Q3 and YTD 2022 Financial Results

9 November, 2022

Full year guidance reaffirmed and positive outlook for Q4 and beyond

Atalaya Mining Plc (AIM: ATYM; TSX: AYM) is pleased to announce its third quarter and nine-month results for the period ended 30 September 2022 (“Q3 2022” or the “Period” and “YTD 2022” respectively) together with its Unaudited Interim Condensed Consolidated Financial Statements.

The Unaudited Interim Condensed Consolidated Financial Statements for the period ended 30 September 2022 are also available under the Company’s profile on SEDAR at www.sedar.com and on Atalaya’s website at www.atalayamining.com.

Highlights

  • Consistent quarter of production, supporting confidence in full year guidance
  • EBITDA of €37.1 million in YTD 2022 despite extremely high electricity prices and other input cost inflation, which resulted in EBITDA of negative €4.3 million in Q3 2022
  • Maintained a strong balance sheet with net cash of €55.6 million
  • Continued investments in growth, future cost reductions and decarbonisation via exploration programme, 50 MW solar plant and E-LIX Phase I project
  • Lower power prices post quarter end support positive outlook for Q4 2022 and into 2023 when new power purchase agreement and 50 MW solar plant are expected to materially lower costs

 

Q3 and YTD 2022 Financial Results Summary

Period ended 30 September   Q3 2022 Q3 2021 YTD 2022 YTD 2021
Revenues from operations €k 82,284 107,161 261,953 304,265
Operating costs €k (86,550) (58,362) (224,838) (156,054)
EBITDA €k (4,266) 48,799 37,115 148,211
(Loss)/profit for the period €k (7,219) 38,206 22,887 104,199
Basic (loss)/earnings per share € cents/share (4.7) 27.5 17.4 75.9
Dividend per share (2) $/share 0.036 0.395 0.036 0.395
   
Cash flows from operating activities €k (3,810) 51,214 17,572 124,244
Cash flows used in investing activities (1) €k (8,681) (6,982) (36,004) (77,835)
Cash flows from financing activities €k (12,647) (3,131) 2,816 51,710
     
Net cash position (3) €k 55,598 88,854 55,598 88,854
Working capital surplus €k 106,817 126,891 106,817 126,891
   
Average realised copper price

(excluding QPs closed in the period)

US$/lb 3.52 4.24 4.06 4.17
Average realised copper price

(including QPs closed in the period)

US$/lb 3.83 4.31 4.18 4.08
   
Cu concentrate produced (tonnes) 63,400 64,262 180,635 206,018
Cu production (tonnes) 13,453 13,893 38,300 42,225
Cash costs US$/lb payable 3.34 2.19 3.26 2.16
All-In Sustaining Cost (“AISC”) US$/lb payable 3.49 2.48 3.47 2.49

 

  • YTD 2021 includes €53 million early payment of the Deferred Consideration to Astor.
  • Dividend per share announced on 10 August 2022 and paid on 20 September 2022.
  • Includes restricted cash and bank borrowings at 30 September 2022 and 30 September 2021.

 

Alberto Lavandeira, CEO commented:

“Q3 was a consistent quarter operationally with good throughput and improved grades compared to earlier quarters in 2022. These trends are expected to continue in Q4 and into 2023 and support our reiterated 2022 guidance.

In terms of financial results, we were impacted by lower copper prices and very high inflationary pressures, most notably the price of electricity including extremely severe spikes in August and September 2022. Since the end of Q3, electricity prices have decreased by around 40%, due to mild weather and growing wind generation in Spain, reduced industrial demand and a good supply of LNG cargoes.

As a result, we expect that costs will moderate in Q4 2022 and look forward to 2023, when we will also benefit from our new long-term power purchase agreement and the start-up of the 50 MW solar plant, which will together provide around 50% of our electricity requirements at highly competitive rates.

With the benefit of a strong balance sheet, we remain committed to investing in growth. Through greenfield exploration, the development of higher-grade orebodies and Touro, and operating a commercial scale E-LIX plant, we are confident that Atalaya will transform into a growth oriented and diversified multi-asset copper producer.” 

Investor Presentation Reminder

Alberto Lavandeira (CEO) and César Sánchez (CFO) will be holding a live presentation relating to the Q3 and YTD 2022 results via the Investor Meet Company platform at 2:30pm 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.

Q3 and YTD 2022 Operating Results Summary

Units expressed in accordance with the international system of units (SI) Unit Q3 2022 Q3 2021 YTD 2022 YTD 2021
Ore mined Mt 3.8 3.4 11.3 10.0
Waste mined Mt 5.8 7.8 19.3 23.2
Ore processed Mt 3.9 3.9 11.5 12.0
Copper ore grade % 0.41 0.40 0.39 0.41
Copper concentrate grade % 21.22 21.62 21.20 20.50
Copper recovery rate % 84.62 87.24 85.70 85.63
Copper concentrate tonnes 63,400 64,262 180,635 206,018
Copper contained in concentrate tonnes 13,453 13,893 38,300 42,225
Payable copper contained in concentrate tonnes 12,819 13,251 36,494 40,165

Mining

Ore mined was 3.8 million tonnes in Q3 2022 (Q3 2021: 3.4 million tonnes) and 11.3 million tonnes in YTD 2022 (YTD 2021: 10.0 million tonnes).

Waste mined was 5.8 million tonnes in Q3 2022 (Q3 2021: 7.8 million tonnes) and 19.3 million tonnes in YTD 2022 (YTD 2021: 23.2 million tonnes).

Processing

The plant processed ore of 3.9 million tonnes during Q3 2022 (Q3 2021: 3.9 million tonnes), consistent with the plant’s ability to operate above its 15 million tonne per annum nameplate capacity. Throughput was 11.5 million tonnes in YTD 2022 (YTD 2021: 12.0 million tonnes), with the decline a result of the Q1 2022 transport sector strike and related maintenance stoppage.

Copper grade was 0.41% in Q3 2022 (Q3 2021: 0.40%) and 0.39% in YTD 2022 (YTD 2021: 0.41%). Lower grades in YTD 2022 were the result of blending with lower grade stockpiles during H1 2022 due to pit sequencing, however, in Q4 2022 grades are expected to be higher than the average grade processed in YTD 2022.

Copper recoveries in Q3 2022 were 84.62%, which was consistent with expectations but below the comparative period last year (Q3 2021: 87.24%) as a result of the characteristics of the ore processed during the quarter. Copper recoveries in YTD 2022 were 85.70% (YTD 2021: 85.63%).

Production

Copper production was 13,453 tonnes in Q3 2022 (Q3 2021: 13,893 tonnes) and 38,300 tonnes in YTD 2022 (YTD 2021: 42,225 tonnes). Lower production for the nine-month period was due to lower grades (pit sequencing) and lower throughput (Q1 2022 plant maintenance stoppage).

Q3 and YTD 2022 Financial Results Highlights

Income Statement

Revenues were €82.3 million in Q3 2022 (Q3 2021: €107.2 million) and €262.0 million in YTD 2022 (YTD 2021: €304.3 million). Lower revenues were the result of lower copper prices during the 2022 periods, as well as lower copper concentrate volumes sold in YTD 2022 compared to the YTD 2021 period.

Operating costs were €86.6 million in Q3 2022 (Q3 2021: €58.4 million) and €224.8 million in YTD 2022 (YTD 2021: €156.1 million) as a result of significant increases in key input costs such as electricity, diesel, explosives, steel and lime. Compared to the prior periods in 2021, the increase in the cost of electricity in Q3 2022 and YTD 2022 was €20.2 million and €49.6 million, respectively.

EBITDA was negative €4.3 million in Q3 2022 (Q3 2021: positive €48.8 million) and positive €37.1 million in YTD 2022 (YTD 2021: positive €148.2 million). The decrease in EBITDA was driven by the combination of lower revenues and significantly higher operating costs compared with the equivalent periods in 2021.

Loss after tax was €7.2 million in Q3 2022 (Q3 2021: €38.2 million profit) or a 4.7 cents loss per basic share (Q3 2021: 27.5 cents earnings per basic share) and a €22.9 million profit in YTD 2022 (YTD 2021: €104.2 million profit) or a 17.4 cents earnings per basic share (YTD 2021: 75.9 cents profit per basic share).

Cash costs were $3.34/lb payable copper in Q3 2022 (Q3 2021: $2.19) and $3.26/lb payable copper in YTD 2022 (YTD 2021: $2.16/lb), with the increases due to significantly higher costs associated with electricity and other supplies and lower production volumes, partially offset by the weaker Euro.

AISC were $3.49/lb payable copper in Q2 2022 (Q2 2021: $2.48/lb) and $3.47/lb payable copper in YTD 2022 (YTD 2021: $2.49/lb). The increase in AISC in 2022 was driven by the same factors that increased cash costs. AISC excludes one-off investments in the tailings dam, consistent with prior reporting.

Cash Flow Statement

Cash flows from operating activities before changes in working capital were negative €4.2 million in Q3 2022 (Q3 2021: positive €45.0 million) and negative €3.8 million after working capital changes (Q3 2021: positive €51.2 million). Working capital movements are mainly related to changes in account receivables and payables due to timing differences. For YTD 2022, cash flows from operating activities before changes in working capital were positive €37.0 million (YTD 2021: positive €151.1 million) and positive €17.6 million after working capital changes (YTD 2021: positive €124.2 million).

Cash flows used in investing activities were €8.7 million in Q3 2022 (Q3 2021: €7.0 million) and €36.0 million in YTD 2022 (YTD 2021: €77.8 million). Major investments in YTD 2022 included €12.1 million for the 50 MW solar plant (YTD 2021: nil), €4.5 million in sustaining capex (YTD 2021: €4.5 million) and €9.4 million to increase the tailings dam (YTD 2021: €9.5 million). The YTD 2021 period included the early payment of the deferred consideration to Astor.

Cash flows from financing activities were negative €12.6 million in Q3 2022 (Q3 2021: negative €3.1 million) as a result of debt repayments and the payment of the interim 2022 dividend. Cash flows from financing activities were positive €2.8 million in YTD 2022 (YTD 2021: positive €51.7 million). Unsecured debt facilities were drawn in YTD 2022 in order to finance the 50 MW solar plant, while in YTD 2021, unsecured debt facilities were drawn to fund the payment of deferred consideration to Astor.

Balance Sheet

Consolidated cash and cash equivalents were €107.6 million at 30 September 2022 (31 December 2021: €107.5 million).

Net of current and non-current borrowings of €52.0 million, net cash was €55.6 million as at 30 September 2022, compared to €60.1 million as at 31 December 2021.

Inventories of concentrate valued at cost were €5.8 million at 30 September 2022 (31 December 2021: €5.2 million). As at 30 September 2022, total working capital was €106.8 million, compared to €102.4 million as at 31 December 2021.

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 caused the price of electricity in Spain to reach unprecedented levels of over €500/MWh in March 2022.

The governments of Spain and Portugal responded to the energy crisis by implementing a gas price cap, which took effect in mid-June 2022. While the legislation had a positive impact on market electricity prices, it also introduced 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, consumers like Atalaya have been subject to realised electricity prices that are significantly higher than the observed spot market rates.

During Q3 2022, European gas prices increased to levels well beyond the previous peaks in March 2022, following the curtailment of gas deliveries via Nord Stream 1 and then the indefinite curtailment of gas deliveries following the damage to the Nord Stream pipelines in late September 2022. In addition, Spain experienced a historic heat wave in late August 2022, triggering high energy demand and electricity prices near the March 2022 peaks.

As a result, the Company’s realised electricity price for Q3 2022 was around €290/MWh, the highest quarterly average so far in 2022. Of this total, the market price component averaged around €150/MWh and the gas price “adjustment” component accounted for the remainder. For reference, the Company’s annual average electricity price for 2021 was around €65/MWh. As previously disclosed, an increase in realised electricity prices of €100/MWh results in an increase to the Company’s annual operating costs of around €37 million.

Subsequent to the end of Q3 2022, expected realised electricity prices have decreased by around 40%, as a result of mild weather and growing wind generation in Spain, lower industrial demand for electricity and gas in Europe and a growing supply of LNG cargoes into Europe. Should these positive trends continue for the remainder of Q4 2022, the Company’s financial performance would benefit meaningfully from moderated electricity costs.

Electricity Procurement Strategy

Looking forward into 2023, the Company’s cost structure is expected to benefit materially from the new long-term power purchase agreement (“PPA”) and start-up of Atalaya’s 50 MW solar plant. Combined, the PPA and the 50 MW solar plant will provide over 50% of the Company’s electricity requirements at an average final cost of less than €40/MWh, representing a reduction of almost 90% from the average realised electricity price of around €290/MWh in Q3 2022. Compared to Q3 2022 average prices, the PPA and 50 MW solar plant would imply annual cost savings of around €50 million.

Construction of the 50 MW solar plant is progressing, with the delivery of panels to site in the coming weeks and orders in place for all critical equipment. Targeted start-up is mid-2023.

Atalaya continues to evaluate additional renewable power projects, 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. Such initiatives would build on Atalaya’s ongoing strategy to develop new sources of reliable, low cost and carbon-free electricity for its operations.

Longer term, the Company is optimistic on the electricity market in Spain, which is a leading producer of renewable energy in Europe. Since 2020, Spain has added over 6 GW of solar photovoltaic capacity and significant additions are expected to come onstream in the next 6-12 months. As a result, electricity prices are expected to decrease in the coming years, with the futures market indicating rates of €40-50/MWh by the end of the decade.

Outlook for 2022

Production

As announced in the Company’s Q3 2022 Operations Update, full year copper production guidance remains at 52,000 – 54,000 tonnes. The copper grade for Q4 2022 is expected to be higher than the average grade processed in YTD 2022.

Operating Costs

The cost guidance ranges that were announced in the Company’s Q2 and H1 2022 Financial Results are also unchanged. Cash costs and AISC for 2022 are expected to be in the range of $2.95 – 3.25/lb copper payable and $3.25 – 3.45/lb copper payable, respectively. Although input cost inflation remains high, realised electricity prices so far in Q4 2022 have decreased meaningfully from the average price realised in Q3 2022, which was the highest quarterly average in YTD 2022.

Capital Expenditures

Total capital expenditures for 2022 are expected to be consistent with the original guidance provided by the Company in its 2021 Annual Results.

Exploration

The Company’s original exploration budget for 2022 was €10 million. As previously disclosed, equipment availability issues and high temperatures during the summer have delayed drilling campaigns, and as a result, the Company now expects 2022 exploration spending to be less than €5 million.

Asset Portfolio Update

Growth Strategy

Atalaya continues to execute on its strategy of growing its resource base and production potential from assets located in regions with modern infrastructure and long histories as mining districts.

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, farmers 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 the 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 Activities

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, with four holes having been completed. Drilling at the flagship Alconchel-Pallares copper-gold project is 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. As announced in the Q3 Operations Update, the Company 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.

 

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