Given their company’s relatively high cost profile, investors in Atalaya Mining (ATYM) will likely have fretted over the state of the copper market in recent months. At $2.65 (£2.04) a pound, the price of the red metal is a fifth off its June high. But with sentiment currently depressed, and fears of a protracted global trade war overriding forecasts of a market deficit, backers of the copper miner can face the rest of 2018 with some optimism.
That’s because operations at the Riotinto mine have been performing well ahead of guidance. Second-quarter production leapt 15 per cent on the previous year to 10.4kt (thousand tonnes), while cash costs declined from $2.27 to $1.88 per pound thanks to a lower average strip ratio (that is, processing of waste rock).
Still, full-year production guidance has been maintained at 37kt-40kt, alongside a full-year cash operating cost range of $2.15 to $2.30, suggesting management may soon expect lower recoveries, inflationary pressures, or both.
Should that happen, Riotinto has at least built itself a buffer. Lower depreciation and amortisation charges, a €1.1m (£0.98m) net foreign exchange gain, and a fall in the tax rate conspired to more than double net profit to €24.5m in the first half. And despite the increase in working capital committed to Riotinto’s expansion, cash generation and net cash are up.
On average, analysts expect full-year adjusted earnings per share of 24¢, rising to 33¢ in 2019.
| ATALAYA MINING (ATYM) | ||||
| ORD PRICE: | 214p | MARKET VALUE: | £294m | |
| TOUCH: | 212-216p | 12-MONTH HIGH: | 261p | LOW: 152p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 10 | |
| NET ASSET VALUE: | 198¢* | NET CASH: | €51.4m | |
| Half-year to 30 Jun | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 79.1 | 15.0 | 10.1 | nil |
| 2018 | 101.5 | 29.1 | 18.2 | nil |
| % change | +28 | +94 | +80 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=€1.12. *Includes intangible assets of €73.0m, or 53¢ a share | ||||
