Altaley Mining Corporation (TSX-V:ATLY) is an emerging multi-mine producer in Mexico, which has transformed in the past year, and has near-term catalysts that could potentially re-rate the stock.
That's the view of Red Cloud Securities, which recently carried out a site visit at the firm's Campo Morado mine and Tahuehueto projects - both wholly-owned polymetallic assets. Operational improvements at the former and first production from the latter are key to a potential re-rating, noted its analysts.
Campo Morado is already a producer, having restarted operations in January 2020 due to the improved zinc price. Since then results have progressively improved, and it is now producing at around 2,200 tonnes per day (tpd) and generating around C$2.2 million in earnings before interest, tax, depreciation and amortization (EBITDA) per month.
Altaley is now looking at expanding the plant to over 3,000 tpd by adding a flotation circuit but it is also investigating technologies to boost base and precious metal recoveries, said Red Cloud.
"Both Imhoflot and Jamison Cell technologies are being evaluated using pilot plants. Additionally, around 280k oz gold equivalent (AuEq) could potentially be unlocked from historic tailings using forced oxidation and leaching technology if testing is successful," it said.
READ: Altaley Mining delivers C$4.3M in income during 3Q thanks to strong output from its Campo Morado mine
Meanwhile, at Tahuehueto, construction was well underway with underground development around 90% complete and a 1,000 tpd processing plant around 80% finished, said analysts.
Red Cloud said it expected the mine to begin initial production near the end of 2021 at a throughput rate of 500 tpd which would ramp up over H1/22 to 1,000 tpd with commercial production anticipated to be declared in the third quarter of 2022.
Analysts also highlighted that an updated pre-feasibility study (PFS) for Tahuehueto was expected in the near term.
"We anticipate Tahuehueto to initially produce a single bulk concentrate, though the plant is configured to have three circuits to produce separate zinc (Zn), lead (Pb) and Cu (copper) concentrates in the future. We also anticipate that the company would optimize the economics of the project by bringing forward more high-grade material to the earlier part of the mine plan," they said.
Red Cloud has no rating or target for the shares, but listed five key upcoming catalysts:
- Tahuehueto construction updates (ongoing)
- Campo Morado metallurgical test results from pilot plants (Q4/21-Q1/22),
- Q4/21 production and financial results (Q1/22)
- Tahuehueto PFS (Q4/21)
- Initial production at Tahuehueto (Q4/21-Q1/22)
Red Cloud also noted that Altaley’s goal was to double Campo Morado’s resource base over the next several years as funding becomes available and to expand production to over 5,000 tpd over the next five years.
"Once Tahuehueto reaches commercial production we believe its cash flow could support a comprehensive exploration program that could potentially materially grow its resource base. At this time, we are of the opinion that Altaley has only scraped the surface at Tahuehueto and that a substantial amount of drilling is warranted to more fully characterize the project, it added.
Contact the writer at giles@proactiveinvestors.com