Atalaya Mining Plc

Good morning and welcome to the Atalaya Mining PLC Q3 2024 financial results investor presentation. Throughout the recorded presentation, investors will be in listen-only mode. Questions are encouraged and they can be submitted at any time by the Q&A tab that's situated on the top right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO Alberto Lavandiera. Good morning to you, sir.

Good morning. Thank you very much, Alejandro. We are here to review the financial results of the last quarter, Q3, and year-to-date. Thanks, everybody, for being here. Most of the production numbers had been pre-submitted, so I'm not going to be reading all the numbers as they had been already announced. But it's worth saying that... that production levels of copper had been similar a little bit better than previous quarter 11.9 million a thousand tons and year to date 34 000 tons and what i think is the highlight of this quarters are the all-in costs were 329 and 326 year to date so it's slightly higher than previous years and other other than that the production and everything has been quite consistent with previous months. As a result of this production, our EBITDA was around 17 million euros and 53 million year to date. And we remain in a good cash position and good net cash position because we have been able to generate cash flow while we maintain under control our investments. Let me go through the graphs, which are much easier to explain and to show you. And then we can advance also a little bit what have been the developments of the company during this quarter, which have been lots. And how are we going forward? So the first graph shows the tons that we have processed which means the plant has been performing well and actually has reached almost a record level since we started up around five years ago. This has in some way compensated all the things that were not that good because we had very good decent copper recovery similar to the previous quarters and production was slightly better previous quarters at 11.9. So the reason of this lower production, basically, although we had more tons, similar recovery, we had low grade treated, 0.33% of copper, which I will explain a little bit what's the reason for that and how these things are going to be changing in the future. As a result of that, As a result of that, our sales were slightly lower than previous quarter simply because we had a slightly lower copper prices. Of course, that translates immediately into EBITDA and also immediately the same thing in the net cash position. As you can see that the lowering in revenues EBITDA and cash has been basically the same. We still maintain a good working capital position, slightly lower than what we had nine months ago, but still very comfortable and quite good after having invested a significant amount of money. I think the good point here is to show the operating costs. The operating costs for the nine months have been 195 million euros, which is almost identical to the 195 million that we had in the previous year. This means that since we have been treating a little bit higher tonnage through the plant at around over 12 million tons, almost 12 million tons of material through the plant, it means that our cost per ton have been 16 point, a little bit less than 16.1 euros per ton versus 16.7 euros per ton previous year. This has implications. What does it mean? It means that we have controlled very well the inflation. So some things have been going down like diesel and like price of bowls and of course the energy. And by treating more tons and keeping our fixed cost down, we have been able to maintain the cost per ton at the operations and why is this important well because at the end our costs are driven by two things first is the cost of operation per ton second is the what copper you produce which is a result of recovery and grade recovery has been maintained more or less okay while grade has gone down and this is important because we believe and we are seeing it already that we are going to be getting better grades which means that with better grades having control on the cost per ton we'll see lower costs per pound which is what matters The cost per pound that we have got is around $3.26 per pound, which is slightly higher than the guidance that we had, one cent. But we believe that in this quarter that we are right now, the fourth quarter, it's going to be lower because we are seeing better grades. So we will be within the guidance and still well under control. Looking a little bit more into the details of the mining, you will see that the mining costs have been going up, like the processing costs have been going up, and other sides going up. But if you make the calculation, you will see that this is directly, exactly directly linked with the lower production. So when you multiply this by the pounds produced, and divided uh and divided by the tones you will see that this have been quite constant as i said before this is what we can control what's out of our control only part is off-site costs and you have you will see two things there that the freight transport and things which are related to the to the metal produced so they are not linked with the grade, basically, of our production, have been kept quite constant. But you will notice, and that's something that has happened already in the previous quarter, that we have a very large by-product rate, which is basically 37 cents. It's almost more than four times what we had in the past. And this is due that this is part of our controls, is because we are blending in some higher grade silver ore that goes through the plant. It's very soft ore. It doesn't contain copper, but it contains very high, very good grades of silver. And since the silver is, we can recover most of it. It means that our concentrates used to have 60 grams of silver per ton of concentrate. And right now they're having around three times higher, 180. So By doing this, we lower a little bit the grade of the concentrate because we are introducing more pirate, which doesn't have the silver, but we are well compensating the offsite costs, which are reduced by over almost 20 cents and overall this results in a benefit for the company actually the byproduct rates are over 15 million if i remember well in this first nine months so this is this is the good thing so let's say that we are going through an area with a lower grade of the mine or rating in federal colorado which was more or less known but we are compensating that a little bit with a with the silver credits All in, the rest things are quite in line. We are keeping our overheads well in line and all the rest of the things, sustaining capital and corporate costs well under control, even lower than used to be in the past. With that, compared to peers, we always benchmark with peers. We are slightly higher in the last four quarters, five quarters, but well within within the range that we have always been in this last couple of years. And guidance for 24, we're maintaining it. It looks like we are going to be treating tons at the plant in the high range. The grade is expected to be slightly higher in the last quarter and it's going, it's been higher. So we will be probably in the low range of the guidance of around 45,000 tons of copper. As a result of that and slightly in the high range in the C1 cost and in the all-in cost, we always report all-in costs. And we are in the low range in sustaining development, basically the development of San Dionisio. And there is a reason for that. And the reason is that we are seeing better cost in mining. So it means that we are not spending as much in San Dionisio as needed. And also the fact that we have this delay, the delay in the permitting is also slightly lower than we had anticipated. I will talk about this thing of the permit in a second. So now going back to the, what have we been doing in this quarter? Finally, we have seen the connection of the solar plant. The solar plant is finally connected, is ready to, to connect to the grid. Sorry, not to the grid, it's connected to our grid. It's still not producing because we need a kind of stamp from the electric company to connect. But this is something that we expect either this week or next week maximum. It's the official, let's say, paper, that's all. But everything is done and approved. And finally, we have got this out of the way. Remind you that this thing is going to provide around 22% of our electricity needs in the future. And this will also be a further reduction of cost in the future, in 2025 and beyond. So, in the initial, you know, we have flagged the delays of the permitting process because we incurred in a different permitting process that we had anticipated in the beginning of our plans. But actually, we are not going bad when we compare it to the revised plan, the authorities have allowed us to go and to mine a pit, intern pit, which is providing the ore. You can see it's quite advanced. And we have already gone through the most complicated and lengthy part of the process of permitting process, which is the public information, like the public information period and we this thing has gone through with minimum allegations actually almost nothing and uh we are very confident we will be getting the environmental permit of the sandinicio at the end of this year or maximum in january so and without any uh any problems at all so for me the the possibilities of not getting the permit of sandinicio is is are I don't think it will be any problem at all. And of course, the idea here is to blend higher grade, which we are already starting to blend with this interim pit and be able to get higher rates combined with the grades of Cerro Colorado. In Maza Valverde, we have been also doing a lot of work with one rig, drilling some deeper stuff. The plan we have here is to start a ramp waiting for some final paperwork and buying some land of the portal the plan is to start a ramp to develop a ramp in 25 early 25 and we have not provided the information of what were we going to mine here but if you look at previous previous press releases you will see that the area of Masa Valverde contains an area that has around 2% copper drilled from surface with true thickness over 20, 30 meters thickness. And we are continuing to drill this area to confirm exactly the shape while we get to the ramp. So that will be our first focus to try to get to a high copper area to be able to blend in our installations. It's clean copper without any other metal. So we've been quite active in that front. In ELEX, although I'm always disappointed for the lack of speed of progress, I realize that this is a very difficult and very different process. It's encouraging the pictures I'm showing right now. For those of you that are familiar with the treatment of copper, concentrates with charcoal parrot. you know that leaching copper chalcopyrite is extremely difficult. If not, it's almost considered impossible. And you can see that it has been done in this few months, producing a copper precipitate, which is this thing called kind of green-blue in the center, zinc precipitate in white, and re-dissolving these two precipitates, copper cathodes and zinc cathodes. So this is with a new plant, which is working, although with lots of commissioning issues. Commissioning issues only related to the lack of experience of predators or teething issues or problems sometimes with the filter, typical commissioning things. And since it's a totally new method with totally new people and something that's basic needs to be developed. It sometimes once in a while gets issues with the production, continuous production, but has been working for some weeks in the continuous basis, leaching copper sink concentrates, so copper with sink concentrates. Why is this important for us? I mean, it's not essential. We are not in a rush. We are quite patient. Of course, I'll be disappointed with the lack of speed. But this is very important because I don't think leaching copper concentrates, clean copper concentrates will be economic due to the very low prevailing treatment charges in the market today. As you know, treatment charges with clean concentrates, the benchmarks are being set very low. And with that, there's no way anybody can beat the conditions given by smelters. You can sell almost everything to the smelters. But in the area of San Dinizio deeps and in some parts of Pasa Valverde and some of the deposits that we've been drilling, we have not announced resources yet, we have complex sulfites, which have a mix of copper and zinc. based on the test work that we have done and historically was done. At San Dionisio and San Antonio, the recoveries assumed in our PAA, in our studies, were 58% copper and 75% zinc. With those, the project was very economic. But using the system, ELIX, we were able to get a high bulk concentrate of around 85% recovery for both, and then leaching over 90% copper and zinc, which means we will get between 15 and 20 points high recovery for this type of concentrates. And that's why we see this is very important. So we see the system works. We now need to fine tune to make sure it works continuously. And of course, it is economic. Otherwise, if it's not economic, we will have to find the right concentrate to be able to make it economic. But I'm quite encouraged to see that this thing has been working Continuous ways even with all the hiccups of problems with filters problem with retro winning, you know things like that Which are really nothing to do with the principle of Alex, which is what's very difficult to reproduce Total without any question is the value driver of this company. It's the next thing so I have been having lots of meetings in in Galicia with lots of people attending and big support from the local communities. What I'm pleased to report is that all the papers are finished and ready for the public information, which actually is only waiting for the official Gazette to have a space to be published and that we have absolutely no opposition. So I'm quite confident that we will be getting the public information consultation through during this year before the year end and at the same time the next steps are that the administration will have to prepare the sectoral reports which will be prepared at the same time we are in public information and in the first few months of of 25 we believe we are going to be getting the a positive environmental impact declaration, which is the key step before development of this project. And we still see this thing happening during the first half of 2025 from all our conversations that we are having. As you know, The Junta de Galicia, the local government, has declared this project of strategic interest, which means they, by law, they set a one-year timeframe period to give you the authorizations, which would be given, I don't remember, I think it was first part of June. I think this is an excellent thing. I have an additional thing that is not mentioned here, which is redomiciliation. It has taken a long time. We are already in, the main market but finally we have the final hearing of local court in Cyprus which should be something very short and very simple to let's say give the final authorization with all the papers blessings and everything it's sort of the preset for the first days of December and with that in also in another 10 days or two weeks we should be able to have a full domiciling in in spain the effect of that is that in the next revision of the index in in the main market which will happen around march for sure we'll have all these papers ready and we would be able to to be included in the uh in the index which also we believe is going to improve a lot the liquidity of the so things are progressing well of course we have this disappointment of higher costs due to the lower production not unexpected but we were i would say quite effective in being able to control those costs in the circumstances so with that 20 minutes i think i can go into the question and answer

Perfect. Alberto, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do that just by using the Q&A tab, which is situated on the top right-hand corner of your screen. But just while the company take a few moments to read the questions that have been submitted today, I'd like to remind you that the recording of this presentation, along with a copy of the slides on the published Q&A, can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Now, Alberto, if I can just hand back to you to read out the questions and give responses where it's appropriate to do so, I'll pick up on you both at the end.

Excellent. Thank you very much. I will start with one which is in Spanish, but I will read it in English. What is the current situation and expectations on the future for ELEX? This is in Spanish. I mentioned before, right now what they're doing is treating material copper concentrates. Actually, we are treating copper zinc concentrates. Concentrates we have around 12% copper and around 10% zinc. So basically, it's a bulk concentrate coming from a mix of San Dinizio and Colorado. And they're treating it in continuous continuously and producing precipitates, which are later released and produce copper cathodes and zinc cathodes. Right now, I would say they are going at half of the capacity of the design of the plant, simply because there's lots of stops, stops related to to not to the leaching system, but basically through winning system or filters or simply typical commissioning issues. What's the future? The future I would say is the next year should be self-sufficient. The plan should be working producing positive cashflow. and with the right feed. The right feed could be copper sink or a copper sink to remove the sink only and leave the copper. This is still not decided and it will depend on the economic results of each of the tests. The next question is, when will the grades increase or is it 33% the new normal of the existing mine? No, no, it's not the new normal. The reserves grades are higher than that, around 37.37%, without including San Dinizio and also without including some new areas that we have been drilling, which could extend the mine life of San Dinizio. of Federal Colorado, the existing pit. So, I don't know, the grades will go up, will go up without even mixing San Dionisio, but this is whoever checks the production plans that were in the PA, you will see that during 23 and 24, we were going through a low grade period. Actually, the plan at that time, the PA, was to produce 50,000 tons of copper in this year. But it's true that we were expecting to blend San Dinizio already more in 2024. And due to these delays of permits, we have not been able to blend as much as we wanted. The next question is, will the byproduct silver positive contribution to all costs be a recurrent going forward or is it just one of this year it will go a little bit beyond this year and in the next year but they will not be forever so it will be one year two years maximum as far as i know the next question is will you give us more color about or grade evolution entry in 25 should you spec production of about 50 000 tons next year and the official timeline for total project thank you we have not given high guidelines of uh 425 yet but yes we expect it to be higher than this year yes i think will be in the range of 50 000 plus uh from preliminary plans And the official plans for Tolo are going to be during this year. I think we'll see the public information anytime. What I mean anytime is we are waiting for the publication in the Diario Oficial, let's say the Official Gazette of Galicia, with all the papers already submitted, everything signed. During this period, we will... get the reports from all the departments from the Junta, which have been already positive to declare it strategic, so we don't expect a problem there. After that, we'll have the period of receiving delegations and answering them, which will happen likely in January and mid-February. And from there on, it's time for them to issue the declaration, which I think it can happen sometime at the end of the first quarter or not about. Of course, that's what I believe. But in theory, they have until the end of May or something like that in order to give us the full permits. And so far, indications that everything is going according to schedule. Next question. Have the mining operations or exploration works been adversely affected by heavy rain and flooding in Spain in recent months? No. Nothing happening in this area. Well, we had a lot of rain, typical wet season autumn. But three years ago, we had a drought, and we were very worried about not having enough water in the tailings. Now we are OK with the water, and we have more enough. But we didn't have any problems at all. same there's another question similar weather events in spain's the way impacted atalaya total potential years in spain you consider investing in we continue to there's no no effect in our presence as i said and we continue to invest in inspiration in the southern part of the whole field pure exploration there with no special news there and we are considering investing in Let's say that there may be some use of investing in new areas of exploration, but we have not made them public yet. Spain's a world leader in renewable energy, and second in Europe in installed renewable capacities, wind and solar. Will Atalaya consider continuing growing solar plants 50 megawatts? A second find would be much easier and quicker. one of we are considering the possibility of building at a longer term a very large plant but this is something totally independent of the of the existing one. We are looking at installing a new tailings pond and having then space in the existing tailings for 400 hectares, very close to some stations. So that's something that's being contemplated, the possibility of installing a huge, large solar plant in this area with all the things. That's something that we're considering, but a totally separate business related to the mining. The next question is, post-mining in Atalaya, the next 20 years, Spain is a leading destination of data centers, massive investment over the next decade. Microsoft, 6 billion euros, Blackstone, 7, Amazon, 16 billion. Atalaya has clean energy, land infrastructure, we look at this. Actually, this is exactly my point. My point before is that we are very close to an area where we can install a very good solar with also good possibility of wind in the area and connect it to a grid We have basically clean water. We have all the ingredients with something that we're looking at and we are actually we are talking about All this with a with an expert on these installations Next question is Alex given how long it has taken in generosity fatalia. Will you renegotiate the current deal? Would this be a fair move? Well? Let's say that we have already given a kind of deadline to the owners that any money will come with equity and participating of this. And yes, I think in the future we may have a little more participation than we have had in the past. Next question is, after the update in TOTO, when do you think you would start operations there? This is realistically, when do you think you will be able to sell copper from TOTO side? If things go as expected or what we are seeing of having permits by mid-year after environmental permit, mid first half and then full permit mid-year, we will be ready to produce, to be in production of concentrates before the end of 26. There will be 15 to 18 months of construction. We have already the team, the financing quite advanced, identified all the equipment, the long lead items, everything. So I think we will be able to sell copper at the end of 26 or maximum beginning of 27. told official Gasset when, how soon could it be approved and how soon could it start work on the first production? I think it's the same question before. I think it would be approved. The first thing is environment pack declaration, which normally happens three months or four if after the public information and then then the approval of the project follows at around two months simply to prepare the papers to to put the conditions of the environment impact the statement the next is uh can you please explain why profit and earth's pressure is so much lower this quarter since evita is comparatively only a bit lower um i think it's It's probably a matter of the precision, which is higher. And to be honest, I don't know exactly why the precision is higher, because that's the only reason. I don't know if this is correct, and maybe if Fesla can check it in the meantime. I think this is the main reason.

Yeah, Alberto, it's all the items that we have below the bitdap, basically. OK.

What is the time expected for total permits, final authorization, construction, production, CAPEX, risk of delays? It's what I said before. I think I answered that one. Mid-year have final authorization, construction 15 to 18 months, and CAPEX is around 250 million euros. The risk of delays are basically linked with getting or not the permits. I don't think the plan is quite simple, very similar to what we have installed and actually much better because it's with new equipment. Are you still looking for possible acquisitions? In the past, you said prices have all been realistic. Has the climate changed overseas Europe? Well, let's say that we are looking at something in Europe, which is in advanced exploration and it's in Europe. and reasonable reasonable costs what are the difference in processing silver recover from processing copper and zinc nothing nothing special simply right now the the cereal we have recovered in the concentrates simply because it floats but cinema material has very low copper so it's very soft material it's an enriched area so the we put that from the plant we it goes into the copper concentrates without any change in the process itself. Do you think there's still a lot of copper to be found in Spain and will the government let you mine it? Yeah, the government here specifically in Andalusia is very, very proactive and pro-mining. We don't have any issues. Maybe people will perceive the delays in San Dionisio, but the reality is that mines are permitted, we get full support and things go much faster. than in other countries. So, yes, the Garvin will allow it to mine it. In the case of other copper in Spain, well, the Pirate Belt is the best place. And, of course, there's much more in the Toro area. And I think things will improve a lot once they start producing in Toro, because they will see a very nice mine. Next question also related to TOTO. In the case of TOTO, how easy is to construct once the permits are received? Are you looking to finance and source from this project? It's quite easy to construct. It's very similar to what we have done in the past. Basically, it's a sack mill, a ball mill for recycling and flotation and filtering. Very similar to what we have done with the same people. So I don't see any problem. Looking at financing sources, yes, we have been already dealing with local banks in Spain at several cases. We have also been looking at And we had lots of interest shown by off-takers, traders, and smelters to give us, and also some, even some local companies interested to put some money into the ground at project level. So we don't think financing would be a problem here. When would the high rate of ore start to be blended in Saint-Denis? What would be the grade uplift? Well, it depends on how much we blend. We are looking at blending around 20% at this stage, which if you blend something with 0.35%, with something with around 0.7 or 20%, it would give the grade would be around 0.4 to 0.42%, which is a significant increase if you consider 16 million tons treated. Do you have any intention to continue Atalaya as a standalone or independent business for long term? How do you plan to fight a hostile offer given you no longer have a poison pill in your article of association? That's a good question. Well, it's quite difficult to fight a hostile takeover, but I don't think it will be any hostile offer. offer, considering that we have two or three shareholders that together get almost 50% of the company. So we have Trafigura with 22%, Cobas I think is now 17%, and a few other Spanish shareholders and and insurance companies which together you can get another easily let's say 15% with three or four hands. So I don't think any hostile will have any success if these people which have basically over 60% of their company do not think that the price is correct. Do you have any thoughts on the process of Lundin's never scoring? Well, it's interesting that we are only looking in the distance because obviously if that thing is successful, it will show a big, huge interest in the Pirate Belt and obviously in some way will benefit because it also gives a kind of indication of what's the value, the real value of Atalaya, which is much higher than it is right now. What is the total amount in capital investment and the total in production? Around 250 million euros. Can you update us? Next question. Atalaya ranking ESG. Some investments were collected and invested in 2023. Are you starting to see any dividend? Do you have the ranking that we got from the ESG?

Not the actual ranking, but we've been doing a lot of documentation and we have improved quite a lot. Now, when discussing with the rating agency, we have some difficulties contacting with them as normal. And I can see that some of the rankings, for example, I'm thinking of one specific house now that decreased their rate, but they didn't even look at the sustainability report that we produced in 2023. So sometimes it's just that we need to engage more with them. And this is something that we're thinking about doing in next year, just to have a little bit more engagement with them, which obviously will have a cost on our side. But it's just to ensure that they go through all the documentation that we have publicly available. But for the time being, I think we're maintaining some of the rating in the agency to basically download the rate that we have for that. But I don't think that is capturing all the information and all of it.

Thank you, Cecil. The next question is, will the dividend policy be reviewed and buybacks considered instead of dividends? This will be better for UK shareholders as withholding tax will be applied for dividends to dividends after domiciliation to Spain. Well, this is something that has been considered in the past by the board, the possibility of buybacks, and probably very likely in the future we'll see a combination of both. Will you please give an update in the development plans for plant upgrades, required process of polymetallic sulfides, CAPEX timeline, key work items, et cetera. Right now, what we are doing is doing additional test work with different, we have had four or five different companies doing works, both in bulk concentrate, production of bulk concentrate and production of differential concentrates. The studies that are ongoing are basically to decide if it's better to produce first a global bulk concentrate, which later you regrind and separate differentially, or if it's better to have a kind of two separate lines where we would split the existing plant and we have that flexibility and having a separate line for the polymetallics and another one with stock work. Right now that's work ongoing and capex, let's say very wide range between 50 and 100 million. Timeline for construction of this product would be 26. And as I said, working on projects, we don't have a, we have like four years of, five years of only stock work. So where we don't really don't, it's not essential yet. When talking about potential acquisitions, how much room do you think you have available in your balance sheet? How big such acquisition would be? depends on how we buy. If we buy with cash, not much. If we buy with shares, I think depends on the value of the other company. And then what we are looking right now is smaller joint ventures, small companies, small things of where we would go basically to exploration. We did something that was much larger This size we have been looking in the past our size is equivalent To to our company. So basically doubling the size Not not we are not looking at things of 1 billion or sorry 1 and a half billion 2 billion. We're looking at things of between 200 to 500 600 it has always been the case in the past Okay, that's the last question 28 questions, that's excellent Thank you very much

Alberto, thank you very much for answering those questions. Just before redirecting investors for their feedback, which is particularly important to you both, I'm just wondering if you had any closing comments.

Look, the closing comments I think would be that this quarter from the economic point of view has been difficult. We expected that because we had low production and as I said before, our cost per tonne and if you use less, your cost per pound is higher. The good thing is that we have kept the cost per ton constant, we have been fighting inflation and we are keeping that under control, which has a good result, which means once we get back the grade, and we will get it because we have always had very good reconciliation in our pits, this cost will go down and we will continue generating cash flow. Second thing is that we believe that we are just at the beginning and the copper price is going up, so we will also see a benefit there. And this benefit will come in the right moment because we believe we are going to have an additional production coming from Toro and from the better grades from Rio Tinto and also from the better grades that we may find from the development of Masal Verde, which probably in less than two years we'll be able to also bring some more from there. So I think it's encouraging that we see that the the costs are maintained under control and the rest will change in the right moment. I think it's about a quarter, but we are seeing the end of the tunnel.

Perfect. Alberto Cesar, thank you for updating investors today. Could I please ask investors not to close this session? As you know, we automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but some shall be greatly valued by the company. On behalf of the management team of Atalaya Mining, PLC, we'd like to thank you for attending today's presentation and good afternoon to you all.