Aura Minerals reported a first quarter with a substantial increase in its EBITDA, as a result of an expansion in production volume, cost reductions and an appreciation in the price of gold.
Adjusted EBITDA came in 10% above market expectations, with Aura delivering US$53 million, compared to US$48.6 million in the Bloomberg consensus. This marks growth of 45% year-on-year and 30% versus the previous quarter.
In the first quarter, the gold and copper mining company produced 68 thousand ounces of gold equivalent, an increase of 28% year-on-year. At the same time, it managed to reduce its cash/ounce cost from US$1,311 in the fourth quarter to US$1,287, while gold went from around US$1,900 a year ago to US$2,070.
The cost reduction had mainly to do with efficiency gains at the Honduras mine, CEO Rodrigo Barbosa told Brazil Journal.
According to him, from mid-2022 to mid-2023, this mine — Minosa — produced well below its capacity due to operational problems.
“In 2022, the contractor who operates this mine was raising prices a lot, above inflation, and so we decided to replace him with another, reducing costs by 30%,” said the CEO. “The problem is that the new contractor took a long time to reach production stability, so we had a huge loss of productivity during this period.”
Furthermore, “our team that takes care of this mine was not yet 100% aligned with our culture.”
From the third quarter onwards, these issues were adjusted and production gradually returned to normal, reaching its stable level in the first quarter, when the mine produced 19 thousand ounces.
This increase in production led to a dilution of the mine’s cash costs, helping the cash/ounce cost indicator.
Barbosa also said that the company worked on reviewing suppliers and products, which also helped to reduce costs.
For the second quarter, the CEO said that there are no longer any relevant efficiency gains to extract from Honduras, and that the expectation is for stability in both costs and production volume.
Aura, however, should benefit from a significant increase in the price of gold.
While in the first quarter, the average price of gold was US$2,070/ounce, in the second quarter the ounce reached more than US$2,300. The price of copper, which represents around 30% of the company’s results, also rose significantly, going from around US$3.80 in the first quarter to US$4.40 now.
Despite the expansion of EBITDA, Aura Minerals had another quarter of net loss, delivering a Bottom line negative by US$9 million, which was impacted by the mark-to-market of gold hedge contracts. This marking had a negative impact of US$21 million on the bottom line of the balance sheet.
In the fourth quarter, when it posted a loss of US$6 million, Aura had also suffered from the same issue.
The result comes at a time when Aura is executing a robust growth plan.
The company began operating the Almas mine in August — its first project greenfield — which will add around 50 thousand ounces/year to production; and the construction of Borborema is finishing, which will add another 85 thousand ounces/year and should be ready by the end of the year.
There is also the Matupá project, which should be ready by the end of next year and add another 50 thousand ounces/year.
The CEO said that, with the gold price at R$2,300, the project’s NPV would increase by 143% to US$439 million, compared to when the initial studies were carried out (with the gold price at R$1,712).
The leveraged IRR would also increase substantially, from 40% to 73%.
“And this still does not take into account the gold reserve that is close to a highway and that we still need licensing to move it,” said the executive. “If you consider this gold, Borborema’s reserves would double, and the NPV would increase even further.”
Barbosa also said that Aura continues to actively look at M&As, mainly in copper, as its objective is to maintain the metal’s share of its revenue at 30% even with the entry of new projects.
The company also intends to continue with its dividend policy, of distributing at least 20% of EBITDA minus recurring capex.
Aura shares are up 5% in the last twelve months, but are down 48% since the high in May 2021, when the BDR traded at R$68.71. (The stock closed today at R$38.50).
The mining company is worth C$759 million on the stock exchange.
Pedro Arbex
