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Atico Mining Corp. (ATY) - Gold Diversification to Ecuador is Part of Long-Term Strategy

June 16 2020, 16:59 GMT+01:00

Atico Mining Corp. (ATY)

  • TSX-V: ATY
  • Shares Outstanding: 119M
  • Share price C$0.26 (16.06.2020)
  • Market Cap: C$31M

Based in Canada, Atico Mining is a copper-gold developer and producer with projects in Latin America. Atico Mining's ambition is to build itself into a mid-tier copper-gold producer. The business strategy is to acquire advanced-stage copper-gold projects for astute amounts of capital. Atico Mining intends these projects to be able to provide sustainable organic growth and high-margin operations. They are in it for the long-haul.

The flagship project is the El Roble VMS mine, located in Carmen de Atrato, Colombia. Massive sulphide deposits usuallt excite investors. Over the last c. 22-years, El Roble has processed close to 1.8Mt of copper-gold ore. Based on recent research by Atico Mining, the company claims to have identified high-grade mineralization 'below the lowest production levels at El Roble.' The defined proven and probable reserves are 1.47Mt at a grade of 3.40% copper and 1.88 g/t gold. It has a life-of-mine of just 4-years, but the limits of the deposit are undefined. Investors will be hoping there is more to come.

Matthew Gordon talks to Fernando Ganoza, 16th June 2020


Atico Mining claims the project is geologically favourable, being open at depth and allowing strike. The large land package, 6,355 ha, could provide significant exploration upside as Atico Mining looks to eventually ramp El Roble up. Atico Mining holds 90% of the operating mine and surrounding claims; current operations run at 850tpd throughput capacity.

Their other project is La Plata in Ecuador, is at a much earlier stage. It was acquired from Toachi Mining in September 2019. Atico Mining owns 60%, with an up to 75% earn-in option. It's another VMS deposit with a large land package, and a 43-101 PEA was released last year.

The COVID-19 situation in South America is ostensibly similar to the rest of the world. The economy is tentatively reopening, and Ganoza appears confident that investor sentiment towards the region will become favourable again.

Ganoza earnt his stripes at Fortuna Silver alongside his father and brothers. Fortuna Silver went from $40M all the way to over $1Bn, and this is what Ganoza wants to replicate. Atico Mining was created as a separate vehicle to take advantage of different kinds of opportunities; Fortuna Silver was a pure silver play. Atico Mining is a business with family at its core. If he can replicate a fraction of the accomplishment at Fortuna Silver, investors will be laughing all the way to the bank.

What do the production numbers look like? These 2019 numbers should be similar to 2020.

  • A cash cost of US$1.24/lb of copper.
  • An AISC of US$1.81/lb of copper.

This creates a substantially economical margin, provided copper prices hold steady. If copper prices go to US$3/lb, things could start to look really appealing.

The share price has been erratic this year; investors don't appear to be appreciating the free cash that Atico is throwing off. Atico Mining is taking its time to make sure it does everything the right way, but the market is only so patient. The market doesn't always reward frugality and pragmatism; it wants a sprinkle of excitement. The lack of scale/life-of-mine at El Roble is clearly a major concern for investors. Can Atico Mining stand up to the larger-scale competition? Ganoza is holding out on a discovery to bring about a "significant re-rating of the company," but this carries with it the risk profile of an exploration company and a partly Ecuadorian one at that. Is it worth it for investors? I want to see some proof.

Atico Mining intends to develop La Plata via cash flow from El Roble in a non-dilutive approach, probably the one redeeming feature to this investment proposition. The company doesn't have a huge amount of cash in the bank, but Ganoza claims this is due to short-term cash flow issues following the acquisition of La Plata. If he can develop La Plata without going to the market, investors are probably going to feel a lot more confident in the company going forward. In addition, M&A could change the game, but right now the focus is on La Plata and El Roble. If Atico does look to acquire, it will be copper-gold projects that range from post-discovery to operating mines.

Looking at the share registry, management holds around 16% and retail holds roughly 53%. With such a big retail component, it is a concern that there is very little talk within the retail investment community about Atico Mining. While Ganoza claims his company had a "lot of retail marketing," it is clearly ineffectual, and he needs to accelerate the company's marketing shift from institutionally-focussed to retail-focussed.

Ganoza claims that he leans towards "long-term" compensation via stock options. Around half of his compensation is stock options, which could align him with shareholders. Having moved from a giant company, I'm curious about how much the other half is though... perhaps we should look at the MD&A.

What did you make of Fernando Ganoza and Atico Mining Corp? Comment below and we will respond.

Company Website: http://aticomining.com/

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Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

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