Yesterday after market close, Atico Mining Corp. released its Q3/22 production results. The Company produced 3.6 Mlbs of Cu, missing our estimate of 4.2 Mlbs Cu while Gold production was in-line with our estimate, producing 2.8 Koz Au vs. our estimate of 2.8 Koz Au. The miss on copper production was attributed to lower-than-expected processed tonnes as a result of delays during the maintenance of the SAG mill in Q2. The miss on processed tonnes was partially offset by improved copper head grades. The Company stated the plant was operating at a steady state towards the end of the quarter.

ATY mined higher-than-expected grade with the average mined copper grade coming in at 3.12% Cu vs. our expectation of 3.00% and gold grade at 2.28 g/t Au vs. 2.00 g/t expected. Copper and gold recoveries were within guidance at 91.5% and 62.0%, and in line with our expectations of 91.4% and 62.9%, respectively.

Overall, we have a mixed view on this quarter as we expected a full quarter of steady-state operations however the elevated head grade helped soften the miss. The operation has been running well the last several weeks and the Company has stated it expects to 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 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.

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.