Atalaya Mining Copper, S.A. (ATYM) Earnings Call Transcript & Summary

Good morning, and welcome to the Atalaya Mining Q2 and H1 2026 Financial Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Alberto Lavandeira. Good morning to you.

Thanks very much. Good morning, ladies and gentlemen. Thanks for being here in this morning. Today, as you know, we announced the Q2 and H1 results -- financial results. And I'm going to go through the highlights and try to give a bit of try to give some details. Going to the slide, you will have the slide on the screen. I will have with me Cesar Sanchez, the CFO, which will also help me in replying some of the questions that may be related to financial details. If I went to some highlights, I would like to say, although I don't like to repeat what you can see in the screen, but just remember that we produced 13,500 tonnes of copper during the second quarter, which we had already announced, which brings a total of 23,400 tonnes for the first half. This was quite a good production for second quarter. And it meant that we recovered more than half of the copper production that we have lost in the first quarter due to the heavy rains in the last week of January and basically all of February. As a result of very good production, the cash costs were $2.40 -- around $2.36 per pound in the second quarter and around $2.43 for the first half, which are quite good. Of course, we had higher mining costs and processing costs than we would have expected due to basically inflation and especially diesel. And of course, also to other external things like the stronger euro dollar during the quarter. But this higher operating costs were offset by higher byproduct credits and lower treatment charges. So at the end, we have quite good result. Our all-in sustaining costs were $2.79 per pound in the second quarter, a little bit lower than the $2.97 for the whole first half. And again, they were impacted by the same factors that our cash costs. We also had a slightly lower all-in sustaining cost because we had lower capitalized stripping costs. And of course, remember that we are excluding from this all-in sustaining costs, those investments that are in the tailings and waste stripping in the San Dionisio, which are kind of a one-off. Advancing to the details of the production. Let me continue first. Let me continue here going into the details of the financial results. The revenues were EUR 147 million and EUR 264 million for the first half. And this was due to good production, but especially due to higher copper prices and higher silver grades. As a result of that, EBITDA was quite good, EUR 17.2 million in the second half and EUR 126 million for first half of the year. And this is basically a new record, a new quarterly record and a new year record for Atalaya. We continue investing during the second quarter in San Dionisio and some capitalized stripping around EUR 9 million in San Dionisio, around EUR 4.6 million in Cerro Colorado. And as a result of all that, we had a fantastic free cash flow of EUR 58 million in the second half, which basically all the free cash flow corresponding to the year to date was generated in the second quarter. And of course, we enjoy a fantastic balance sheet. We have a net cash position of almost EUR 320 million with a working capital surplus of EUR 284 million. And we -- the Board decided as a result of all this, decided to give an interim dividend of EUR 0.055 per pound, which compares to the dividend of 2025, almost 25% higher. From the corporate point of view, the resolutions that we had in the AGM were all passed. We also acquired a participation of a -- strategic participation in Lara Exploration, a company that has a copper project in Brazil in Carajas area, very nice future project. We believe it has offered value. We are very happy with our investment. And we will see -- we will keep an eye on them. We also had -- I remember in the first part of the year, we had a placement of GBP 130 million, which is going to be dedicated to the development of our pipeline. Looking at the assets, basically, we continued working in San Dionisio. At San Antonio, we were drilling, completing the -- basically finalizing already the infill drilling. We are already doing all the engineering for the polymetallic circuit. And we're also starting the production of a byproduct from our tailings due to the good demand that we are seeing and that we are getting for this type of product that right now goes into the tailings due to the very good sulfuric acid market. At -- our recent conversations between Atalaya and the [indiscernible] administration can confirm that all the studies are positive and all the studies, the reports are positive, received, signed. And that we also know -- confirm that the DIA is under preparation. So there are -- it's a group of people doing that. And as when it's going to be released, we are uncertain due to out of our control, but we believe it's advancing slower than we expected, but it's advancing very well. In the meantime, we are doing some work. We are advancing to get ready, not to waste time, getting ready to buy the order, the queue equipment. We also completed all the geotechnical work around the plant. So things are advancing well. We have also our plant of E-LIX, where we are financing has been working quite well during the quarter, has been now working over 100 days without stopping quite smoothly. It's processing material that concentrates that have copper content with very high zinc content. And we produce a better copper concentrate and a precipitate of -- high-grade precipitate of zinc, which we are selling without any problem. And right now, it is working smoothly without stops, although we believe that it's under the design capacity and should be a little bit better in order to be more economic. But the important thing that is working well and it's breaking even. [indiscernible] , we are completing our surface works, all the access platforms, magazine, which is quite relevant. And once the Board gives the go ahead, we will start escalating the ramp. In the meantime, we have a couple of rigs there drilling the copper zone. As soon as we announce the start of the, let's say, the first blast of the ramp, we will also give an update of all the drill results of basically the copper zone, but also some of the areas of the polymetallic material that's there. We also have some results of the Sweden joint venture, which we still very early days, some encouraging results. We will be doing winter campaign drilling starting almost now. The rigs are getting ready. And let's see, we will try to follow up the good results that we obtained in this campaign. Talking a little bit about sustainability and ESG in general, we are trying to focus, as usual, in reinforcing the safety to reduce the accidents. We are quite good level of actions, but still, we believe we can perform. We had actually quite a good quarter, but we want to continue improving there. We have a foundation to continue to support education, cultural, infrastructure and social things around Riotinto, and we will be launching something similar in Touro as soon as we go. And going to looking at the details, I have already mentioned most of them. Production results were quite good, better recoveries, better rates and better copper production that had already been announced. Very good revenues due to high copper prices. And as a result of that, record EBITDA, better than a real record. And of course, about half of that goes directly into a cash position even after tax and dividends. The first half, as I said before, it's really a record quarter of operating cash flow of EBITDA and profits, almost an increase -- a significant increase versus previous year. Going slightly deeper into the comments of the operating costs. You will see an increase in mining costs and in processing costs. In processing costs is due to the higher prices of gas, which affect the line. But in mining, the main reason of the increase is due to the higher -- much higher diesel price and the price of explosives, both of them linked with the oil and gas prices. But of course, as I said before, we continue to produce nice silver byproducts. So that offsets a lot of our higher costs. And we also have low treatment charges. The benchmark has been much lower than it was in previous years. And we are also selling -- we have been selling some limited lots at negative treatment charges. So as a result of that, in the first half, we have a negative off-site costs of over $0.50 per pound, which is much higher than the full year of '24, which was already negative. So as a result of that, we are keeping our cash costs around $2.43 for the first half, which is almost identical to what we had in the previous year, which is excellent considering the very high inflation due to the diesel price and explosives and other consumables. From the all-in sustaining costs, it's a little bit the same reasons that we mentioned before. Corporate costs were similar. Sustaining costs were similar to the previous years. And the other thing is that we had slightly lower capitalized costs and other costs. So at the end, we are quite well, when we compare ourselves with our peers, which we always do that. You can see that we are maintaining our all-in sustaining costs within the same range even in spite of this high inflation that we are seeing right now. Going forward, how do we see things? We have changed a little bit the guidance of ore processed. So we will be treating a bit more material with slightly lower grade, but with higher recovery. So then this will -- one will compensate the other. We believe we are going to be getting some material that has better recovery at slightly lower rate. So then the production result will be very similar. And we are maintaining our copper guidance, albeit in the low end of the guidance, we don't think we have to change it, but we prefer to be -- to say that we are going to be in the low end of the guidance. While our cash cost, the way things are going, we believe we are going to be well within the range. I just mentioned before. Right now, we are going in the low side of the guidance. So we believe we are going to be well within our indicated figures. There are some investments that we have delayed simply because some of the projects are delayed, not because we are saving money. So instead of spending EUR 52 million -- sorry, EUR 75 million to EUR 100 million, we are going to be spending EUR 50 million to EUR 80 million simply because of the delay of some of the things that we are doing. With this good balance sheet, the Board decided to keep the policy. Remember, we had a 30% to 50% of the free cash flow available for dividends, and we decided to increase the dividend around 25% higher than previous year, an interim dividend of around EUR 0.055 per pound, which is roughly EUR 0.05 pound -- sorry, per pound per share. We will be paying this at the end of September. And we believe that the things continue like this, of course, the final dividend will be much higher. Just a few words of how things are going in our pipeline. As you know, we have some areas of growth, all of them linked -- three of them linked to the south part of Spain, San Dionisio, higher rates. You can see there the pushback, how it's advancing. It is a little bit delayed due to the interference of a power line that has been already contracted to be moved, but still a bit delayed by the contractor. That's limiting our access to that area for the moment, which is in the right side of the picture. [indiscernible] polymetallic is basically installing some circuits to be able to treat the material that contains higher copper grades, but also contains higher lead and zinc. And this is being optimized. We have the engineering firm visiting Riotinto and finalizing the layouts and try to optimize the CapEx, which initially was going to be around EUR 80 million to EUR 90 million. We try to reduce that a little bit and start construction as soon as possible. At Masa Valverde, you can see a red area, there around the massive sulfides. That red area is the copper zone is very good grades. We are infilling that from surface. But the idea there is to start to ramp. As I said, we are doing all the work on surface. Once this is finished by the end of this month and so on, we will be finalizing -- starting to ramp and we will probably be there in 2.5 years, we will be there in the copper zone. But of course, our growth project comes from Touro. Touro you can see there the -- one of the old pits. As I said before, here, we are just waiting for the environment impact declaration to be issued. We believe it can be any time, but it's out of our control. So we prefer not to give any guidance because we are in all the administration and the offices are sometimes are not full with people, and we don't know how it's going to be delayed, but we -- there's no more projects, papers, questions, meetings, whatever, everything. It simply they're drafting it. They have asked for lots of summaries, and we know it's being drafted and it can come out any time. With that, we plan to push ahead as fast as possible and we can get production ready in 1.5 years. With that production ready of total, which provides the big increase of another 30,000 tonnes of copper, we can -- we are in our path to grow from the current 50,000 tonnes level to the 100,000 tonnes level equivalent when we add the polymetallic when we add the additional San Dionisio and Masa Valverde areas and the polymetallics, which, as I said, in 2 years' time, 3 years' time, we will get into that area when you consider the lead zinc as copper equivalent. It would be like 80,000 tonnes of copper and the rest to [indiscernible] as a copper equivalent. So we are in a very good position, and I think I will now go into the questions and try to reply to all of them as I used to do. I think I can start directly into the questions.

And we have lots of pre-submitted questions. So I will try to read them and reply if we can. First question is in the filings [ 43-101 reports ] and sustainability briefings, Atalaya has given some detail of post-mining land use, industrial renewable energy, mining heritage. Can you expand on this? Would there be any accretive opportunities for current Atalaya shareholders? Well, post mining, I hope that this is in lots of years. But yes, we are looking specifically at the land use for the old tailings pond. I say old tailings because we will be permitting a new tailings pond. The old tailings pond is a flat surface with access to water, clean water and very close to the substation. So it has a good possibility of having a good -- an option of installing a set of solar with hybrid batteries for industrial scale because it's totally -- it's very close to the regional substation. I think this is the most likely use of the existing tailings, but it's a little bit early to say. Certainly, what we will not be looking is at just covering with grass and bush like it was the original plan because we believe that this almost 500 hectares of flat ground very close to the substation has some better value. But as I said, it's a little bit early, and I don't think the current shareholders, the value for this is still very, very far away. Next question is mine life. With respect to expansion of mine Riotinto satellite deposits in San Antonio, Masa Valverde and processing low-grade resources, the E-LIX. The official mine life keeps extending. How many years do you hope Riotinto copper plant will be full capacity? It's a very good question. It ties a little what I said. 100% right that we have all these resources. We also have lots of gold tailings that eventually they can be mined once we finish with the copper or in parallel. So I would guess, right now, we have been mining for 11 years. The original mine life was 12 years. We still have ahead of us at least 10 years, but we keep finding things in some of the areas. So I would guess that a good estimate would be 12 to 15 years as we speak, which will bring the whole thing to around 25 years, which is generation, which is very important. Beyond that, we will need to have further discoveries, which you can never rule out. Next question is post mining, have you looked at pumped hydro storage using Cerro Colorado as lower water reservoir, pumping water to a higher ground during cheap electricity or overcapacity at least on demand? We have been looking at pumped hydro in the past for several places, but not specifically Cerro Colorado. The reason why we could not use the Cerro Colorado pit is that it will have some acid water drainage and this thing damages the pumps. So it's probably not the best solution. But we have looked at pumped hydro with the dams of clean water that we have just north of our installation. And yes, it could be a potential business. In the case of Cerro Colorado, very likely this pit will simply be to allow it to be flooded. Eventually will [indiscernible] with evaporation in water rainfall. And that's the plan in the future will simply be a side for tourism, which, by the way, is very popular right now. Another question is E-LIX is the processing of lower grade of fine complex concentrate to E-LIX, do the numbers work? It is a success technically, it's working smoothly now without any stops, smoothly. When I say smoothly is that there's one guy in the operating room, control room and things are running smoothly, automatically using precipitates and achieving the results. Right now, the problem we have is that the existing plant is limited in capacity due to some bottlenecks in filter capacity and a few other things, which would need to be expanded to have a better economic result. When I mean better economic result is to be able to pay back the existing loan. That's why we continue to keep the impairment that we had of the loan in our books. But it's breaking even and it's not costing money. So it's a matter of time where we can debottleneck and be able to use this for for other type of materials, and we are doing that. It's operating well and getting the right results. The next question is recently, we [indiscernible] Riotinto, the miner needs to buy more copper assets. There has been some chatter that smaller bolt-on acquisition makes sense. Any contact with Riotinto? Would you -- if they will welcome the deep financial resources? Well, Riointo is a very good company, but I believe personally that we are too small for them. I think they will not make -- change the needle in their case. Of course, we will welcome them. But right now, actually, Atalaya doesn't have a problem of financial resources. I mean we have an excellent balance sheet, and we have the team. So I don't think it's essential. I think the more likelihood at the end is for Atalaya to grow by itself and be a decent sized company more than be part -- a small part of a large company like Riotinto, is my opinion. Question for Cesar, you can read it and reply.

Yes, happy to take that one. So [indiscernible] withholding tax creates a [ 19 ] drag on U.K. shareholders' dividend. Would you consider exploring some of the following: one, dividend access schemes allowing U.K. shareholders to create -- to receive payment from U.K. [indiscernible] Subsidiary rather than directly from the Spanish company. Two, option 2, scrip dividend with buybacks offer shareholders new shares in view of a cash dividend combining with an automatic reports and options. Well, these are slightly sophisticated way to pay dividends. We haven't looked at these specifically. We discussed the possibility of share buybacks as an alternative of the dividends, which the Board of Directors decided is not the best approach for the dividend. So we're happy with the dividend and increasing the dividend. Happy to look a little bit more detail in these two options, but look. I can see this issue of some of the options. But yes, something to look at.