Atalaya Mining Plc

Good afternoon, ladies and gentlemen, and welcome to the Atelier Mining PLC Q2 results presentation. Throughout this presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted anytime via the Q&A tab situated on the right-hand corner of your screen. Just click Q&A, type in your question, and press send. The company may not be in a position to answer every question received during the meeting itself. However, we'll respond to all questions submitted today where appropriate to do so. And these responses will be available via InvestorMeet company dashboard and you'll be notified once they're ready for your review. I'd also like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Alberto Lavandera, CEO and Cesar Sanchez, CFO of Atalaya Mining. Good afternoon.

Thank you very much. Welcome everybody to this Presentation, that's the first time we do, thanks to this technology. With me, I have Cesar Santiago, our CFO, which is somewhere down south of the mine, and Mike Restainer, which is somewhere in London. And I'm sitting in the north part of Spain, close to the total project at this stage. So I am going to make a brief presentation of the company, assuming that some people that may be interested in this company are not shareholders and do not know the company. Sorry for those that know the company, but at least I would like to have this short introduction. And after that, we'll have some time for questions. So I suppose everybody has the presentation in front of them or can access through the So in the first page, you will see what we are mining right now. It's in Spain. It's called Cerro Colorado. It's an open pit producing copper in the north part of Spain. And we are located in slide five. We are located very close to Sevilla, about one hour from Sevilla. We have another project. about 20 minutes from Santiago, the capital of Galicia in the north part of Spain. You won't find mines assets so close to places where you can fly in from London and be there at the mine in less than one hour. We are a copper producer in a fantastic country with consistency, and I would try to emphasize that. Always, we always, always perform our targets. Some people say we are boring. Well, we like to be boring. Boring investment is quite a good thing. Always, no surprises, especially no bad surprises. We have a long life, strong pipeline of growth, and we have delivered the core, so trust me, we will continue to be delivering. And we will do that because we have a fantastic team, people that have built several mines in Spain and in Africa, and have done it before, and this has been the key to the success of this company. And just in the same page five, I'm going to ask you to point to the figure of market cap of the company. Enterprise value is around $550 million. That figure is important because we will see what is the type of cash that we are generating compared to this figure. So turning into the next page, which is six, you will see what are our assets. We have a producing mine with 700,000 tons of copper. We have another deposit besides it, which has around 800,000 tons of copper plus over 1 million tons of zinc. And then about 25 kilometers from now, we have another 400,000 tons of copper and a similar amount of zinc. So in our reserves, In our valuation, in our mine life, we only have the first 700,000 tons of copper enough for 12 years. Trust me that this rest of these resources are not going to stay in the ground. So the mine life is not going to be 12 years. It's going to be much more than that. In the north, it's around 700,000 tons of copper when you consider the copper prices who will stay as we are right now. So if I pass to the page, 7 briefly it just shows a picture of what the installation of Rotinto looks like there was nothing there four years ago all that has been constructed from scratch that shows you the capability in that picture you will see timeline timeline was in 2015 we started with first production I joined the company with my team in mid 2014 after I would say, ages of permitting, we got that up and running in less than one year. One year later, we expanded the first time. And two years later, we expanded the second time. And we tripled the production from that asset. If I turn to page eight, you will see how the growth of production of ore ponds treated through our installations have grown from 15-16 at the different stages of expansions. You will see there two important things. One is the consistency. We always deliver going upwards. And second, a figure that for some of you that are not familiar with it, which is a capital intensity, that the capital cost, the investment divided by the copper production. And that is very important because it tells you how efficient you are with your capital. It may be low because you are in a fantastic location with very good infrastructure like we are. It may be low because you care about the money, because you look at the best offers, because you don't give it to a turnkey contractor to do everything by themselves. Our cost of less than $5,000 per ton is one-third, one-third at least, of what it costs to replace production. In other words, somebody could pay double by our share price and say look i would like to pay for this company x million and it will still be cheaper than building new production this is like the price of let's say a house or apartment in the center of london when you see that it costs less than the bricks is there it's a good thing these people are doing a good job i think that's That picture of how we care of the CAPEX and how consistent we are is essential to be able to invest in our company. And what do we have besides Rio Tinto? Well, if you look at page nine, you will see a map. In that map, you will see some red stain in the center, which is called Project Rio Tinto. That's where we are. Left south, which is west south, is Maza Valverde. 29 kilometers, and to the right, an area dashed with green. Those are our mineral rights. In red, the stars, arrows, are existing deposits. That's the pirate belt. It's full of deposits. West of us, that's left in the picture, you will see Aguas Teñidas, Badalena, Sotiel. Those are mines being managed and operated by Mugadala and Trafigura, which right now, they're on sale, by the way, for a price tag of $1.5 to $2 billion. They have a center hub where they transport the ore from the two other mines south and west to a central mine in Aguastanides. We are going to do exactly the same thing. So our future expansion does not need new installations. We already have set the foundations for that further expansion of whatever we find in the concessions that are shown in green. That's the key of our pipeline. Why I insist so much in a pipeline? That's in page 10. I insist so much because investing in a mining company requires long life because that means optionality. It means you will have lots of years where you would still enjoy some good prices. Remember, for those of you that are not familiar with our company, when we came here in 2015, the mine life was 12 years. We have been producing six years and the mine life of Rotinto is still 12 years. By doing that, by extending the mine life and spending inspiration like we did, we now are enjoying still lots of years on good prices. It's very important that the mine life is long because that's the essential sustainability of a mining company. And that's what we show in page 10. We have routine to producing in the right side. We have total getting permits with the facility study completed. Something called ELEX, which is basically a system to add value to other assets. Then further to the left, we have impermitted MPA what we call Mazabal Verde, San Dionisio, and San Antonio, which are additional deposits which are going to pass through the same stages that we went through with Rio Tinto. And then forward to the left, we have Mazabal Verde, Majabales, which is a new discovery, and the whole concessions of what we call Rio Tinto East. It's essential that the mine line goes beyond 15 years, 20 years, the maximum possible. That will give you time to find more and to create value to the shareholders. We love copper, and all these concessions contain mainly copper. If we go to page 11, you will see why we love copper. I'm not sure how familiar you are with copper, and excuse me if I state the obvious, but copper has only one way to go. up and the reason is look at where's the supply coming from peru political problems chile they're going to implement a huge tax zambia congo i lived there seven years one of the most unstable places in the world perfecting is getting more difficult all over the place not only in spain in the us in chile there are no new discoveries because companies have not invested in the last year when the prices were low so at the end what means that bringing new mines in production is very difficult just takes time but in the other hand we have politicians saying hey we need to have more copper because we want clean energies we want green energies so at the end we want more copper we need to get the stimulus We need to do something to fight the COVID. We need to do investments. If you do investments, you need electricity. If you need electricity, you need copper. Everybody likes to live in towns, so towns require more copper. Electric vehicles, where the hell are we going to get the copper for the motors and the grids to load them? So then we have a lower supply, higher demand globally, and that means the copper price will have to go up significantly in order to maintain production and also to incentivize new products coming on stream. And before getting into the results itself, which is the main purpose of this call, and before getting into questions, let me show you in page 12 where we are versus others. First, I will show you in page 12 how we are in size. but especially what the market is telling us, the consensus of what the beta should be in this year. They are saying that we are going to have, based on consensus, 200 million U.S. dollars. Remember that figure I told you in the first slide. It was our enterprise value is 550. So we're going to have a beta of just shy of less than two times well, a little bit more than two times EBITDA. And the free cash flow, they're saying we are going to have around 93 million. Well, that means the rate use, if we go to next page 13, the rate use of enterprise value versus EBITDA is 2.7 times. And free cash flow yield is 17%. And compared to what other peers have in our universe, like your copper, Tseko, Central Asia, Copper Mountain, all of them much higher than us. But that's based on consensus. The reality is that the results have been much better than that. So if I summarize what we have been doing in the first part of 2001 before letting Cesar go through the results, I would say that during the first quarter, first half of the year, we continued performing. Consistent, consistent, consistent. In good cover prices and with very good controls of costs. If you look at our expenditures, it had been very consistent and similar to the previous quarter. As a result of that, with higher cover price, more cash flow. And of course, our position of net cash position, it continues to grow. We continue to delivery, delivery, delivery. That's the important thing. We have additional reserves. We highlighted what we have in San Dionisio. We are already reducing the costs by installing water thickeners, by installing solar plant. And what are we doing in the future? Well, finalizing all these reports that are needed to give full value to the reserves and resources at San Domingo Planes in San Antonio. So we have started for the three 101 technical reports in all of them, which as soon as they are available, it will be given to the market. And of course, we continue to like what we have in TOTO and we are doing big effort in TOTO. And I'm a strong believer that we will get the permits of TOTO this time. And now I may pass it to Cesar to speak a little bit about the financial results and economic results that are shown in page 16 and 17. Cesar, do you want to go?

Yeah. Thank you, Alberto. Hello, everyone. So on page 16, we have a summary of the H1 2021 production results. We also have some historical production metrics since we started the operation in Q1 2016 for the output for the copper production. As you will see, since we started consistent in our production, as you can see in the trends in the metrics on the graph on the right-hand side, we have been producing steadily since the beginning of 2016. Growth, we have done two plant expansions from 5 million tonnes per annum in 2016 to 9.5 million tonnes per annum, and then to 15 million tonnes per annum to get to the 16th 28.3 thousand tons of copper production in 2021. And we also deliver copper production. So we have delivered since the beginning with no exemptions, not even when we were in the transitions when we were funding the plant. So as Alberto mentioned, it's almost boring to keep the production levels very quite steady. In terms of guidance that you have on the bottom, the guidance that we have released at the beginning of the year, which remains unchanged. But given the production level during H1 2021, we expect to be towards the end of the production and therefore towards the lower end of cost. But again, we're being conservative. We still keep an eye on COVID, for example. On slide 17, that's on the next slide, we have, if someone can just click for the next slide, please. Thank you. On the next slide, we have a summary of the financial results of Atalaya for H1 2021. So we had two continuous quarter delivering production, as I mentioned. So good production levels together with high copper prices means high revenues, which amounted to 197.1 million. Atalaya has a high leverage to copper price. So if you're bullish on copper price, as we are in the future, revenues level will continue or even increase the level that we have in the first half of 2021. So good revenues followed by a good cost control policy means better debita, which amounted to 99.4 million for the six months and a net profit of 66 million euros. On the cash flows, we have generated 71 million in operation cash flow. And as we don't have to invest much annually to run the plans, we have a good level of free cash flow amounted to 53.1 million. So it's a representation of a good level of cash generating ratio from EBITDA. As you can see, the impact of the cash generated by Atalaya on the bottom right graph, where we have the net cash debt position of the company since Q1 2016 showing a negative working capital of around 40 million, which increased to a negative working capital of about 50 million in Q4 2016 and Q2 2017. You can also see the improvement due to the equity raise that we did in December 2017, where we raised 31 million sterling and then progressively improving all the way through to get to a positive net cash position of 37.8 million as of 30 June 2021. Now, if you see the cash generated by Atalaya in Q1 and Q2, you will easily get to the expected cash balance at the end of the year as we're building up cash at a very high speed. So in summary, the main metrics for the balance sheet are on the bottom left where we have cash of 92.9 million and continue growing. We have 55 million in borrowings that will be repay over the next three years up to December 2024. By the way, these borrowing are unsecure and have an average rate of 2%. This gives us a net cash position of 37.8 million and a working capital surplus of 90.9 million, as I already noted.