First Quarter 2022 Operations Update

13 April, 2022

Atalaya Mining Plc (AIM: ATYM, TSX: AYM) is pleased to announce its operations update for the first quarter of 2022 (“Q1 2022” or the “Period”).

Q1 2022 Proyecto Riotinto Operating Highlights

Q1 Q4 Full year
2022 2021 2021 2022 Guidance
Ore mined (M tonnes) 3.7        3.3 3.5 15.5
Waste mined (M tonnes) 6.8 7.4 7.3 23.4
Ore milled (M tonnes) 3.6 4.0 3.9 15.2 – 15.8
Cu grade (%) 0.37 0.41 0.43 0.42
Cu recovery (%) 85.86 84.79 85.69 83 – 86
Cu production (tonnes) 11,249 13,979 14,332 54,000 – 56,000

 

Mining

Ore totalling 3.7 million tonnes was mined during Q1 2022, compared to 3.3 million tonnes in Q1 2021 and 3.5 million tonnes in Q4 2021.

Processing

The plant processed 3.6 million tonnes of ore during Q1 2022, compared to 4.0 million tonnes in Q1 2021 and 3.9 million tonnes in Q4 2021. The decrease resulted from the transport sector strike, which interrupted the supply of essential daily consumables and forced the Company to bring forward certain maintenance works previously planned for Q2 and shut down the plant temporarily in order to minimise the impact of the transport sector strike on full year production.

Copper grade was 0.37%, which was below comparative quarters and resulted from pit sequencing. Copper recoveries were strong at 85.86% despite lower grades, above both the Q1 2021 and Q4 2021 periods.

Production

Copper production in Q1 2022 was 11,249 tonnes, which was 19.5% lower than Q1 2021. The decrease in copper production compared to prior periods is mainly attributable to the temporary plant shutdown following the transport sector strike and lower copper grades processed, partially offset by higher copper recoveries.

On-site copper concentrate inventories at the end of Q1 2022 were approximately 9,904 tonnes. All concentrate in stock at the beginning of the Period was delivered to the port at Huelva.

Realised Copper Price

Copper prices increased in Q1 2022 compared with Q4 2021, with an average realised price per pound of copper payable, including the QPs closed in the Period, of $4.42/lb compared with $4.36/lb in the previous quarter. The average copper spot price during the Period was $4.53/lb. The realised price during Q1 2022 excluding QPs was approximately $4.50/lb.

Outlook for 2022

Despite the above-mentioned operational disruptions, the Company is maintaining its full year copper production guidance for 2022 at 54,000 – 56,000 tonnes.

Cash operating costs for the Period are expected to be higher than the full year 2022 cost guidance owing to the extremely high cost of electricity and diesel and lower production levels, while being partly offset by a weaker Euro/U.S. dollar exchange rate of 1.12 compared with 1.16 budgeted by the Company in its 2022 guidance. Further details on costs will be provided with the Q1 Financial Statements that will be reported in May.

Asset Portfolio Update

Riotinto District – San Dionisio and San Antonio

An independent consultant has finalised new Mineral Resource Estimates for the San Dionisio and San Antonio deposits, as part of preparing a new NI 43-101 technical report on the overall Proyecto Riotinto property. Further details can be found in the separate announcement released today by the Company.

The San Dionisio deposit is located immediately west of the operating Cerro Colorado open pit. It represents a high-grade resource that could be mined first by open pit methods by expanding the existing historic Atalaya pit followed by underground methods for the remaining resource. The San Dionisio deposit contains copper ore that is very similar to what is currently being mined at Cerro Colorado, as well as polymetallic mineralisation containing copper, zinc and lead. Atalaya plans to complete a PEA on an operating schedule that combines Cerro Colorado reserves with higher grade material from San Dionisio deposit.

San Antonio is a shallow polymetallic deposit that will require underground mining methods. It is located immediately east of the Cerro Colorado open pit, from where it is easily accessible via the construction of a ramp.

Riotinto District – Proyecto Masa Valverde

Proyecto Masa Valverde (“PMV”) consists of two main deposits: the large Masa Valverde (“MV”) deposit and the smaller, shallower and higher grade Majadales (“MJ”) deposit, which is located 1 km to the southeast of MV along the same northwest trending structure.

A new Mineral Resource Estimate for PMV was announced on 5 April 2022, which included a significant increase in tonnage and contained copper, gold and silver compared to the prior estimate. An initial Indicated Mineral Resource was also declared for the MV deposit. As a next step, the Company plans to complete a PEA that focuses on scenarios that would leverage the existing plant at Proyecto Riotinto and access the orebodies via a single ramp.

Three rigs continue drilling at PMV, with two focused on the Campanario trend and the other drill testing a Fix Loop Electromagnetic Anomaly (“FLEM”) anomaly 300 meters west of MV. The Campanario trend is a parallel structure to MV-MJ, located 1 km to the north and with associated outcropping mineralisation (gossans and sulphide stockworks) along approximately 5 km. In addition, several high-priority FLEM anomalies were defined on PMV, all of which will be systematically drill tested.

Proyecto Touro

Atalaya remains committed to the development of the Touro copper project and has continued to hold constructive dialogue with all the stakeholders in order to resolve any concerns associated with the project.

Consistent with its commitment to a world class development of the project, the Company made the decision to address the legacy issues associated with water runoff from the historical mine prior to submitting the Environmental Impact Assessment (“EIA”) for the new Touro development proposal. The original plan was to construct a water treatment plant during project development, but the Company has now committed to addressing the legacy matters ahead of the EIA submission as an early contribution to the local community and to demonstrate that operating systems have drastically improved over the last 35 years. The water treatment plant is under construction and is to be commissioned during April 2022.

In addition, as an integral part of Atalaya’s commitment to excellence and long-term transparency in relation to the development of Touro, agreements have been signed with major fishing communities in order to implement a water quality control system located downstream of Touro at the Ulla River, in order to demonstrate the project’s lack of impact on the river. This is consistent with the Company’s overall project design and its “zero-discharge” philosophy.

The Company continues to be confident that its approach to Touro, which includes fully plastic lined tailings with zero discharge, is in line with international best practice and will satisfy the most stringent environmental conditions that may be imposed by the authorities prior to the development of the project.

Other Regional Exploration

Drilling is expected to commence in a few weeks at Proyecto Riotinto East and Proyecto Ossa Morena. Several promising drill targets have been already delineated at both projects.

In aggregate, Atalaya has a controlling interest in approximately 1,100 km2 of exploration concessions in Spain. The Company has an exploration budget of €10 million for 2022 that will be mainly dedicated to drilling.

E-LIX Phase I Plant

In January 2022, the Company announced the approval of the development of a Phase I industrial-scale plant that utilises the E-LIX System. The plant will produce high value copper and zinc metals from complex sulphide concentrates produced from material sourced within the Riotinto District.

All equipment has been ordered and construction activities are under way. The plant is expected to reach the commissioning phase before the end of 2022.

Legal Update

As announced on 21 March 2022 and 24 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 in deferred consideration to Astor.

The Judgment, which puts an end to the litigation between the parties (subject to any appeal by either party), clarified the basis for calculating the interest due and confirmed that it is payable by the Company. As a result, Atalaya expects the interest payable to be in the range of €9.6 million to €11.7 million.

On 8 April 2022, the Company transferred €9.6 million to Astor from the trust account already established by Atalaya on 15 July 2021. The remaining interest payable to Astor, if any, is expected to be clarified on 6 May 2022 after of which the issue will be finished, subject to appeal, and the remaining balance of the trust account will be transferred back to the Company.

Update on Energy Market in Spain

During Q1 2022, the price of electricity in Spain continued the volatile trend of late 2021 and reached unprecedented peaks in March coincident with the Ukraine conflict. The European natural gas reference price (“TTF”) peaked at an all-time high that was ten times the level of one year ago. Although the consumption of European gas in Spain and Portugal is minimum, the price of electricity is set by the marginal high-cost producer that uses TTF as a reference, and as a result the Company has seen the price of electricity during Q1 2022 averaging around €230/MWh, which is almost four times higher than the price realised in 2021.

The Spanish Government has announced measures that will aim to significantly reduce prices, which are currently unsustainable for the general economy. The details of these measures have not been finalised yet but are expected to come into effect during Q2 2022.

In order to provide future price stability, in Q1 2022 the Company signed a long-term Power Purchase Agreement (“PPA”) with its electricity supplier for approximately 31% of its electricity requirements, with deliveries beginning in January 2023 at prices that are approximately 80% of the rate realised in 2021.

In addition to the new PPA, the Company’s planned 50 MW solar plant for self-consumption will also help to reduce the Company’s long term power costs while at the same time lower its carbon emissions. The solar plant, which is expected to provide approximately 22% of the Company’s electricity needs, is under construction following the signing of an agreement with an affiliate of Endesa, the power supply company. With ground preparation under way and equipment on order, full commissioning of the solar plant is expected in H1 2023.

Additional long term renewable power initiatives are being evaluated, such as further solar capacity, the installation of a wind farm for self-consumption at the mine site and a pumped hydro project linked with the clean water dams that the Company is utilising.

Alberto Lavandeira, CEO, commented:

“The start of 2022 has been one of the most challenging periods experienced by the Company since the re-start of Proyecto Riotinto. The unprecedented high prices of energy products have affected all the economic sectors in Spain and culminated with a strike of the transport sector that temporally interrupted our processing operations. The extremely high electricity price, due to the record natural gas price in Europe, has also created inflationary pressures that have only been partially offset by the higher copper prices and favourable exchange rates. Measures have been taken by the Company and by the Spanish Government and we are confident that the situation will improve in the coming months. The Company maintains its full commitment to continue improving its operations by developing its pipeline of organic growth projects which benefit from a growing resource base.”