Research Note - Atico Mining Corporation (ATY:TSXV,$0.29|BUY $1.10 TARGET) Q2 Production; On-Track to Meet Guidance Despite Shutdown
Yesterday, after market close, Atico Mining Corp. (ATY:TSXV) released its Q2/22 production results. The El Roble mine reported a miss against guidance but a small beat to our expectations with a surprising turnaround despite a three-week operational shutdown.
The Company produced 3.6 Mlbs of Cu, above our estimate of 3.3 Mlbs Cu while Gold production was also above our estimate, producing 2.8 Koz Au vs. of estimate of 2.6 Koz Au. We note that our expectations for the quarter were lowered because of the known three-week shutdown in operations due to the landslide on site which caused minor equipment damage. ATY mined higher-than-expected grade with the average mined copper grade coming in at 3.17% Cu vs. our expectation of 3.00% and gold grade at 2.47 g/t Au vs. 2.00 g/t expected. Copper and gold recoveries were within guidance at 91.4% and 62.9%, compared to our expectations of 90.0% and 56.6%, respectively. Overall, we are pleased with the quarter despite the operational shutdown and are confident the Company will meet annual guidance of 15.0-16.6 Mlbs Cu and 12.5-14.0 Koz of Au.
We are maintaining our BUY rating and 12-month target price of C$1.10/share for ATY.
Exploration is progressing well at both of ATY’s properties and management has specifically highlighted a focus on extending the mine life at El Roble through resource growth. We see significant upside to ATY’s valuation if the drilling campaign at El Roble is successful in extending the mine life further than originally planned. This would extend the period in which El Roble and La Plata are operating simultaneously and would result in a period of substantial cashflow.
The La Plata Project is progressing well, with the Feasibility Study (FS) expected early Q4/22. ATY is also making progress with the permitting process having received their EIA, with only the permit to break ground outstanding. We are expecting this to be secured following the FS.