Atalaya Mining Copper (LSE:ATYM) Q2 2026 Earnings Call

0:00 Good day, ladies and gentlemen, and welcome to Atalaya Mining Second Quarter and H1 twenty twenty six Results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session through the phone lines and instructions will follow at that time. I would like to remind all participants that this call is being recorded. I will now hand over to the CEO of Atalaya Mining, Alberto La Vandera, to open the presentation. Please go ahead.

0:27 Good morning, ladies and gentlemen. Thanks, everybody, for being here. We are today, we announced the results, the Q2 and first half results for 2026, including the financial results. And I'm going to go through the through the highlights of this announcement. Let me first start with a review of of the results during this quarter. We had a good production quarter. We had announced that already. We produced 13,500 tons of of copper with all in sustaining cost of $2.79, which means we are maintaining our guidance and of both for cost and production.

1:20 It was a good quarter. We generated a record quarterly EBITDA of €78,000,000, a record half of the year of €126,000,000, record free cash flow €58,000,000, so that's over 60,000,000. And, of course, we benefited from high copper prices, good silver credits, low treatment charges, and it was very good. And even with the some higher mining cost and processing cost due to inflation and to higher diesel prices, we had an excellent cash generation. This is extraordinary cash generation, meant that our balance sheet at the end of the quarter was excellent, and we ended up with a net cash position of 318 or €319,000,000, which is also again a new record.

2:24 As a result of that, our board declared dividend, an interim dividend of of 5.5¢ euro cents per share, which is also much higher than previous previous interim dividend. And I will go through some of the key points in the next in the presentation. Okay. In the slide seven, you will see a graph that we typically show with with evolution of production. The plant continued to perform very well. The q two was strong. It was a q a very big improvement versus first quarter.

3:11 As you remember, during the late January and almost all February, we had a story high rainfall in the South Of Spain, and that impacted our production. But during the second quarter, things were normal. We recovered out of the lost production. We had a very strong performance. Rates went almost point 4% copper, and we increased the recovery to 84%. So we produced 13,500 tons of copper, which is quite good. And you can see in the graph at the bottom side, a big increase, a large increase versus previous quarter.

3:54 As a result of that, the financial results were quite good. We EBITDA was €78,000,000, which is again new quarter. And, of course, the revenues, you can see, were a record high, were a result of higher copper prices, higher silver credits, and lower off-site off off-site costs. We made some investments of around 20,000,000 during the quarter, milling San Luisio and capitalized stripping at Cerro Atalora Colorado. And with everything, the operating cash flow was almost €80,000,000, and we generated €58,000,000 of free cash flow, which is again a new quarterly record. And our that means that our our balance sheet improved a lot, strengthened even further, and we increased our cash position to almost €320,000,000.

4:52 Of course, we had a nice increase in the capital placement that we had in in late January. But even so, after that period, we continue to strengthen our balance sheet and increase our cash position in in this quarter. Going a little bit further in the in the financial results.

5:23 Excuse me. Because I have I have here some interference. During the whole year, we had during the whole first half of the year, we had an EBITDA of of €156,000,000, which is is, again, a new a new record.

5:50 Looking at the the breakdown of our cash cost and all in sustaining cost, as you know, we always give a full detail of this. Our cash cost were are around $202.40, dollars per pound in q two. And in in the first half of twenty six. And they were solid and well below below the guidance that we had expected for the full 2026. All in sustaining costs were around $280 per pound in second quarter and around, 2 yes. Under $3 in the whole '26. If you look at the details, you will see that mining and processing were higher than the previous quarters, and this is mainly due to the impact of diesel in in the mining side, and also explosives that are affected with the gas prices, which had been affected by by the wars in the in The Middle East.

6:55 Also, we have some not favorable exchange rate during during the quarter. The euro euro and the US dollar euro strengthened a little bit during the quarter. But, of course, even having this kind of bad bad news at the operational level, at the site level, we most of this increase of, in the costs were offset by higher silver credits and low treatment charges, as you can see in the in the lines of the off-site costs.

7:31 We are, we are right now enjoying low treatment charges from the benchmark, but also we are also selling some parcels, some lots with negative treatment charges, which means that at the end, we have been able to to have quite low freight even charges and all other off-site costs. Going forward beyond '27, all our legacy offtake agreements will be disappearing, will have expired, and if the market, conditions to stay like that, we think we are going to be in a very good position to enjoy very low treatment charges.

8:26 As you all know, the evolution of treatment charges has gone from being positive, in the range of the 50 to 80 to being negative even at spots spot sales of minus 200. With most of our optic agreements expiring this year and and all of them next year, we are fully exposed to this good conditions to the for the miners that we believe are going to to persist for a while due to the lack of new projects and due to the excess smelted capacity. Of course, also the the smelters are are enjoying the high sulfuric acid prices, high gold prices, and silver, which means that they are not losing money, so there's no specific danger for the smelters to close with even with this low and negative treatment charges.

9:28 When we benchmark ourselves with others, we always like to to compare with other pure copper players. We continue to maintain our all in sustaining costs quite under control. We continue to be very well positioned compared to the rest, and our all in sustaining costs have been trending downwards even even with this inflation that we have been seeing that's general all all over the world. With this, how how do we see the rest of the year? We have preferred that we want to maintain our our prior guidance. We believe we are going to be in the low end of production, although we will be recovering some of the lost production of the first quarter, but we think we are going to be the low end even with a good production result of the of the second quarter.

10:29 From the cash cost point of view, we had pressures on diesel and explosives, but we don't think they are going to be worse than this quarter. If anything, looks like diesel is is relaxing a little bit, at least from the oil point of view, oil price point of view. So we prefer to maintain also our our our guidance. We have made some small amendments to our operating metrics. We believe that the mill is going to be performing very well, has been doing very well. We had some actually, we had a record May where the mill stopped only three hours in the whole the whole month. It was fantastic.

11:16 But we do have a a maintenance program in the in the third quarter. But still, we we think we are going to be mining processing in the high end of 16,000,000 tons or more than that at the mill. The grades maybe is going are going to be slightly lower than we predicted. Probably this is slightly shy of that, but the recovery is going to be slightly better. So one will compensate the other. So then we are maintaining our our guidance. The CapEx the CapEx, we have lowered the the CapEx a little bit around 20,000,020 million euros less.

12:07 And the reason is the delays in starting some of the projects, our growth projects, which I will we'll talk a little bit later. This is the the stripping of of Chardonnay. It's slight was slightly delayed, the movement of the road and the start of the ramp. So, basically, it's doesn't mean we are saving CapEx. We are simply pushing that to to later in the year and beyond in 02/2027. Looking at dividends, as I said before, the policy of Atalaya is to give back between 3550% of the free cash flow.

12:54 We believe that we have to keep a dividend even if we know that we're going to have ahead of us a good set of investments of growth initiatives, especially in total and also at Atalaya Mining. But the the board decided due to the good financial position to to increase the the interim dividend by around 25% versus the previous previous year, and this is a 5.5¢ per per share euro cents per per share.

13:34 This this dividend is expected to be paid in September. And as I said, it's an interim dividend, and we hope that we can continue increasing that in the in the final dividend. Now this company is operating well, but now where is our growth? What's the situation of our growth projects?

13:59 For the rest of the year, we'll continue developing this. In the slide in the corner, you see some initial. We continue doing the pushbacks, and they are advancing well. We had a small delay by of by the electric company removing the electric line that's in our way. That's the reason why there's a small delay in the accessing the better grades up from the issue.

14:28 Something of months, not years. At Massimo Verde, we basically we have continued doing all the works on surface, access roads, explosive magazine, which are quite big, excavation of of the preparation for portal, platforms, and so on, which are almost ready and simply waiting for the final decision to to decide to push ahead with the ramp, which is expected sometime in in this later in this quarter.

15:10 At Rutinto, as you know, we are going to be doing some work to be able to process polymetallic material in our mill. The engineering studies are progressing. We have the engineering firms on-site this month to optimize the layouts because we have the although it looks like we have lots of space, we have to remove some of the old installations in order in order to install the the the new circuit and try to optimize and have a flexible a very flexible circuit that can treat both type of materials, the the pure copper that we have right now and the polymetallic. In addition to that, we have been doing lots of test works to produce pyrite concentrate from our tailings due to the strong interest from the market.

16:01 We have had a lots of inquiries and and and companies wanting to to get access to our our pyrite concentrates because, basically, our waste is composed by silicates and a little bit of pyrite, and it's ground. It's quite clean, and it's a perfect stream to be sold into the into the market. As you know, sulfuric market has a it looks like it's it's coming to a point of deficit. And some of the the people that that produce sulfuric acid are looking to diversify and produce some of the sulfuric acid through the burning, through the roasting of of of parrot. Important product in our growth portfolio, as you all know, is total. In total, we are really hoping to receive the environmental pack declaration soon.

16:57 We have been expecting this for for weeks, if not months. We now know that all the the reports have been have been positive. We we have them. We know that the the civil servants are

17:15 are preparing the the the declaration. Unfortunately, we cannot give any additional color of on timing because it's out of our control. We know there's no additional steps, no additional papers, nothing simply in their in their hands to to to finalize the drafting. We believe it can be soon, but we all know also the the the complications that the summer can bring with with

17:46 less people available and so on. But we are quite positive, and actually, we are getting ready for that. We have already completed all the geotechnical studies at the plant site in order to push ahead the moment that the moment that that we are receiving this this final permits at Toro. With what's the plan? The plan of of of Atalaya is is basically that we have said before. We are quite positive in the years ahead. We have several attractive projects, good pipeline of projects in Spain.

18:35 These projects could take us to around 100,000 tons of copper equivalent. Of course, the big contribution would come from total, but also higher rates from and the production of lead zinc concentrates in addition to the copper concentrates from Rio Tinto will also contribute to that. Right now, we are we have the teams, which is very important, very low rotation in our in our teams, experienced teams. And we have an excellent balance sheet with well over 300,000,000 net cash in in our balance sheet and no debt. We will be looking probably to raise some natural debt. And, of course, the the team continues to to to look at new things, to apply their experience.

19:27 They're they have been there in the development of mining projects in Spain in their last years. I would say our teams, some of our people have participated in in the the last mine that were developed in Spain and some in Africa, and we have the ingredients to grow.

19:52 So I think we're very well positioned that in less than three years, we'll be in this almost doubling our our production of copper equivalent in in only in Spain. And we continue to look at any other opportunity that can be around. And with that, I think I will I will open the floor for any questions. Maybe the operator can introduce. Yes. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you would like to Our first question comes from the line of Laura Chen with RBC Capital Markets. Please go ahead.

20:49 Hi. Can you guys hear me? Yes. Hi. Good morning. Thanks so much for the call. My first question is just on the CapEx deferral, which is on San Deniso. Once you move the electric line, how quickly you expect to access those higher grade zones? And what's the realistic timeline for that meaningful underneath your oil contribution to the mill?

21:13 And just on last, you've indicated the Board division is expected later this quarter. Can you just confirm what the key remaining gating items are? What's the construction and first oil timeline look like once approval is given?

21:27 Yep. The electric line is something that has already been contracted out by the Endesa. They probably they're the big company that owns the line and is the main supplier in the South Of Spain. And the timeline, I suppose, only question here is is the the availability of of maybe people or teams during the during the the summer period. As soon as they remove it, we can access that immediately. What I mean immediately is, like, days after that. We have equipment that's it's there. We were mining as close as we were permitted.

22:08 So how this can this affect the production?

22:12 I would say probably late this late this year or earlier this next year. I don't think it will be I don't think it will be weeks. I think it will be months, probably the third quarter the fourth quarter. Almasa Valverde, really not much left. They we continue drilling with two rigs mainly concentrating in the copper zones. The the contractor has been selected. So as soon as we have that,

22:52 the decision to go ahead, which as I say, will will likely be almost September with when everything is on surface is ready, we can get there. The contractor can depends on the speed there and the raw conditions, which are expected to be quite good, can take from two years to three years, we say two and a half years to complete the whole ramp.

23:19 We can access ore probably earlier than that, around two years, but not earlier than that. We will concentrate directly in the copper zone with we will go through an area of polymetallic with very good grades, but unless we have the the circuit Of Rio Tinto already, we would would not be mind that we'll go directly into the into the copper zone with grades between one and a half and 2% copper. So production of copper, I would say, the best thing is two and a half to three years to be conservative. That's that's probably the the time for this this new copper production.

24:09 Telexecutive, like you mentioned, what's the kind of project sequencing look like more broadly? And how are you thinking about staggering these different projects, especially if the Toro permit potentially coming quite not far behind? How are you thinking about construction time lines and

24:25 labor contractor availability?

24:27 Do you see any issues there? In our in our case in Spain, we don't expect any issues. We have already preselected the the contractor, and the this availability of of equipment and and people. That's for total. Both I mean, talking about my contractor in the construction teams, the point of of total itself is not very complicated. And the the key will be the availability of equipment, which we have already a permit from the board to approve it to purchase the key equipment like the gyro crusher, the the side mill, the ball mill, and flotations and filters, which are basically

25:20 fifty weeks between forty five and fifty five weeks delivery time. And we are going to be doing that immediately as soon as we get the environmental permit. So I expect the total project to take eighteen months of construction. Maybe it could be one month less or whatever for commission and so on, but, basically, eighteen months is typical. So

25:48 could be a little bit less, but not much less. We are looking at other products in Spain, in in other places, and look availability of Teams is important. It's it's there are there have been cases where we we have been offered things in South America where, really, we could it would be a big stretch for us, so we would have to rely local total local contractor suppliers, and that would probably be a a problem. But in Spain, Portugal, Europe, it's not a problem. Okay. Understood. Thanks so much. And I'll pass it along to someone else. Our next question comes from the line of Jason Fairclough with Bank of America. Please go ahead.

26:39 Good morning, Alberto. Just a little bit of a question about the polymetallic. Can you talk to us a little bit about the capital cost for this? And when do you actually need to have this ready to take ore? Is this still one or two years away? Well, it's a good question. It was actually the if we didn't mind any any of the polymetallic, we would have, like, ten years ahead of us or nine years ahead of us without needing to to to bring any polymetallic material. So the the the fact of having this polymetallic can allow us to start blending in materials from different places and have a better a better operation.

27:28 When I mean a better operation, I mean

27:30 that some of the future polymetallics are going to be underground. And as you know, going underground for a very large plant is is very difficult if you don't have an open pit to to be blending the the the large chunk of the material. That's the reason why we want to to bring this ahead as soon as possible. And when is as soon as possible? I would say one and a half years is also from from now. The design is very advanced. And what does it include in capital cost? The first pass, we had €88,000,000, and that included installing a finer grinding lines plus all the zinc.

28:17 So additional grinding lines, all the zinc, and lead, and filters in addition to basically, to recover in addition to the copper, the the lead sink. Now we are look and, of course, it also required fine grinding with vertical mills or similar ceramic ball mills. One of some of we are trying to optimize that a little bit, probably reduce a little bit the CapEx, and that's the fine we are in the final stages to try to use the excess capacity that we we would have in the in the grinding side because we have excess capacity. And and maybe try to reduce that €88,000,000. That's the way it would work is that when we are processing only polymetallic, we will be processing higher rate of copper and, of course, lead and zinc, but we will be reducing the the tonnage through the mill. Instead of going at 2,200 tons an hour to the sack, we will be going, I think it was 1,200 or something like that.

29:21 So now we're looking how this excess grinding capacity can be optimized and and still be producing the same material. So first pass is €88,000,000, trying to reduce that a little bit. And when? The sooner, the better. It's not essential. So if it's delayed three years, it wouldn't matter, but it doesn't make any sense. The sooner we can make it, the more flexible it will be for us in the future. And and just I I assume this has got a deferral differential flotation to separate the lead zinc from the Yes. From the copper. Does that mean that you're now giving up on ELIX? Actually, it's a very good question because we are not. I mean, actually, we we are going to go like we are doing differential flotation.

30:10 That's absolutely to offer a for a safe bet. But in LX, we have been working now for hundred days continuously without stopping the plant. Really, it's without stopping. The problem is that it's only running three, four tons an hour. So, basically, it's running, let's say, 90 tons per day of concentrate, and it's processing right now. We made some bulk flotation of several zones specifically to feed this this the plant, which had good copper grade, but also contain lots of zinc. So we are feeding with material that has around 13% copper and around 15% zinc. And LX is is removing the zinc very well and leaving it in around 2% or or even less.

30:59 And and then the copper grade goes to around 16%, which we blend with our normal material. It also recovers silver and and both the silver precipitate and the zinc precipitate, which is a cover rate of zinc with around 45 to 47% zinc is blended with the with this with zinc precipitates to with a trader, and we get paid for it like a a concentrate. So right now, this is working already, but I would call it a a big pilot plant, like an industrial scale pilot plant. So are we giving back, giving up? We will go with a safe with a safe bet. And if we can debottleneck, which we have we are seeing what is the what are the bottlenecks to be able to treat more tones? We know it works. So what is the what's the bottleneck to treat more tones? We see energy is one of the things, filtering capacity, settling capacity of the precipitates, things that are gonna be sorted out very well. So that's not what we are studying. But right now, we are keeping with the safe bet, and the other one is running to make sure it doesn't cost us money.

32:18 The in terms of the polymetallic ores, those are mainly coming then from San Dionisio and Massa Belverde? San Dionisio, San Antonio, and Massa Belverde. Yeah. San Antonio, it's we have almost completed the drilling. It's just east of of Rio Tinto, Indonesia. It's most of it is open pit, and we are looking how we can increase the open pit and destruct much more open pit than underground. And Macelo Verde, in addition to the copper zone, there's there are areas around good good lead zinc and copper grades. We have a few other deposits called Mojarra, Campanari, whatever, which are not even in the resource, let's say, blocks kind of drill, but we're still evaluating, which are also polymetallic.

33:11 Main, material, which is the only one we are counting for this project, is San Diocio Penrithin underground, San Antonio underground, and Valverde underground combined with Okay. Thank with the leftover of the copper stock work at Atalacornado. Mining Our next question comes from the line of Christopher Mainwaring with Berenberg. Please go ahead. Thanks for taking my questions. Just on the guidance to lower copper grades into H2, following this period, could you please just provide some more color on how we should be thinking about the grade profile into early next year? Do we expect some pickup in grades sort of after h two? Thanks.

34:09 Yes. We expect a little bit of higher grades next year, especially when we get the some of the material coming from the upper part of San Denisio kicking in. So I think this next year, you should be expecting in rates in the range of point four. I don't have the plan up here, but I think, yes, you will see better rates next year. Okay. Great. Thank you. And just to follow-up on the earlier question on Helix. In the text of the release, have this statement saying, uncertainty remains regarding the recoverability of the related assets. Can you please just sort of explain what you mean by this? Or is that what you were talking about earlier? Well, the thing is that we, as you know, we as you know, we made an impairment in the investment due to the very bad financial situation of the company that runs Helix.

35:09 And we have doubts that our our investment, which basically we had had, we had loans into Alex, could be recovered. So we were careful to to include this sentence saying that although the plant is working, there's no assurance yet that this would that that to reverse this impairment. It's simply saying, look, it's working and the process is working fine. It's breaking even, but is this enough to change our impairment that we decided in the first part of the year? We are not yet sure. So simply to be conservative. Okay, makes sense. Thanks. And it seems that we have a follow-up from the line of Jason Serco with Bank of America. Please go ahead.

36:03 Alberto, just to come back on Toro. I think with the last set of results, you were making some very positive noises. Toro, any day now. I don't think those were the exact words, but something like that. But it now it seems to be taking longer again. So what's what's the holdup? Look. I don't know. It's you're right. I've been wrong so many times that I almost feel embarrassed here, but I feel embarrassed. What has I have to say because I'm from the region. Last quarter, the reports were ready. They said that they could send us anytime. And, finally, we received them in, I think it was in July or late late early July, totally signed.

36:56 And then they asked us for, okay. Can you make a summary for of the project, like a a compendium of a project? We said, well, why didn't you ask this before? Because it's, 20,000 pages, and they needed that to kind of finalize the EIA the DIA. We prepared that, send it to them with meetings and clarifications, basically, to prepare the the the the the. Why I think now it's it's it's there's no more work simply because they are working already on it. They told us. We know the person that's preparing this. What's holding up? I suppose they are civil servants that politicians cannot go and and and ask them to work if they have a planned holiday on the fifteenth of of July or the August 15, it doesn't matter what they say. They will go out for holidays.

37:59 I suppose this is what's holding up. Really nothing else, but there's no more send me a new summary, a new project, or a new whatever. So right now, it's it's it's final. Also, we also have other signs that are indirect to to justify this, which is they gave us the the permit to do all the geotechnical work, including trenching, including drilling at plant site and tailings, which we completed already, which in theory should be waiting for the final DIA. So there are lots of signs going on there. But when when the guy finalizes?

38:44 We always believed it was going to be in summer. When once they passed a certain point, it was going to be in summer because if they're scared, the politicians sometimes are scared or worried or or about about the the noise, probably probably summer is a quieter period, but but we have had positive environment, the bag decorations, and lots of projects in Spain in any month of the year. So I think it can happen anytime. But could it be in September? Could it be in August? I spoke so. But could it be early September? Yes. Certainly not going to go much more than that because there's no SKUs.

39:32 No excuse. K. Okay. The just a question on the the exploration in Sweden. So we don't wanna get too excited about drill results and intercepts, but still smells kind of interesting. How are you thinking about a a timeline to a resource in Sweden? Timeline is is difficult to say. I think exploration is difficult because, yeah, we have good results, but it would be few million tons. It would be not enough to have a to have a project to be developed. There are two zones, the Scaletti and areas. I think this winter campaign will provide us a little bit more color because until now, we were going very conservative following up interception anomalies.

40:25 While now we are going to do a little bit this this year, we expect to do some step outs to show is there is there something big there, or is it better to to to look at different options to farm it out or to explore different alternatives. So I think this this winter season, which is starting we are already mobilizing rigs in the the North Belt, will be essential to to understand if we have other deposits there that are worth mining by themselves or or or do anything with them. Yeah. It's it's early days. And in Okay. In the in the other Belt and Road leading, it's it's still a little bit early.

41:14 Masculate has a few Okay. Few good areas. Okay. Perfect. Okay. Thanks for that, sir. Thanks. Our next question comes from the line of David Ratcliffe with Global Mining Research. Please go ahead. Hi, good morning, everyone. So my question is just a follow-up to the polymetallic question. So I'm just wondering, does this mean that you're thinking about publishing an update to the 2023 PEA? If so, when would that be? And I guess to what level would that study actually be? And then just wondering, in the work you've been doing, has there been any change to the scope of that study from obviously quite a few years ago now?

42:01 You obviously mentioned kind of a little bit about the plant potential capital, but from memory there's a lot of mine development as well that went with that. So any sort of color on that would be very helpful. That's a very good question. We will have to at certain time update the PA. Yes. When? I would say next year, certainly not this year. You're a 100% right that what has changed from that year, which is how the as you say, already outdated is the timing. Things have slipped, which means the the timing of the blends are different. So I would say that's that's the first adjustment.

42:50 Otherwise, in principle, it's still the same. It's it's basically having a some material being mined from San Antonio. It it there is there we already have the the signs of of access ramps of of mining and and and even preliminary mining designs. The access through San Antonio is through a ramp of around 1.2 kilometers from one of the sites of the Cerro Corralo Pit in the East side. We already have where it's going, the rock conditions, and so on. And we were basically waiting to finalize the infill drilling, which is it's about to be finished. There should be only three or four holes remaining. So that's that basically, what it includes is is a ramp access ramp in connection where there is a shaft there for emergency exit and ventilation.

43:47 So that's one thing. In the case of San Ignacio, most of it is open pit. We we want to optimize that open pit to try to do as much open pit as possible. And and that includes the final results of your technical campaign because the one of the sites most of most of the rock is very good, but there's one side that has some shells that require a much lower slope, and we have to to finalize the technical study, which has been carried out. When is it going to be this update? I would say next year. I don't think we'll have time to do it this year. The scope itself is is similar to what it was previous year. Well, not not big difference. The only thing is what changes is the timing.

44:40 Okay. Alright. No. That's very helpful. Thank you. I'll pass it on. Thank you. And at this time, we have no further questions on the conference line. I will now turn the call back over to the management team for closing remarks. Okay. Thank you very much. Well, only to thank you, everybody, to be here this morning with us. Thanks for your continued support. We look forward to an excellent second part of the year and and finally getting total, which is we are all looking for for that. Thanks a lot. Thanks a lot.