Atalaya Mining on track after power price reprieve

Being a European miner has its advantages over elsewhere – mining camp accommodation or a flat in Sevilla? –  but in the past 18 months it has been a harder place to do business due to the spike in power prices that came after Russia invaded Ukraine. Spike being the key word here. 

Atalaya Mining (ATYM), which owns the Riotinto mine in Andalusia, reported a significant fall in its costs for the first half – a 60 per cent fall on last year. This meant a one-third drop in processing costs, the company’s single-biggest operating expense, and the company beat broker Peel Hunt’s cash cost forecast by 7 per cent. 

As a result, cash profits were level in the period against last year, at €40mn (£34.5mn), even with realised copper prices 11 per cent lower. Atalaya also beat Peel Hunt’s estimate for the interim payout by 25 per cent after announcing a dividend of 3.9p. 

The company reiterated guidance for full-year production at 53,000-55,000 tonnes of copper (contained in concentrate), at a cash cost of $6,173-$6,614 (£4,822-£5,167mn) a tonne. The company has several capital projects on the go that could eat into its sustaining cost figure, however, in the short term. 

The solar plant at Riotinto is not far from commissioning, which should further cut power costs in the coming years. Management guided for “modestly higher investments” in a new processing plant as well. The E-LIX phase I plant will help increase recoveries from “complex” ores, meaning there is higher metal content in the concentrate it ships. 

Atalaya is unique in its European setting, and has a healthy balance sheet and pipeline of projects. There is the risk it will continue to have its second mine blocked by local opposition, but even Riotinto’s medium-term prospects are enough to keep us interested. Buy. 

Last IC View: Buy, 332p, 24 Mar 2023