the full year and is as follows:

  • 2022 cash cost range of $2.25 to $2.80/lb
  • 2022 AISC range of $2.50 to $3.05/lb (net of the one-off project to increase the capacity of the tailing dam, see below for further information)

These cost guidance ranges are based on an assumed electricity annual average market price range of €100 to 200/MWh for the full year of 2022. Accordingly, a significant proportion of the guided cost increase over 2021 is attributable to the assumed increase in electricity prices.

The Company will continue to update the market on cost guidance as the energy situation globally, and particularly in Spain, normalises and the ability to forecast electricity prices improves.

Capital Expenditures

Atalaya remains committed to growing its production and enhancing the efficiency and sustainability of its operations.

For 2022, the Company will be making the following capital investments:

  • €11.9 million for the 50 MW solar plant, out of the total budget of ~€28 million
  • €15.0 million for the Phase I E-LIX plant
  • €12.5 million for expansion of the Riotinto tailings facility

Exploration

Atalaya controls a large and strategic land package in the Iberian Pyrite Belt, where numerous high-quality discoveries have been made in recent years by Atalaya and its neighbours.

For 2022, the Company’s exploration budget is approximately €10 million, with a focus on expanding and enhancing the resource at Proyecto Masa Valverde and testing prospective targets at Proyecto Riotinto East and Ossa Morena.

Approval of Phase I E-LIX Plant

In January 2022, the Company announced it had approved the construction of a Phase I industrial-scale plant that utilises the E-LIX System, which will produce high value copper and zinc metals from complex sulphide concentrates. The E-LIX System is expected to unlock significant value from Atalaya’s portfolio of polymetallic resources in the Riotinto District by materially increasing metal recoveries, reducing transportation costs, treatment charges and penalties, while also reducing the Company’s carbon footprint.

The plant has a construction budget of €15 million Phase I plant has been designed to produce 3,000 tonnes of copper metal or 10,000 tonnes of zinc metal per year depending on the nature of the concentrate feed.  Construction activities are under way and the plant is expected to reach steady-state production in H2 2022.

Update on Asset Portfolio

Riotinto District – Cerro Colorado

In June 2021, the Company announced a new independent reserve estimate for the Cerro Colorado open pit at Proyecto Riotinto, which confirmed its status as a long-life mine. Independent consultants are currently finalising the supporting NI 43-101 compliant technical report for Proyecto Riotinto.

Riotinto District – San Dionisio and San Antonio

Following the June 2021 announcement of an internal resource estimate for the San Dionisio deposit, consultants were engaged to produce independent NI 43-101 compliant resource estimates for both the San Dionisio and San Antonio deposits. The estimates will be incorporated in the new Proyecto Riotinto NI 43-101 compliant technical report described above.

San Dionisio and San Antonio are located adjacent to the existing Cerro Colorado open pit. It is expected that a significant portion of San Dionisio could be mined via open pit methods, while San Antonio could be mined using underground methods. Both deposits could provide material that is significantly higher in grade than the ore currently being mined at Cerro Colorado, potentially allowing the Company to increase production without the need to further expand capacity at Riotinto’s 15 Mtpa plant.

Riotinto District – Proyecto Masa Valverde (“PMV”)

PMV consists of two polymetallic deposits, Masa Valverde and Majadales, and several drill-ready targets that are located less than 30 kilometres from Proyecto Riotinto. It is expected that the Masa Valverde and Majadales deposits could be mined via underground methods following the construction of a ramp. Thereafter, ore would be trucked to Riotinto, consistent with the Company’s strategy to utilise its existing 15 Mtpa mill as a central processing hub for material sourced from its deposits in the region.

In 2021, the Company continued exploration work at the Masa Valverde and Majadales deposits, and at the 5km long, shallow Campanario prospect.  At present, three rigs are conducting exploration drilling to the west of Masa Valverde and at Campanario. Initial indications from the drilling campaign have been encouraging, with infill drilling at the Masa Valverde deposit returning long intersections of continuous and high-grade copper mineralisation as well as polymetallic mineralisations with associated high gold grades.

Technical consultants are currently finalising a new independent NI 43-101 compliant resource estimate and technical report for PMV. In addition, in August 2021, the Company submitted application for an exploitation concession with the Junta de Andalucía.

Riotinto District – Proyecto Riotinto East

In May 2021, the Company announced the acquisition of an option on three new investigation permits located immediately east of Riotinto. Exploration work has commenced on the three permits including mapping, rock sampling, soil geochemistry and geophysics (airborne EM survey). Several coincident geochemical and geophysical anomalies were defined which will be drill tested once all the permits are in place.

Proyecto Touro

Proyecto Touro is a high quality past producing copper project located in Galicia, northwest Spain, and is in the permitting process.

In 2021, the Company focused on engaging with local and regional stakeholders on a variety of matters. As part of this engagement, the Company began during the Period, the construction of a new water treatment and monitoring system that will restore the legacy water runoff from the historical mine.

The Company continues to be confident that its development approach to Proyecto Touro is in line with international best practice and is working towards the submission of the Environmental Impact Evaluation for the new enhanced project design.

Proyecto Ossa Morena (“POM”)

In December 2021, the Company announced the acquisition of a 51% interest in Rio Narcea Nickel, S.L., establishing a presence in the Ossa Morena Metallogenic Belt in the southwest of Spain. The district has strong exploration potential for a range of base and precious metals. For 2022, the Company approved an exploration budget for up to €2 million, with a focus on the priority targets of Alconchel, Pallares, Vicaria and Guijarro.

Update on Corporate Developments

Judgment on Astor Litigation

As announced on 21 March 2022, the Company received the formal Judgment from the High Court of Justice in relation to the Claim by Astor for residual interest arising out of the payment of €53 million to Astor.

The Judgment, which puts an end to the litigation between the parties, clarifies the basis for calculating the interest due and confirms that it is payable by the Company. As a result, Atalaya expects the interest to be paid to be in the range of €10 million to €11.7 million. Any amount payable to Astor will be paid from the €15.4 million trust account already establish by Atalaya on 15 July 2021. As at 31 December 2021, the Company has accrued in its profit and lost account the maximum exposure as interest cost.

Plans to Establish Atalaya’s Parent Company in the United Kingdom

The Company is considering re-domiciliation from Cyprus to the United Kingdom through the incorporation of a new holding company incorporated in England and Wales.

The Company will provide further information on the process in due course.

Alberto Lavandeira, CEO, commented:

“I am very pleased with all aspects of Atalaya’s performance in 2021. Once again, we demonstrated our ability to operate in a sustainable and safe manner while achieving record production, highlighting the strength of our people. Our operations generated record cash flow, providing the Company with the financial strength to make investments in our growth pipeline, pursue initiatives that will enhance our sustainability, pay an inaugural dividend and further strengthen our balance sheet.

“We look forward to 2022, where another good year of production is expected. We see the industry-wide inflationary pressures as being supportive for copper fundamentals and expect that energy prices in Spain will return to normalised levels as Europe enters the spring.

“We remain excited about our portfolio of growth and exploration projects, which have the potential to significantly increase our production in Spain, providing our customers with a reliable, sustainable and ethical source of copper to support the modern economy and the energy transition.”

Investor Presentation Reminder

Alberto Lavandeira (CEO) and César Sánchez (CFO) will be holding a live presentation relating to the FY2021 results via the Investor Meet Company platform at 11:00am GMT today.

To register, please visit the following link and click “Add to Meet” Atalaya via:

https://www.investormeetcompany.com/atalaya-mining-plc/register-investor

Management will also answer questions that have been submitted via the Investor Meet Company dashboard.

This announcement contains information which, prior to its publication constituted inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

 Contacts:

SEC Newgate UK Elisabeth Cowell / Axaule Shukanayeva / Max Richardson + 44 20 3757 6882
4C Communications Carina Corbett +44 20 3170 7973
Canaccord Genuity (NOMAD and Joint Broker) Henry Fitzgerald-O’Connor / James Asensio +44 20 7523 8000
BMO Capital Market (Joint Broker) Tom Rider / Andrew Cameron +44 20 7236 1010
Peel Hunt LLP (Joint Broker) Ross Allister / David McKeown +44 20 7418 8900

 

About Atalaya Mining Plc

Atalaya is an AIM and TSX-listed mining and development group which produces copper concentrates and silver by-product at its wholly owned Proyecto Riotinto site in southwest Spain. Atalaya’s current operations include the Cerro Colorado open pit mine and a modern 15 Mtpa processing plant, which has the potential to become a centralised processing hub for ore sourced from its wholly owned regional projects around Riotinto that include Proyecto Masa Valverde and Proyecto Riotinto East. In addition, the Group has a phased, earn-in agreement for up to 80% ownership of Proyecto Touro, a brownfield copper project in the northwest of Spain. For further information, visit www.atalayamining.com