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Research Note - Atico Mining Corporation (ATY:TSXV,$0.25|BUY $1.10 TARGET) Mixed Q2 on Shipment Delays - Strong Operational Quarter

Yesterday, after market close, Atico Mining released its Q2/22 financial results. As previously reported, Q2 was a strong operational quarter with production coming in at 3.6 Mlbs of Cu, beating our estimate of 3.3 Mlbs Cu. 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. Financially, the Company posted a sizeable miss relative to guidance posting an operational loss of -$242k and revenue of $5.5M compared to $11.2M and $20.6M in Q1, respectively. The miss was due to vessel and port delays causing the majority of ATY’s June concentrate shipment to be pushed into Q3. We note that the revenues will simply roll over to Q3 and nothing operational caused the miss. In saying that, we expect Q3 revenue to have an additional $10M from the missed shipment in Q2.

From a cost perspective, ATY performed well with cash costs coming in at $1.36/lb Cu vs. our estimate of $1.27/lb and AISC coming in at $2.33/lb in line with our estimate.

We expect ATY to post a solid Q3 & Q4 as a result of the recent strong operational performance as well as the Company mining higher than expected grades for both copper and gold. Additionally, the stock should have additional tailwinds from the La Plata Project with the feasibility study expected this quarter and a possible construction decision by year end.

ATY continues to maintain a strong financial position with $15.1M in cash and a working capital of $24.1M. We are maintaining our BUY rating and 12-month target price of C$1.10 per 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.

20220818- M Partners - ATY - Q2 FS
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