Q3 2022 Operations Update

17 October, 2022

Consistent quarter of copper production supports full year production guidance

Atalaya Mining Plc (AIM: ATYM, TSX: AYM) is pleased to announce its operations update for the third quarter of 2022 (“Q3 2022” or the “Period”).

Proyecto Riotinto Operating Highlights

Q3 Q2 Year-to-Date Full Year
2022(1) 2021 2022 2022 2022 Guidance
Ore mined

(M tonnes)

3.6 3.4 3.6 10.5 15.5
Waste mined

(M tonnes)

5.8 7.8 6.7 19.3 23.4
Ore milled

(M tonnes)

3.9 3.9 4.0 11.5 15.2 – 15.4
Cu grade (%) 0.41 0.40 0.39 0.39 0.40

Cu recovery

(%) 84.62 87.24 86.44 85.70 85 – 87

Cu production

(tonnes) 13,453 13,893 13,386 38,300 52,000 – 54,000
  • Figures for Q3 2022 are preliminary and final figures will be released with Q3 2022 financials.

Mining

Ore totalling 3.6 million tonnes was mined during Q3 2022, compared with 3.6 million tonnes in Q2 2022 and 3.4 million tonnes in Q3 2021.

Waste mined during Q3 2022 was 5.8 million tonnes, below the 6.7 million tonnes mined in Q2 2022 and also below Q3 2021 levels. Waste stripping year-to-date has been higher than budget as waste mining was prioritised during the temporary plant maintenance stoppage in Q1 2022.

Processing

The plant processed 3.9 million tonnes of ore during Q3 2022, which was near Q2 2022 throughput and above processing rates in Q1 2022, which was impacted by the transport sector strike and maintenance stoppage. The results demonstrate the plant’s ability to operate above its 15 million tonne per annum nameplate capacity.

Copper grade was 0.41% in Q3 2022, representing an increase from 0.39% in Q2 2022 and also above the comparative period in Q3 2021 of 0.40%. Lower grades earlier in 2022 were the result of blending with lower grade stockpiles due to pit sequencing.

Copper recoveries in Q3 2022 were 84.62%, below Q2 2022 and Q3 2021 levels respectively, due to the characteristics of the ore processed during the quarter; however, performance was consistent with expectations.

Production

Copper production in Q3 2022 was consistent at 13,453 tonnes, above Q2 2022 production of 13,386 tonnes. This performance was the result of higher copper grades and consistent throughput rates.

On-site copper concentrate inventories at the end of Q3 2022 were approximately 4,349 tonnes. All concentrate in stock at the beginning of the Period was delivered to the port at Huelva.

Select Financial Highlights

Realised Copper Price

The average realised price per pound of copper payable, including the QPs closed in the Period, was $3.83/lb in Q3 2022, below the average realised price in Q2 2022 of $4.32/lb and the Q3 2021 period of $4.31/lb. The average spot copper price during Q3 2022 was $3.51/lb and the realised price excluding QPs was approximately $3.52/lb.

Provisional Pricing Adjustments

For Q3 2022, provisional pricing adjustments were negative €1.8 million, based on the outstanding QPs and copper forward curve prices as at 30 September 2022.

Asset Portfolio Update

Riotinto District – San Dionisio and San Antonio

The Company is advancing a preliminary economic assessment (“PEA”) which will include the evaluation of a scenario that combines Cerro Colorado reserves with higher grade material from San Dionisio, targeting an uplift to copper production by increasing the blended head grade. The permitting process for San Dionisio is currently underway.

Subsequent to the end of the Period, a NI 43-101 Technical Report for Proyecto Riotinto, including the San Dionisio open pit and the San Dionisio and San Antonio underground deposits, was filed on SEDAR in order to fulfil the Company’s reporting obligations in Canada.

Riotinto District – Proyecto Masa Valverde (“PMV”)

Atalaya continues to advance its exploration programme at PMV. At present, there are three drill rigs on site – the first is devoted to resource definition at the Campanario Trend, the second is completing infill and step out drilling at the Masa Valverde (“MV”) deposit, while the third has commenced first drill testing of Fix Loop Electromagnetic (“FLEM”) anomalies at the Mojarra Trend, located 1km north and parallel to the Campanario Trend.

Initial drilling results from Campanario were announced in July 2022 and included shallow high grade intervals such as 18.10m at 1.19% Cu, 0.08% Zn, 0.32% Pb and 36.66 g/t Ag from 43.20m (hole CA21) and 35.20m at 0.70% Cu, 1.53% Zn, 1.39% Pb and 62.50 g/t Ag from 77.80m (hole CA15).

Atalaya is currently progressing a PEA which will consider operating PMV as a satellite deposit by processing mined material at Riotinto’s 15 Mtpa plant. The permitting process for PMV is ongoing.

Proyecto Touro

Atalaya remains fully committed to the development of the Touro copper project in Galicia, which could become a new source of copper production for Europe. Running parallel with the permitting process, the Company is focused on numerous initiatives related to securing the social license, including engaging with the many stakeholders in the region in advance of its plans to submit a new improved project design. Positive and favourable feedback from numerous meetings with municipalities, farmer and fishermen associations and other industries indicate meaningful support towards the development of a new and modern mining project.

The Company is now operating a new water treatment plant at Touro, which is addressing the legacy issues associated with acid water runoff from the historical mine, which closed in 1987. The construction of the treatment plant was contemplated in the original project proposal, but Atalaya volunteered to fix the historical acid water issues prior to the new Environmental Impact Assessment (“EIA”) in order to demonstrate its operating philosophy and the benefits of modern operating systems. The field work carried out by Atalaya has resulted in an immediate and visible improvement of the water systems surrounding the project.

Atalaya continues to be confident that its approach to Touro, which includes fully plastic lined thickened tailings with zero discharge, is consistent 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

At Riotinto East, the Peñas Blancas investigation permit was granted. Drill target definition is in progress and the first drill testing of selected anomalies is expected by year end.

At Proyecto Ossa Morena, the first drilling campaign is now underway at the Hinchona copper-gold target. Two holes have been completed and the third hole is in progress. Drilling at the flagship Alconchel-Pallares copper-gold project is now expected to commence during Q4 2022.

E-LIX Phase I Plant

Construction of the E-LIX Phase I plant continues to advance, including the assembly of metal structures and the delivery of equipment to site. The Company now expects the plant to be ready for commissioning by Q1 2023.

Once operational, the E-LIX plant is expected to produce high purity copper and zinc metals on site, allowing the Company to potentially achieve higher metal recoveries from complex ore, lower transportation and concentrate treatment charges and a reduced carbon footprint.

50 MW Solar Plant

Construction of Atalaya’s 50 MW solar plant at Proyecto Riotinto is underway, with equipment for the solar plant starting to arrive on site at the end of October.

Electricity Market in Spain

Situation Update

The ongoing conflict in Ukraine continues to impact global energy markets, especially with respect to natural gas prices in Europe, which drove the price of electricity in Spain to unprecedented levels of over €500/MWh in March 2022.

In response, the governments of Spain and Portugal implemented a gas price cap, which took effect in mid-June 2022 and had a positive impact on market electricity prices. The legislation also included a new mechanism whereby certain power consumers must make additional “adjustment” payments to compensate gas power plants that are disadvantaged by the gas price cap. As a result, the realised electricity price by a consumer like Atalaya is well above the observed spot market rates.

Following a period of curtailed gas deliveries via Nord Stream 1 as well as maintenance activities, Gazprom announced the indefinite shutdown of the pipeline in early September 2022. Then in late September, leaks were detected in the Nord Stream 1 and Nord Stream 2 pipelines, with many observers suspecting an act of sabotage. Consequently, gas prices have remained at unprecedented levels, including severe spikes in late August 2022, which coincided with a historic heat wave in Spain, triggering high energy demand and electricity prices near the March 2022 peaks.

As a result of high gas prices and the “adjustment” mechanism, the Company’s estimated realised electricity price for Q3 2022 is expected to be around €280/MWh, with the market price component averaging around €150/MWh and the “adjustment” component accounting for the remainder. Since the end of Q3 2022, estimated realised electricity prices for the Company have improved to around €200-240/MWh. During the extreme pricing in late August, the Company took the opportunity to carry out planned preventive mill maintenance to mitigate the impact.

Electricity Procurement Strategy

Atalaya’s 50 MW solar plant is expected to become a reliable source of low cost and carbon-free energy for Proyecto Riotinto, and, combined with the Company’s previously announced long-term power purchase agreement (“PPA”), will guarantee that over 50% of the electricity requirements at Proyecto Riotinto are sourced at an average final cost of less than €40/MWh. This average rate represents a discount of 80-90% from recent peaks in the realised electricity price in Spain, and is also below long run historical prices in the Spanish market over the 2016-2020 period.

As previously disclosed, an increase or decrease in realised electricity prices of €100/MWh results in an increase or decrease, respectively, to the Company’s annual operating costs of around €37 million.

The Company continues to evaluate additional renewable power initiatives, including the installation of wind turbines at Riotinto dedicated to self-consumption. In September 2022, an evaluation tower was installed to test the area’s wind characteristics and compare measurements to extensive historical ground level data. Based on preliminary measurements, it is estimated that the wind turbines could potentially produce around 15% of current electricity needs.

Production Guidance for 2022

Atalaya reiterates its 2022 guidance of 52,000 – 54,000 tonnes of copper production. The Company will continue to monitor the volatile electricity markets in Spain as well as overall input cost inflation, which has moderated from earlier peaks but remains elevated.

Alberto Lavandeira, CEO, commented:

“We are pleased to report consistent copper production for the quarter and reiterate our guidance for the full year despite the many uncertainties in Europe and abroad. Inflation remains high mainly due to high electricity prices that will continue to impact our cash costs during this year. We look forward to 2023 and the significant benefits we will realise from the start of our long term PPA and 50 MW solar plant.

Regardless of current challenges, we remain excited about many growth opportunities within Atalaya’s asset portfolio and confident on the outlook for copper. It is evident that more copper supply will be required to fuel the global energy transition, and that high quality assets in safe jurisdictions will become increasingly scarce. These views are clearly shared by the diversified majors, who have been active in pursuing copper growth in recent months.”