Atalaya Mining (ATYM) - Technical Analysis & Due Diligence

Atalaya Mining is a fast-growing AIM and TSX-listed mining and development company that produces copper concentrates and silver by-products at its wholly-owned Proyecto Rio Tinto site in southwest Spain and is currently under expansion. The company has a phased, earn-in agreement to acquire up to 80% ownership of Proyecto Touro, a brownfield copper project in northwest Spain that is currently in the permitting stage. 

Merlin Marr-Johnson caught up with Alberto Lavandeira, CEO and Director, Atalaya Mining. Alberto has over 42 years of experience operating and developing mining projects. As CEO, President, and COO of Rio Narcea Gold Mines, he built 3 mines between 1995-2008. He was also involved in the development of the Mutanda Copper-Cobalt Mine (DRC) during this tenure with Samref Overseas S.A. as a Director.

Company Overview

Atalaya Mining strives to become a leading multi-asset copper producer in Europe, maximising the potential value of its low-cost, low-risk assets and exploring new opportunities. The company was founded in 2004 and is headquartered in Cyprus. EMED Tartessus S.L., Eastern Mediterranean Resources, Atalaya Minas de Rio Tinto Project UK Limited, Winchcombe Ventures Ltd, Tamari, LLC, Emed Mining Spain S.L.U., Atalaya Financing, Limited and EMED Marketing Ltd are the company's subsidiaries. The company is listed on the Toronto Stock Exchange (TSX-V: AYM), and the London Stock Exchange's Alternative Investment Market (AIM: ATYM). 

Atalaya Mining has a copper-producing asset along with a pipeline of projects in Spain. The company expanded its production from 9Mt to a 15Mt throughput and is currently producing 55,000t copper per annum. It restarted an old project that was sitting for 15 years. Within 1 year, the project was up and running with limited resources. In the second year, the company doubled its production. At the same time, the company continued to drill and was able to increase the mine life from 13 years to 25 years. 

The company carried out a fast-track facility study that led to positive results. In 1.5 years, the company expanded 50% more supply through the mill compared to 2018. Within the last 6 years, the company went from zero production to 56,000t copper produced annually. 

Notably, the company was able to achieve these numbers within the set timeline and budget. The company was also successful with its expansion, consolidation, and continued growth. 

Once the company has stabilised the Rio Tinto asset and the Cerro Colorado project, it is preparing to carry out extensive ground exploration to achieve organic growth. It has plans to expand production at Rio Tinto by bringing in additional tons of higher-grade copper and zinc. It has allocated a significant portion of the budget towards exploration in a very large and prospective land package. 

The Cerro Colorado Project

The Cerro Colorado Project is an open pit with 53Mt of resources and 0.42% copper processing grades. This asset is an open-pit located in the north of Spain. The company also has an open pit in Rio Tinto, the only place where it has reserves. All the reserves are drilled. 

The company has 2 deposits located very close to Rio Tinto along with a 3rd deposit in the north. Notably, the Cerro Colorado project has a 2.4km long outline along the edges of the pit. This contributes to 10-11 years of mine life. 

On the west end, the company has another open pit which is currently in the permitting process. It also has the Planes-San-Antonio deposit. This asset is planned as an underground deposit and will be treated in the same installations as the existing ones. 

The company has a 186Mt reserve at the Cerro Colorado project. This asset has a 1.8:1 strip ratio. Meanwhile, the company has a 53Mt reserve at San Dionisio deposit with a 4:1 strip ratio. The pit isn’t limited by the strip ratio, but by the safe distance left by the company for houses located in the southeast of the deposit. 

At the San Dionisio asset, the company is planning to expand the existing open pit called Corta Atalaya. Notably, Atalaya Mining got its name from this open-pit deposit. The company is looking to push back around the mine for leftovers that weren’t mined in the past. The Cerro Colorado and the Corta Atalaya deposits barely overlap and almost touch each other. 

Resource Metrics and Mine Life

Atalaya Mining is looking to expand its throughput. However, expansion through planned tons going through the mill has limitations. This is because it requires more power, water, and other resources. Instead, the company is focusing on the 160Mt of current open pit reserves which provide a 10-year mine life. The addition of the underground San Antonio deposit, the open pit, and some ground reports bring the reserves to 60Mt. 

The 60Mt reserves provide an additional 4 years of mine life. The 160Mt resource alone has a 14-15 year mine life. It is important to note that 4 years ago, the company had a 13-year mine life with an annual mining rate of 9Mt. Presently, the company has 14 years of mine life at a much higher throughput. Each ton added from a different deposit will further extend the life of the open pit. 

The company plans to keep the open pit running and complement it with the ore coming from other open pits such as San Dionisio or underground deposits. These pits act as a buffer to provide homogeneity as underground mining is a lot more challenging. Although keeping a large mill running at full capacity is challenging, the company anticipates that it will keep the installations at Rio Tinto running for another 20 years. The company is internally working on its 2040 plan. 

In essence, the company is looking to set longer-term goals. When the project began, it was significantly smaller, since then the company has consolidated its resources. However, the company is facing copper pricing and supply challenges. 

The operating mines that are currently producing have a premium. The company has also found that permitting in the United States, Canada, and Spain can be challenging at times. It is looking to make the most out of its existing installations. 

The Iberian Pyrite Belt

The Iberian pyrite belt has been known for thousands of years. In fact, the Romans were known to mine this belt. The belt features several VMS (Volcanogenic Massive Sulphide Ore) deposits. These deposits were well-known historically. The VMS deposits go into Portugal and continue from Santo Domingo to Aljustrel. The belt features fantastic, world-class deposits. The Las Cruces deposit has a very high grade. 

Rio Tinto has been mined for 2,000 years and for the past 100 years, it has been mined at high-scale. It features deposits that include the Aguas Tenidas, Magdalena, Sotiel, and Miglias. Las Cruces was discovered in 1995. 

Magdalena is a world-class deposit with an original reserve of about 60Bnt. It’s located 500m away from the company’s deposit and contains 3% copper, 4% zinc, and gold. This deposit is located 7km away from Aguas Tenidas and just 300m from surface. Migolias is a copper area located close to Sotiel which has been known for years. A new area was discovered in this region called Elvira. 

Atalaya Mining has a deposit called Masa Valverde, which was discovered 2 years ago. It features the Majadales deposit which is completely grassroots. 

The geophysics for this region is much better known than before. This is because electromagnetic surveys work really well here. Several major deposits have been discovered only in the last 10-20 years. A company called Matsa made a number of discoveries in this region. It was recently acquired by Samphire Uranium. 

Discoveries

Atalaya Mining discovered the Majadales deposit up to a depth of 250m. Similarly, the San Matza deposit and the Magdalena ore body were explored up to a depth of 200m-300m. However, it was found that the mineralization extends up to a depth of 1,000m. The Masa Valverde was discovered in the late 90s, close to the 2000s. This deposit has a 500m-800m mineralization depth. These deposits are known but completely undeveloped. This works in favour of the company as it can test the geophysics on top of these deposits.

Through the use of geophysics, the company has been able to identify deposits. It has drilled at certain deposits and found the lack of any installations on top. The company has also carried out multiple tests that identified mineralization at depth. 

The Neves-Corvo asset owned by Lundin was discovered in the 70s by Rio Tinto and it goes up to a depth of 1,500m. This was a gravity discovery made through EM (Electromagnetic) surveys and geomagnetics. These surveys are well-suited for the region and enable the discovery of very deep mineralization. In comparison, the VMS systems in Canada such as Agnico Eagle’s La Ronde or Kid Creek can go up to 2,000m-3,000m deep. These systems are often huge in size. 

The company’s VMS deposits have a wide area of distribution. Most of these are shallow deposits as they were discovered in the last century. These deposits are spread throughout the belt at 1km intervals. Several of these deposits have been discovered in recent times. According to the company, investing in exploring these deposits would lead to a discovery. Exploration can result in pyrite or it could have 5% copper similar to Neves-Corvo, Las Cruces, Magdalena, or the old Rio Tinto. 

Atalaya Mining recently published data from Masa Valverde that includes 125 continuous metres at 1.2% copper with close to zero lead or zinc. Within the 125m region, there are areas that feature between 12m, 20m, and 15m, with grades of copper over 2%, 2.5%, and 2.7% respectively. This can directly be dumped into the company’s existing installation and it wouldn’t need to carry out additional work for modifying the circuit. 

Similarly, the company found other intercepts that feature 180m of almost 0.9% copper along with some zinc, lead, and gold. These intercepts would be high in copper porphyry. They feature very high quantities of copper in some areas and in other areas they feature more zinc. 

The company has also found certain areas that feature a very high presence of gold. These areas are planned to be mined. The company is focusing on the higher-grade deposits and is anticipating a minimum 70Mt-80Mt deposit that is still open. 

These deposits can also be mined underground. For instance, Matsa is mining 4.5Mt/year underground from 3 deposits. It sends the entire supply to a single mill and the cost of mining is between €25/t-€30/t. This demonstrates that there’s plenty of margin in underground mining. The mining technique utilised at these deposits is mostly long-hole, open stope with base backfill. The mineralization is fairly vertical at 60 degrees with very good rock conditions. 

The Majadales deposit is an exception as it is almost flat-lying. It goes from 2m-15m which is fairly horizontal. In general, its 45 degrees from vertical to semi-vertical and is very well suited for using long-hole sub-level open stopes. 

Andalusia is one of the poorer provinces of Spain that has decades of economic growth ahead. Atalaya Mining has received massive support from the local government and municipalities. The local population is also happy with the operations as the mine and the belt are located in the stretch of land just south of the mountains in the north. This helps in animal conservation. In the middle of the region, there are highly-modern mines with very good teams and quality. Matsa was based in this region and was sold for $1.9Bn.

Proyecto Touro

The Touro asset is probably the highest value-added asset for Atalaya Mining apart from San Dionisio. This asset is located 26km east of the capital of Galicia, Santiago. It is located 7km from the nearest airport, making the commute quicker and simpler. 

The international airport offers flights to London and other parts of Europe. The area is an old brownfield project that was historically mined by Rio Tinto. The mining operations were halted in 1986. As the area is covered by eucalyptus trees, it cannot be used for paper and pulp or for special agricultural demand. 

Here, Atalaya Mining is looking to produce 30,000t copper annually. It features a 170Mt resource which has huge expansion potential. The deposit was previously evaluated when the copper price was $2.6/lb. The company has a highly modernised and environmentally-friendly mine. It is looking to extend the mine life from 12 years to 20 years. 

Grades and Geography

The deposit features chalcopyrite along with a bit of piretite. The only sulphide present in the deposit is clean chalcopyrite with no other elements. It's present in horizontal sills and features an average grade of 0.44% which is slightly higher in the beginning. The previously mined areas featured a significant number of sub-horizontal sheets. This enables the company to carry out mining in a sequence, which allows for waste backfilling, a continuous process. 

Since the area majorly features eucalyptus trees, the company believes that it will be easy to restore. As it rains a lot here, there isn’t any acid water generated by the waste. 

The deposit goes from the surface to a maximum depth of 100m. The sills here are sub-horizontal. The company anticipates that this deposit has tremendous potential because some of the shoots have been mined underground. The company intercepted these shoots on a deeper level. The high-grade portion is not open-pit mineable. The project is expected to have a 12-year mine life after construction with very low copper prices. 

However, with current copper prices, the company is looking at a 20-year mine life. This deposit would serve as a model project as plastic-lined tailings will be used. The non-acid waste rock will be used for the walls beside the plastic lining. Additionally, the company is looking to take all the water on top of the tailings and pump it away to the plastic-lined pit and flotation. 

The resulting concentrate will have a very high grade of 26%. Since there is no other material present apart from chalcopyrite, the company is able to achieve such a high concentration. The only known copper contained here is in cobalt. The company is looking for ways to recover the cobalt from the concentrate. The concentrate is devoid of any penalty elements and contains traces of silver. 

Normally, the concentrate would be shipped from the port at a distance of 78km, which is less than an hour-long drive. Following this, the concentrate would be processed in a smelter in Huelva. However, since the company has received a lot of interest from other smelters in Europe, including Sweden and Germany. The company anticipates that being a clean concentrate, it isn’t going to travel too far away. 

ESG Considerations 

Atalaya Mining plans to use flotation in a zero-discharge environment and will guarantee that no water will be discharged into the environment. In fact, completely recycled water will be used in a plastic-lined basin. The company is looking to demonstrate that its operations are focused on responsible mining. Its Rio Tinto asset has been a model for responsible mining. 

The company anticipates that it will acquire the environmental permit in 2022. Notably, it had received a negative environmental impact statement back in January 2021. This was due to the fact that the company was unable to prove that mining was being carried out in the right way. Additionally, the company received a lot of opposition from the anti-mining groups. This year, there has been more of a pro-mining sentiment. The company has taken steps to explain to the communities and fishermen located downstream the effects of the mining operation. 

It does not plan to have any water in the tailings. As the asset is based in a wet region, there would be no dry-stack tailings. The company plans to remove the accumulated rainwater in the tailings to reduce the chances of a collapse. It has proposed a wide variety of changes to the footprint along with several improvements. 

Targets 2022 and Beyond

Atalaya Mining is developing a system called Helix. This system will allow direct leaching of metals, especially complex ones. The company has been working on this system for the past 6 years in terms of financing and providing assistance. It has been successful in producing copper and zinc directly from complex concentrates. 

The company has exclusivity in the part of the belt where this system can be used. In case the system is sold, the company has the right of refusal. It is looking to start the construction of an industrial plant, which is expected to be completed in 2022. The company believes that this system has the potential to unlock tremendous value, especially in the part of the belt where it can be deployed.

Helix is a process for the concentrate. Once the concentrate is produced, it can be leached. Instead of approaching smelters, the company can produce a global concentrate of copper, lead, and zinc that doesn’t have the high purity generally required to sell each concentrate. This process enables the company to extract copper, and zinc directly into the metal with very high efficiency. Normally, lead is a precipitate, but it can also produce metal. 

It is important to note that some VMSs can be very complex from a metallurgical perspective. The conventional recovery through grinding, separation, and flotation can result in considerable losses. Meanwhile, the global concentrate allows for high recoveries once it's dissolved and leached. This offers a significant advantage for metallurgically-challenging deposits as it allows for more recoveries from each ton while keeping the cost of grinding and concentration the same. The process does not require high acid, high temperatures, or even high pressure. The system creates an environment of high electricity which facilitates leaching. 

Leaching is an oxidation process that involves the moving of electrons from one place to another. There are ways in which oxidation can be achieved without introducing acid into the concentrate. This is similar to how seawater can oxide iron without being acidic or using high pressure or even oxygen. The system allows acceleration of this process. Once the concentrate is oxidised, it can be leached. 

Notably, this process was discovered by a doctor in electrochemistry at Cambridge university. She discovered a process that could exponentially accelerate certain forms of oxidation.

To find out more, go to the Atalaya Mining website