Atalaya Mining’s (TSX: AYM; LSE: ATYM) Proyecto Riotinto copper mine in the Andalucia region of Spain is on the verge of producing 90 million lb. copper (42,000 tonnes copper) in concentrate next year — or 200,000 tonnes copper concentrate — for some of the world’s biggest off-takers, but the company is relatively unknown in North America.
The European junior — formerly known as EMED Mining — put the open-pit mine and mill, 65 km northwest of Seville, back into production in February 2016. (Previous owners put the mine on care and maintenance in 2001, when copper prices were languishing at US$1 per pound.)
Atalaya Mining has been ramping up the processing rate to 9.5 million tonnes per year, and expects to reach this capacity before the start of 2017. The mill operates at a 95% throughput rate, and the mine runs at 100%.
“It has been quite a success,” Alberto Lavandeira, the company’s president and CEO, says in a telephone interview from Spain. “We completed the whole ramp-up in less than two years when the previous management team thought it would be done in three years, and we did it at half the capital cost, or US$150 million, down from previous estimates of US$300 million.”
The new management team, which took over the company two and a half years ago, has deep mine building expertise as well as knowledge of how to get permits for projects in Spain.
Much of the team came from Rio Narcea Gold Mines, where Lavandeira worked as chief operating officer and later as president and CEO. During Lavandeira’s 12 years at the company (1995–2007), Rio Narcea built the El Valle and Carles copper-gold-silver mines in northern Spain, both of which are now owned by Orvana Minerals (TSX: ORV), and the Aguablanca nickel-copper mine in southern Spain, now owned by Lundin Mining (TSX: LUN; US-OTC: LUMI). The company also built the Tasiast gold mine in Mauritania, now owned by Kinross Gold (TSX: K; NYSE: KGC).
Lavandeira and several of his colleagues at Atalaya Mining were also involved in building the Mutanda copper-cobalt mine in the DRC, owned by Glencore.
One of the factors behind Atalaya’s success was the support it had from four shareholders: Trafigura (22%), Yanggu Xiangguang Copper (21.9%), Orion Mine Finance (14.6%) and Liberty Metals & Mining (14%).
“We built the whole thing with equity with the support of our four big shareholders,” Lavandeira says. “It was difficult to get debt in the market at the time, but we were able to finance it all with equity, along with some help from suppliers with whom we got very good payment terms, so we don’t have any long-term debt.”
The off-takers have committed to taking 100% of Atalaya’s copper concentrate produced during the mine’s first 15 years of production. XGC will take 49.1% of life-of-mine reserves, with Orion Mine Finance taking 31.5% and Trafigura taking 19.3%.
Lavandeira says Atalaya cut costs and completed the project ahead of time, due to “lateral thinking” and a “change of approach.”
For the most part, no new general engineering was done, and old drawings were used. “This thing was running 15 years ago, it had been engineered by Rio Tinto, why do we have to re-engineer it?” Lavandeira says.
Management decided not to give all the work to a single engineering, procurement and construction management house, but to several specialist firms from countries like South Africa and Australia instead, as well as to a number of local houses that were familiar with heavy industry and maintenance from a range of industries.
Another recurring theme was repairing equipment whenever possible and bringing in specialists to fix it, rather than sending it off-site to be repaired. “Whatever was still OK, we used,” Lavandeira says. “And if it was too old or in bad shape, we changed it.”
Rather than building new tanks in the acid water treatment plant, for example, the company repaired and conditioned the existing tanks, and built a smaller water-treatment plant. The original refurbishment plan by the company’s predecessors involved building a bigger treatment plant, and dewatering the flooded Cerro Colorado pit before the start of production, then discharging the treated water into the river.
The new plan consisted of mining a section of the pit that was above the water level first, even if it wasn’t the easiest or best ore for early production. This way, while pumping acid water (well after production started), the water could be used in the flotation plant and recycled after it was treated with lime, avoiding discharging it into the river.
“The advantage of that was double,” Lavandeira says. “A smaller water-treatment plant was built with old equipment, and the clean water produced was used in the processing.”
On the financing front, Atalaya used insurance mechanisms rather than posting cash in escrow accounts as bonds. It also saved on exchange rates by using local suppliers.
The orebody, a disseminated and massive sulphide-type deposit, was originally mined as early as 1873 by the company that would become Rio Tinto (NYSE: RIO; LSE: RIO). Other owners over time have included Freeport-McMoRan (NYSE: FCX).
Today, Proyecto RioTinto consists of the main Cerro Colorado deposit — which contains three zones — and Atalaya, the original pit mined by Rio Tinto, 400 metres west of Cerro Colorado.
The Cerro Colorado pit is 2 km long by 700 metres wide, and the Atalaya pit is 1 km long by 700 metres wide (and 400 metres deep).
Lavandeira and his team say the area offers a lot of exploration upside, too.
There has been only limited exploration to date on lateral extensions to Cerro Colorado because the focus was on confirming open-pit potential. But the company is planning more near-mine exploration — with an emphasis on closer drill spacing and testing extensions of mineral targets. The company will also undertake grassroots exploration of anomalies on its exploration licences.
“In the last two years we concentrated on Cerro Colorado to expand reserves, but we’re going to be drilling deeper zones there to look for the continuation of high-grade zones, and we will also drill a little bit under the Atalaya pit,” he says. “But we also have other places around Spain where we have done work, although we like to keep those confidential at the moment.”
The company has confirmed enough resources to sustain a mine life of 16.5 years. Proyecto Riotinto’s measured and indicated resources, at a 0.2% copper cut-off grade, stand at 193 million tonnes grading 0.4% copper for 830,000 contained tonnes copper. Inferred resources add 23 million tonnes averaging 0.5% copper for 110,000 tonnes of contained copper.
Atalaya completed a 51% earn-in for the project in 2007, and acquired the other 49% in 2008.
At press time in London, Atalaya traded at £0.88 per share, and in Toronto, at $1.40.