Atalaya Mining

Multi-asset copper production in Spain

 


 

The company that is today called Atalaya Mining first started trading on London’s Alternative Investment Market (AIM) in May 2005. Exactly two years later, the company (then called EMED Mining) was granted an option to acquire the Rio Tinto Copper Mine known as Proyecto Riotinto in Spain. However, it was not until 2014 that Atalaya received the approved Unified Environmental Authorisation (AAU) for the project, which set the foundations for the firm to begin construction and refurbishment of the historically producing mine a year later. By 2016, Riotinto had commenced commercial production and during the past three years Atalaya has expanded the facilities at the mine and acquired an interest in another copper project in Spain. 

 

Atalaya’s phased, earn-in agreement to acquire up to 80% ownership of Proyecto Touro, a brownfield copper project in Spain’s Northwest, represents a key step towards the company goal of becoming a leading multi-asset copper producer in Europe. 

 

We are still a small company compared with the big producers, but we are on the way towards becoming a mid-tier copper producer,” says Atalaya’s CEO and director Alberto Lavandeira. 

 

There is a lack of companies on the London market, and on European markets in general, that are pure copper producers. This means we give investors greater leverage to pure copper, as opposed to larger multi-commodity company.” 

 

Strong institutional backing 

 

Despite Lavandeira’s acknowledgement that the company is not yet competing with the major producers, Atalaya is backed by a quartet of cornerstone investors that are well renowned across the mining industry.  

 

Multinational commodity trading company Trafigura and Chinese smelting company Yanggu Xiangguang Copper each hold around 22% of the company, while private equity group Liberty Metals & Mining Holdings LLC and Orion Mine Finance own around 14% and 13% respectively. 

 

These shareholders have been very supportive when the markets were down, which has been important because we needed capital and these guys were there. It’s a blessing to have these powerful shareholders, but walso have supportive smaller funds from the UK, Spain, Italy and the US.” 

 

A key aspect of the business that has filled investors with confidence is the location of Atalaya’s assets in Spain – a stable jurisdiction with an established mining sector and excellent infrastructure in place around the mines.  

 

“The main benefit of being in a European country is you don’t have the same country risk as you might have in South American, Asian and African countries,” Lavandeira asserts.  

 

Secondly, both projects are close to industrial areas where there are smelters, refineriesfertiliser sources and so on. This gives you a pool of educated and trained people and allows you to make things of a very good quality. 

 

There is no need for camps either, so people can go to sleep in their houses. There are also universities, good communications and ports close by in both locations. 

 

The close proximity of Atalaya’s assets to industrial centres and existing infrastructure has also allowed for the projects to be developed at a low capital intensity, especially when compared to conventional copper mines that are usually found in remote locations. 

 

Restarting Riotinto 

 

Proyecto Riotinto is an open pit copper mine in the Iberian Pyrite Belt, 65 km Northwest of Seville that is 100% owned by Atalaya through its Spanish subsidiary. The current plant was built over 30 years ago and operated by Rio Tinto until 2000, when it was placed on care and maintenance due to low copper prices. 

 

The first thing we did was put together a good, experienced team that would be able to lead the initial refurbishment phase. It was an installation that had been built over 30 years ago, so there were lots of things we had to fix including electronics and piping, plus additional equipment to install. 

 

The restart phase of the project was completed in February 2016, when first commercial production was declared at an initial processing rate of 5 million tonnes of ore per annum (Mtpa). However, Atalaya wasted no time in starting an expansion project to better capitalise on the +25 years mine life at Riotinto. 

 

The expansion phase aimed to increase processing capacity to 9.5Mtpa and was duly completed on time and on budget. Now, the company is close to finalising the third phase of the project, which will boost capacity to 15Mtpa and allow for a nameplate production rate of 50-55,000 tonnes of copper per year. 

 

This is impressive when you consider its only five years since we received the mining rights for Riotinto and four years since we started the refurbishments,” says Lavandeira. 

 

Steady production growth 

 

While the current expansion phase is not due to be completed until mid-2019, Atalaya’s ambitious growth plan at Riotinto has already resulted in steady production progress over 2018, which culminated in a record Q4 performance. 

 

The company produced a record 11,172 tonnes of copper in the final quarter of last year, contributing to a full-year haul of 42,114 tonnes. Considering this impressive 2018 performance and its track record of delivering consistent near-term growth, Atalaya has set its 2019 production guidance at 45-46,500 tonnes. 

 

Atalaya has also identified additional underground potential for base metals including copper, zinc and lead in adjacent orebodies at Riotinto, and has subsequently set aside €2.57 million for its exploration budget this year. 

 

The life of a mining company is dependent on continued exploration as assets get depleted. Therefore, it’s important to set aside a percentage of annual revenues for exploration, otherwise you have a limited life. 

 

We have not fully discovered the extent of the mineralisation around Riotinto. It has a lot of potential and we plan to drill the areas where we know there is something. We plan to define resources and add to our reserve life.” 

 

Atalaya acquired a 10% interest in Proyecto Touro in 2017, before quietly undertaking two years of drilling and engineering studies without making a single announcement. The project is currently at the permitting phase, with the ball in the court of the Spanish authorities after the company submitted all the relevant studies and stakeholder communications.  

 

Once the authorities return the crucial environmental impact statement (EIS) and Atalaya agrees to the various conditions laid out in the EIS, the company will exercise an option for an additional 30% interest in Touro.  

 

Then, once project financing is secured and construction commences, Atalaya will exercise another 30%, taking its total interest in the project to 70%. To reach the maximum 80% interest, the company would then make a simple decision to increase its interest by another 10%. 

 

“We are expecting things to go well from a permitting point of view this year. We hope to exercise our option for at least 70% by mid-2019, which is when the permit could possibly come through.” 

 

Another low cost asset 

 

Atalaya completed a pre-feasibility study (PFS) for an open pit mine and concentrator in April 2018. The PFS indicated that Touro contained 392,000 tonnes of copper and 2.1 million ounces of silver, which would give an average annual production of 30,000 tonnes of copper and 70,000 ounces of silver. 

 

In addition, the PFS also provided strong project economics with a net present value of US$180 million and a life of mine total free cash flow of $489.3 million. However, Lavandeira is most pleased with the low capital and operating costs indicated in the PFS. 

 

This is a project that has a very low capital intensity. It is not as low as initially thought because we have to spend $165 million on pre-production expenditure, but it is still very low because we are very close to a town, an airport, motorways and a port.  

 

The results have been good and that is why capex is modest compared to others. The project has a lot of potential for upside, we have very good exploration ground, so this is only going to be the starting point. 

 

The Atalaya team has a strong track record of delivering growth and shareholder value, and given the recent progress made at its two low cost assets in Spain, Lavandeira has every confidence in his team continuing to deliver growth on time and on budget. 

 

Not only are we looking at these Spanish projects, we are also looking at other opportunities in Europe and other parts of the world, where we can leverage our experience. We are quite sure this company will continue growing.