Atalaya Mining raises payout despite growth plans

The broad narrative of copper is that the world will soon realise far more is needed every year to maintain global industrial ambitions. But in the meantime, companies such as Atalaya Mining (ATYM) are doing fine with the red metal trading around $9,000 (£7,082) a tonne, still an historically high price. 

Atalaya operates a single mine in Spain, and in 2023 saw a one-third uptick in cash profits as power prices – the main drag on earnings in 2022 – fell. Production for the year was 51,700 tonnes, flat on the year before, while the cash cost dropped 12 per cent to $6,150 a tonne.

The cash flow at the moment is enough to finance Atalaya’s growth plans. It is constructing a new pit at the Riotinto mine near Sevilla, with spending on waste stripping, dewatering and moving a road forecast at €42mn-€46mn for this year. A new solar plant will help power the mine, although the completion date for this has moved back from late 2023 to Q2 this year. 

Further out, Atalaya is grappling with its usual difficulties: permits. The miner is yet to receive approval for the new pit at Riotinto, San Dionisio; the same with its Touro project, also in Spain. Atalaya has been developing this potential second copper mine for years, and is currently cleaning up local rivers to address “legacy issues associated with acid water runoff from the historical mine”, which closed in 1987. 

While the various governments consider letting Atalaya mine more, it is getting its own house in order – the company is now domiciled in Spain, rather than Cyprus, to which the previous management was linked. It is also moving from Aim to the main market. This will get rid of the capital gains tax (CGT) gift relief benefit, although the shares will remain under the Enterprise Investment Scheme for existing shareholders. 

The company is an established miner now with a dividend and sustainable growth plans, so it is right to target institutional investment with a main market listing. The timing is still uncertain, however, after Atalaya pushed this back from late 2023. 

Production is guided as flat on 2023 for this year, while broker Peel Hunt sees adjusted Ebitda staying flat in 2024 before more than doubling next year to €179mn. Buy. 

Last IC View: Buy, 328p, 10 Aug 2023