ATALAYA MINING PLC MANAGEMENT'S REVIEW AND CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 30 September 2017 (UNAUDITED) Notice to Reader

The accompanying unaudited, condensed, interim consolidated financial statements of Atalaya Mining Plc have been prepared by and are the responsibility of Atalaya Mining Plc's management. The unaudited, condensed, interim consolidated financial statements have not been reviewed by Atalaya's auditors.

Introduction

This report provides an overview and analysis of the financial results of operations of Atalaya Mining Plc and its subsidiaries ("Atalaya" and/or "Group"), to enable the reader to assess material changes in the financial position between 31 December 2016 and 30 September 2017 and results of operations for the nine months ended 30 September 2017 and 2016.

This report has been prepared as of 16 November 2017. The analysis, hereby included, is intended to supplement and complement the unaudited, condensed, interim consolidated financial statements and notes thereto ("Financial Statements") as at and for the nine months ended 30 September 2017. The reader should review the Financial Statements in conjunction with the review of this report and with the audited, consolidated financial statements for the year ended 31 December 2016, and the unaudited, condensed interim consolidated financial statements for the nine months ended 30 September 2016. These documents can be found on Atalaya's website at www.atalayamining.com.

Atalaya prepares its Financial Statements in accordance with International Financial Reporting Standards ("IFRSs"). The currency referred to in this document is the Euro, unless otherwise specified.

Forward-looking statements

This report may include certain "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterised by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Assumptions upon which such forward-looking statements are based include that all required third party regulatory and governmental approvals will be obtained. Many of these assumptions are based on factors and events that are not within the control of Atalaya and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or referred to in this report and other documents filed with the applicable securities regulatory authorities. Although Atalaya has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Atalaya undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

  1. Description of the business

    Atalaya is a Cyprus based copper producer with mining interests in Spain. The Company is listed on the Alternative Investment Market of the London Stock Exchange ("AIM") and on the Toronto Stock Exchange ("TSX").

    Proyecto Riotinto, fully owned by the Company's subsidiary Atalaya Riotinto Minera, S.L.U., is located in Huelva, Spain. The Group operates the Cerro Colorado open-pit mine and its associated processing plant of 9.5Mtpa where copper in concentrate and silver by-product are produced.

    The Group has an initial 10% stake in Cobre San Rafael, S.L., the owner of Proyecto Touro, as part of an earn-in agreement which will enable the Group to acquire up to 80% of the copper project. Proyecto Touro is located in Galicia, north-west Spain.

  2. Overview of operational results

Proyecto Riotinto

The following table presents a summarised statement of operations of Proyecto Riotinto for the three and nine months ended 30 September 2017. Note that commercial production was declared in February 2016.

Units expressed in accordance with the international system of units (SI)

Unit

Three months ended 30 Sept

2017

Three months ended 30 Sept

2016

Nine months ended 30 Sept

2017

Nine months ended 30 Sept 2016*

Ore mined

t

2,366,142

2,461,394

7,685,419

4,935,647

Ore processed

t

2,173,826

2,033,889

6,525,032

4,476,617

Copper ore grade

%

0.58

0.52

0.52

0.48

Copper concentrate grade

%

22.57

20.47

22.54

20.85

Copper recovery rate

%

85.95

83.60

85.22

82.87

Copper concentrate

t

47,328

42,993

127,281

82,891

Copper contained in concentrate

t

10,679

8,752

28,542

17,241

Payable copper contained in concentrate

t

10,206

8,445

27,269

16,728

Cash cost

$/lb payable

2.14

1.97

2.06

2.14

All-in sustaining cost

$/lb payable

2.33

2.11

2.29

2.42

Note: The numbers in the above table may differ slightly between them due to rounding.

* Commercial production started in February 2016.

Three months operational review

Production of copper contained in concentrate in Q3 2017 was 10,679 tonnes, reaching a new record and significantly above 9,058 tonnes in Q2 2017 and 8,752 tonnes in Q3 2016 when the processing plant was still ramping up throughput. In terms of payable copper in concentrate, Q3 2017 production was 10,206 tonnes compared with 8,445 tonnes of payable copper in Q3 2016, representing also a record in production of payable copper. Payable copper during Q3 2017 also improved with respect to Q2 2017 production of 8,660 tonnes. Guidance for copper production has been adjusted accordingly and is now estimated to be within the range of 36,000 to 39,000 tonnes for 2017.

On a combined basis, ore, waste and marginal ore amounted to 2.7 Mm3in Q3 2017 compared with 2.8Mm3during Q2 2017. Mining operations are running at a consistent rate quarter-on-quarter, as a result of improved operational efficiencies and the availability of additional mining fleet. As part of the mining fleet replacement programme three new excavators and eight new trucks have been delivered, assembled and commissioned during the quarter.

Ore processed in Q3 2017 was 2,173,826 tonnes, higher than the 2,033,889 tonnes in Q3 2016 and slightly above the 2,154,907 tonnes in Q2 2017. The processing plant was down for maintenance during the last five days of the quarter while relining of the primary mill and other maintenance activities were completed.

Ore grade averaged 0.58% Cu in Q3 2017 compared with 0.52% Cu in Q3 2016. Copper recovery during the quarter was 85.95% slightly above the previous quarter of 85.16%.

At the end of the quarter, the Company´s continuous improvement programme reported completion and commissioning of a new 300 m3primary rougher flotation cell. Installation of plastic lining in one of the paddocks at the tailings storage facilities is also nearing completion and new initiatives designed to improve process and fresh water supply are currently under evaluation.

During Q3 2017, the Group sold 40,989 tonnes of concentrates, compared with 22,701 tonnes in Q3 2016. Concentrate production in Q3 2017 amounted to 47,628 tonnes, compared with 42,993 tonnes for the same period in 2016. On-site concentrate inventories at the end of the quarter were 8,615 tonnes. All concentrate in stock at the beginning of the quarter and produced during the quarter was delivered to the port at Huelva.

Nine months operational review

Production of copper contained in concentrate during YTD17 was 28,542 tonnes, compared with 17,241 tonnes in the same period of 2016. For comparative purposes commercial production was only declared in February 2016. Payable copper in concentrates was 27,269 tonnes compared with 16,728 tonnes of payable copper in YTD16.

Ore mined in YTD17 was 7,685,419 tonnes compared with 4,935,647 tonnes during YTD16. Ore processed was 6,525,032 tonnes versus 4,476,617 tonnes in YTD16.

  1. Overview of operational results (continued)

    Ore grade during YTD17 was 0.52% Cu compared with 0.48% Cu in YTD16. Copper recovery during YTD17 was 85.22% versus 82.87% in YTD16. Concentrate production amounted to 127,281 tonnes significantly above YTD16 production of 82,891 tonnes.

    Dust mitigation measures have been successful over the summer months with indicators significantly reduced and within legal requirements. Installation of a dome covering the coarse ore stockpile is ongoing with civil foundations reaching advanced stages. Dewatering of the Cerro Colorado pit is now complete and will now be limited to pumping runoff water as required. Relocation of pumping stations from the Cerro Colorado pit to the Atalaya pit was completed with dewatering activities now underway.

    Study to increase copper production

    During the quarter, the study to demonstrate the feasibility of increasing mining and processing capacity beyond the current 9.5 Mtpa, to a maximum of 15.0 Mtpa at Proyecto Riotinto was finalised.

    The study has concluded the expansion is technically and financially robust. The Board is encouraged by these results and will provide further details on the expansion over the coming weeks.

    Estimated copper production of the expanded plant would reach approximately 50,000 - 55,000 tonnes per year.

    Exploration and Geology

    Near-mine exploration drilling has turned its focus on to the north-west extension of the Cerro Colorado pit now that the east-west extension of Filon Sur has been completed. The exploration block model has been updated with results which will be part of the resources and reserves update that form part of the studies related to the expansion to 15 Mtpa.

    Greenfield exploration has initiated during the quarter including an airborne VTEM geophysical survey to help further understand deep geological structures in the mining and exploration concessions of the Company around the Riotinto mine.

    Proyecto Touro

    Permitting of Proyecto Touro is progressing according to schedule with the public hearing finalised at the beginning of October. The Company anticipates a period of consultation with different regulatory bodies and stakeholders which should take place over the following months.

    The technical report is progressing ahead of schedule with all efforts now concentrated on getting the report completed and ready for release during Q4 2017. The technical report is confirmed to be at a pre-feasibility level of detail and in compliance with NI 43-101 guidelines.

    The Group signed an option agreement to acquire exploration concessions that cover 122.7 km2immediately surrounding Proyecto Touro, where mineralised copper occurrences are documented. An ambitious regional exploration programme is underway.

    An exploration campaign was initiated during the quarter over the newly optioned exploration concessions around Proyecto Touro. The campaign includes an airborne VTEM geophysical survey, detailed assessment of structural geology and a regional geochemical campaign.

    Corporate Social Responsibility ("CSR")

    The archaeological program initiated in the previous quarter as part of the Company's Corporate Social Responsibility activities is expected to reach an important milestone at the end of the year when the first archaeological level will be fully documented.

  2. Outlook

    The forward-looking information contained in this section is subject to the risk factors and assumptions contained in the cautionary statement on forward-looking statements included in the introduction note of this report.

    Operational guidance

    Proyecto Riotinto operational guidance for 2017 is as follows:

    Range

    Unit

    2017

    Ore processed

    million tonnes

    8.7 - 9.0

    Concentrate

    dmt

    165,000 - 175,000

    Contained copper

    tonnes

    36,000 - 39,000

    Copper head grade for 2017 was budgeted to average between 0.49% and 0.51% Cu, with a recovery rate of approximately 82% to 84%. Cash operating cost for 2017 is expected to be in the range of $1.95/lb - $2.10/lb.

  3. Overview of the financial results

The following table presents summarised consolidated income statements for the three and nine months ended 30 September 2017, with comparatives for the three and nine months ended 30 September 2016.

(Euro 000's)

Three months ended 30 Sept

2017

Three months ended 30 Sept

2016

Nine months ended 30 Sept

2017

Nine months ended 30 Sept

2016

Sales

35,734

27,235

114,808

49,854

Total operating costs

(24,344)

(20,682)

(76,866)

(41,085)

Corporate expenses

(1,880)

(4,469)

(3,508)

(9,744)

Exploration expenses

(228)

(246)

(674)

(926)

Other income

-

44

5

203

EBITDA

9,282

1,882

33,765

(1,698)

Depreciation/amortisation

(3,760)

(2,475)

(11,895)

(4,996)

Impairment of land options not exercised

-

(900)

-

(900)

Net foreign exchange loss

(1,134)

(19)

(1,919)

(296)

Net finance cost

(733)

(5)

(2,412)

(86)

Tax charge

(1,141)

4

(4,108)

(8)

2,513

(1,513)

13,430

(7,984)

Three months financial review

Revenues for the three-month period ended 30 September 2017 amounted to €35.7 million (Q3 2016: €27.2 million). Higher revenues, compared with the same quarter in the previous year, were driven by higher volumes of concentrate sold and an increase in copper prices.

Realised prices of $2.66/lb copper during Q3 2017 compared with $2.18/lb copper in Q3 2016. Concentrates were sold under offtake agreements in place. The Group did not enter into any hedging agreements in Q3 2017.

Operating costs for the three-month period ended 30 September 2017 amounted to €24.3 million, compared with €20.7 million in Q3 2016. The increase was mainly due to higher mining and processing variable costs directly attributable to increase in copper production.

Cash costs of $2.14/lb payable copper during Q3 2017 compared with $1.97/lb payable copper in the same period last year. Cash costs were impacted by penalties and higher freights in the period compared with Q2 2017. Capitalised stripping costs during Q3 2017 amounted to €1.5 million compared with €1.0 million in Q2 2017. All-in sustaining costs in the reporting quarter were $2.33/lb payable copper compared with $2.11/lb payable copper in Q3 2016 and to $2.30/lb payable copper in Q2 2017. The increase in AISC compared with Q2 2017 mainly related to higher cash costs.

Sustaining capex for Q3 2017 amounted to €1.4 million compared with €nil in Q3 2016. Sustaining capex accounted for development programmes at the tailings storage facilities and optimisation of the flotation circuit.

Corporate expenses amounting to €1.9 million (Q3 2016: €4.5 million) include non-operating costs of the Cyprus office, corporate legal and consultancy costs, on-going listing costs, officers and directors' emoluments, and salaries and related costs of the corporate office.

Exploration costs at Proyecto Riotinto for the three-month period ended 30 September 2017 amounted to €0.2 million compared with €0.2 million in Q3 2016. All exploration costs at Proyecto Touro are capitalised.

EBITDA for the three months ended 30 September 2017 amounted to €9.3 million as compared to Q3 2016 of €1.9 million.

The main item below the EBITDA line is depreciation and amortisation of €3.8 million (Q3 2016: €2.5 million). Net financing costs for Q3 2017 amounted to €0.7 million, including accretion cost of the discounted liability for Astor.

Atalaya Mining plc published this content on 16 November 2017 and is solely responsible for the information contained herein.
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