Atalaya Mining bullish on price of copper as it increases production

Copper explorer Atalaya Mining remains bullish on the long-term outlook for the price of copper as it announced it was ramping-up production after expanding capacity at its Andalucia mine.

For the six months to 30 June, revenue was €22.6m, despite which the company registered losses before interest, tax, depreciation and amortisation (EBITDA) of €3.6m.

EBITDA was impacted by the ramp-up in copper production but improved in the second quarter, compared to the first and is expected to improve further in the third quarter.

The AIM-listed company ramped-up copper production by 10% during the second quarter to 4,442 tonnes, compared with 4,048 tonnes in the first, a significant achievement considering its Spanish plant was temporarily shut down due to a tailings discharge suspension by the Junta de Andalucía and interruptions to the commissioning of the mine’s expansion project, the company said in a statement.

In the second quarter, there was a 15% increase of ore processed to 1.3m tonnes compared to the first quarter. Production in June increased to an annualised rate of 6.8m tons per annum, in line with the ramp-up schedule, which continued in August to 8.3m tons per annum.

Copper grade was 21.43% in the second quarter and recoveries were lower at 80.46%. Recoveries rose back over 84% during July and August, to the expected rate of the new flotation circuit.

The average market price of copper for six months ended 30 June was $2.16 per pound. The company's realised copper price for the same period was $2.06 per pound.

Cash costs for the second quarter were $2.36 per pound (Canaccord: $1.96), whereas for the first half of the year it was $2.31 per pound, which is expected to come down as capacity is reached and there is steady production.

For the second half of the year the miner guided towards cash costs of between 205 and 220 cents per pound (Canaccord: 190 cents).

"Costs are always volatile, and high, during ramp up and the company expects these to decline as the operation reaches nameplate capacity," Canaccord Genuity analysts Nick Hatch and Tim Huff said in a research report sent to clients.

Inventories of concentrates at June amounted to €6.2m and capital expenditure for the half year was €17.1m.

Chief executive Alberto Lavandeira, said: "We continue to be satisfied with the rapid progress of the successful commissioning of the plant expansion.

“[...] We nevertheless remain confident that with the ramp-up of the expansion and with steady throughput being rapidly achieved, the company is moving to positive cash generation in the coming months. We continue to remain bullish on the long term outlook for copper."

On 5 September, Atalaya Mining also completed a $14m prepayment funding facility with Transamine Trading SA, which covers part of its short term working needs in order to support the ramp-up phase, but the company continues to look for alternative funding solutions.

"Atalaya is doing a good job of ramping up its production, and as it approaches nameplate capacity we would expect operating costs to fall and cashflows to improve. We believe Atalaya remains one of the most highly leveraged plays to a recovering copper price," Canaccord said.

Shares in Atalaya Mining were down 8.24% to 80.75p at 1033 BST.