However, as a result of the ongoing conflict in Ukraine and the inflationary environment globally, our costs have increased materially since last year and it is likely that current conditions will persist for some time. High electricity prices are having a notable adverse impact, along with consumables linked to the price of energy, such as explosives and diesel.
Thankfully, we have preserved a strong balance sheet and continue to make meaningful investments in the sustainability and growth of our business. In H1, we progressed development of our 50 MW solar plant, which will deliver stable and low-cost electricity from mid-2023. We are also advancing construction of our E-LIX Phase I plant, which is expected to reduce costs and help to unlock value from our polymetallic resources in the Iberian Pyrite Belt. Further, we are conducting exploration and progressing the permitting process at several projects and deposits, including Proyecto Masa Valverde, San Dionisio and Proyecto Touro, which we believe will allow Atalaya to grow its production, reduce unit costs and become a multi-asset copper producer."
Investor Presentation Reminder
Alberto Lavandeira (CEO) and César Sánchez (CFO) will be holding a live presentation relating to the Q2 and H1 2022 results via the Investor Meet Company platform at 1:00pm BST 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.
Q2 and H1 2022 Operating Results Summary
| Units expressed in accordance with the international system of units (SI) | Unit | | Q2 2022 | | Q2 2021 | | H1 2022 | | H1 2021 |
| Ore mined | Mt | | 3.6 | | 3.3 | | 7.5 | | 6.6 |
| Waste mined | Mt | | 6.7 | | 8.0 | | 13.6 | | 15.5 |
| Ore processed | Mt | | 4.0 | | 4.0 | | 7.5 | | 8.0 |
| Copper ore grade | % | | 0.39 | | 0.42 | | 0.38 | | 0.42 |
| Copper concentrate grade | % | | 21.23 | | 19.27 | | 21.19 | | 19.99 |
| Copper recovery rate | % | | 86.44 | | 84.83 | | 86.26 | | 84.85 |
| Copper concentrate | tonnes | | 63,027 | | 74,495 | | 117,235 | | 141,755 |
| Copper contained in concentrate | tonnes | | 13,386 | | 14,353 | | 24,847 | | 28,232 |
| Payable copper contained in concentrate | tonnes | | 12,756 | | 13,608 | | 23,674 | | 26,914 |
Mining
Ore mined was 3.6 million tonnes in Q2 2022 (Q2 2021: 3.3 million tonnes) and 7.5 million tonnes in H1 2022 (H1 2021: 6.6 million tonnes).
Waste mined was 6.7 million tonnes in Q2 2022 (Q2 2021: 8.0 million tonnes) and 13.6 million tonnes in H1 2022 (H1 2021: 15.5 million tonnes). Waste stripping in H1 2022 was higher than budget as waste mining was prioritised during the temporary plant maintenance stoppage in Q1 2022.
Processing
The plant processed 4.0 million tonnes of ore during Q2 2022 (Q2 2021: 4.0 million tonnes), consistent with the plant's ability to operate above its 15 million tonne per annum nameplate capacity. Throughput was 7.5 million tonnes in H1 2022 (H1 2021: 8.0 million tonnes) as a result of the Q1 2022 transport sector strike and maintenance stoppage.
Copper grade was 0.39% in Q2 2022 (Q2 2021: 0.42%) and 0.38% in H1 2022 (H1 2021: 0.42%). Lower grades so far in 2022 are the result of blending with lower grade stockpiles due to pit sequencing but are expected to improve in H2 2022.
Copper recoveries were strong despite lower grades, with Q2 2022 at 86.44% (Q2 2021: 84.83%) and 86.26% in H1 2022 (H1 2021: 84.85%) as a result of continuous improvements made at the plant.
Production
Copper production was 13,386 tonnes in Q2 2022 (Q2 2021: 14,353 tonnes) and 24,847 tonnes in H1 2022 (H1 2021: 28,232 tonnes). Lower production was due to lower grades (pit sequencing) and lower throughput (Q1 2022 plant stoppage), partially offset by higher recoveries.
Q2 and H1 2022 Financial Results Highlights
Income Statement
Revenues were €93.4 million in Q2 2022 (Q2 2021: €99.7 million) and €179.7 million in H1 2022 (H1 2021: €197.1 million). Lower revenues were the result of lower concentrate sales volumes and negative provisional pricing adjustments in 2022, compared with positive adjustments in the comparative 2021 periods.
Operating costs were €78.7 million in Q2 2022 (Q2 2021: €47.8 million) and €138.3 million (H1 2021: €97.7 million) as a result of significant increases in key input costs such as electricity, diesel, explosives, steel and lime.
EBITDA was €14.7 million in Q2 2022 (Q2 2021: €52.0 million) and €41.4 million in H1 2022 (H1 2021: €99.4 million). The decrease in EBITDA was driven by the combination of lower revenues and higher operating costs compared with the periods in 2021.
Profit after tax was €11.8 million in Q2 2022 (Q2 2021: €32.3 million) or 8.6 cents basic earnings per share (Q2 2021: 23.3 cents) and €30.1 million in H1 2022 (H1 2021: €66.0 million) or 22.1 cents basic earnings per share (Q2 2021: 48.1 cents).
Cash costs were $3.12/lb payable copper in Q2 2022 (Q2 2021: $2.26) and $3.22/lb in H1 2022 (H1 2021: $2.15/lb), with the increase due to lower production volumes and higher costs associated with electricity and other supplies, partially offset by the weaker Euro.
AISC were $3.33/lb payable copper in Q2 2022 (Q2 2021: $2.52/lb) and $3.45/lb in H1 2022 (H1 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 €14.3 million in Q2 2022 (Q2 2021: €50.1 million) and negative €6.9 million after working capital changes (Q2 2021: €33.3 million). Working capital movement is mainly related to changes in account receivables and payables owed to timing differences. For H1 2022, cash flows from operating activities before changes in working capital were €41.2 million (H1 2021: €106.1) and €21.4 million after working capital changes (H1 2021: €73.0 million).
Cash flows used in investing activities were €19.8 million in Q2 2022 (Q2 2021: €6.9 million) and €27.3 million in H1 2022 (H1 2021: €70.9 million). Major investments in H1 2022 included €11.7 million for the 50 MW solar plant (H1 2021: nil), €2.9 million in sustaining capex (H1 2021: €3.4 million) and €6.4 million to increase the tailings dam (H1 2021: €6.8 million). Cash flows from investing activities in the H1 2021 period included the early payment of the deferred consideration to Astor.
Cash flows from financing activities were €17.8 million in Q2 2022 (Q2 2021: €1.9 million) and €15.5 million in H1 2022 (H1 2021: €54.8 million). Unsecured debt facilities were drawn in H1 2022 in order to finance the 50 MW solar plant, while in H1 2021, unsecured debt facilities were drawn to fund the payment of deferred consideration to Astor.
Balance Sheet
Consolidated cash and cash equivalents were €127.1 million at 30 June 2022 (31 December 2021: €107.5 million).
Net of current and non-current borrowings of €59.6 million, net cash was €67.6 million as at 30 June 2022, compared to €86.8 million as at 31 March 2022 and €60.1 million as at 31 December 2021.
Inventories of concentrate valued at cost were €8.4 million at 30 June 2022 (31 December 2021: €5.2 million). As at 30 June 2022, total working capital was €129.3 million, compared to €120.1 million as at 31 March 2022 and €102.4 million as at 31 December 2021.
Update on Key Input Costs
Electricity Market in Spain
As a result of the continued conflict in Ukraine and its impact on energy markets, especially in Europe, electricity prices in Spain were significantly higher than historical levels during Q2 and H1 2022. Market prices reached unprecedented levels of over €500/MWh in March 2022, before moderating and averaging approximately €190/MWh in April and May 2022. In mid-June 2022, the legislated gas price cap for Spain and Portugal took effect. The cap had a positive impact on electricity prices, with rates averaging approximately €145/MWh since the implementation of the new pricing mechanism.
Market electricity prices averaged approximately €180/MWh in Q2 2022 and approximately €205/MWh in H1 2022, a sharp increase over the H1 2021 average of around €60/MWh. 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.
Cost of Key Consumables
In addition to elevated electricity prices, the Company continues to experience material cost inflation in many key consumables. These include explosives, diesel, tyres, grinding media and lime for which prices have increased 40 - 90% from levels observed in late 2021 for several of these cost inputs. The Company continues to pursue cost savings and efficiency initiatives, however, prices of these inputs are heavily linked to energy costs and CO2, which remain elevated globally.
50 MW Solar Plant
Development progress continues at Atalaya's 50 MW solar plant, which will become a reliable source of low cost and carbon-free energy for Proyecto Riotinto. Equipment orders have been placed and deliveries of key materials are expected to arrive on site during Q4 2022. Planned start-up of the solar plant continues to be Q2 2023. In H1 2022, the Company incurred capex of €11.7 million related to the 50 MW solar plant.
Combined, the 50 MW solar plant and the previously announced long-term power purchase agreement ("PPA") will guarantee that over 50% of the electricity requirements at Proyecto Riotinto are sourced at competitive terms. Once the 50 MW solar plant is operational and the new long-term PPA is in effect, the annual impact on cash costs would be a reduction of around $0.35/lb copper payable compared to a scenario where actual H1 2022 electricity prices were realised for a full year.
E-LIX Phase I Plant
Development progress continues at Atalaya's E-LIX Phase I plant, which will produce high value copper and zinc metals from complex sulphide concentrates produced from material sourced within the Riotinto District. The E-LIX System is expected to provide numerous benefits including higher metal recoveries, lower transportation and concentrate treatment charges and reduced carbon emissions. The Company expects the plant to be ready for commissioning by the end of 2022.
Atalaya has placed all equipment orders and has started initial construction activities on the site. In H1 2022, the Company incurred capex of €5.8 million related to the E-LIX Phase I plant, of which €5.3 million are long term loans to Lain Technologies.
Outlook for 2022
Production
As announced on 14 July 2022, Atalaya expects 2022 copper production to be 52,000 - 54,000 tonnes. Good operating performance from the plant is expected to continue, with full year copper grade and copper recoveries expected to average 0.40% and 85 - 87%, respectively.
Operating Costs
As a result of the elevated prices of electricity and other key consumables, the Company now expects 2022 cash costs to be $2.95 - 3.25/lb copper payable and AISC to be $3.25 - 3.45/lb copper payable. These new ranges are based on an assumed electricity market price range of €150 - 175/MWh for H2 2022. Should the electricity market price be lower than expected, cash costs and AISC may be lower than the revised guidance.
Capital Expenditures
Atalaya continues to make significant investments in growth and the long-term sustainability of its operations. For 2022, the main components of the capex budget are associated with the 50 MW solar plant, the E-LIX Phase I plant, expansion of the Riotinto tailings facility as well as sustaining capex. The Company is maintaining its prior guidance for full year 2022 capital expenditures.
Exploration
The Company continues to maintain an exploration budget of €10 million for 2022. However, due to the availability of equipment and delays owing to high temperatures during the summer, the budget might be only partially utilised.
2022 Interim Dividend
In October 2021, Atalaya declared its inaugural dividend and also announced the implementation of a sustainable dividend policy that provides capital returns to its shareholders and allows for continued investments in its portfolio of low capital intensity growth projects. The dividend policy consists of an annual pay-out of 30 - 50% of free cash flow generated during the applicable financial year and is payable in two half-yearly instalments.
Accordingly, the Company's Board of Directors has elected to declare an interim dividend for H1 2022 of US$0.036 per ordinary share ("Interim Dividend"), which is equivalent to approximately 3 pence per share.
The record date for the Interim Dividend will be 19 August 2022 and the shares will become ex-dividend on 18 August 2022. Shareholders will also have the option to receive the Interim Dividend in Sterling or Euros, should they elect to do so by communicating their currency election to the Company by no later than 31 August 2022. The exchange rates for payment in Sterling and Euros will be fixed by the Company on 5 September 2022 and subsequently announced.
Update on Asset Portfolio
Riotinto 15 Mtpa Plant - Process Optimisation
During H1 2022, several improvement initiatives were implemented and tested, with the goal of lowering reagent consumption, improving copper recoveries and reducing cash costs.
Riotinto District - San Dionisio and San Antonio
On 13 April 2022, the Company announced new independent Mineral Resource Estimates ("MRE") for the San Dionisio and San Antonio deposits at Proyecto Riotinto. San Dionisio includes a potentially open pittable resource, with separate copper-rich and polymetallic zones, that represents an extension of the existing Cerro Colorado pit, as well as an underground polymetallic resource. San Antonio is an underground polymetallic deposit located less than one kilometre east of the Cerro Colorado pit.
The Company expects to complete a preliminary economic assessment ("PEA") for San Dionisio by the end of 2022, including an evaluation of a scenario that combines Cerro Colorado reserves with higher grade material from San Dionisio, potentially providing an uplift to copper production by increasing the blended head grade.
Riotinto District - Proyecto Masa Valverde ("PMV")
On 5 April 2022, the Company announced a new MRE for PMV's Masa Valverde and Majadales deposits. Highlights included a significant increase in tonnage and contained copper, silver and gold compared to the prior estimate, as well as an initial Indicated Mineral Resource at Masa Valverde. The mineralisation includes zones that are copper-rich and low-zinc, which could deliver higher grade material for processing at the existing Riotinto plant with minimal plant modifications.
Exploration activities continue at PMV, with four drill rigs currently operating including two rigs at the Campanario Trend and two at anomalies west of the Masa Valverde deposit. Initial drilling results from Campanario were announced subsequent to the end of the quarter and included intersections of massive and semi-massive sulphides at shallow depths.
In addition, the permitting process continues, and the Company expects to complete a PEA for PMV by the end of 2022.
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. The Company continues to engage with the many stakeholders in the region in advance of its plans to submit a new project design.
In June, the Company commissioned a new acid water treatment plant at Touro, which will address the legacy issues associated with water runoff from the historical mine. The construction of the plant was contemplated in the original project proposal, but Atalaya volunteered to fix the historical acid water issues prior to submitting the Environmental Impact Assessment ("EIA") in order to demonstrate its operating philosophy and the benefits of modern operating systems.
Atalaya continues to be confident that its approach to Touro, which includes a fully HDPE plastic lined thickened tailings facility 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, various exploration activities continue including field mapping, rock sampling, soil geochemistry and reinterpretation of geophysical data. The Company expects to begin drilling targets later this year once the investigation permit is granted.
At Proyecto Ossa Morena ("POM"), the Company has been focused on permitting, environmental and social matters. Subsequent to Q2 2022, Atalaya increased its ownership interest in POM to 99.9%, up from 51%, following completion of a capital increase that will fund exploration activities. An initial drilling campaign is expected to begin soon at the Hinchona copper-gold target and at the flagship Alconchel-Pallares copper-gold project.
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 Markets (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, as well as a 99.9% interest in Proyecto Ossa Morena. For further information, visit www.atalayamining.com
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SOURCE: Atalaya Mining PLC
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