Mr. Rodrigo Barbosa reports
AURA ANNOUNCES 2022 ANNUAL FINANCIAL AND OPERATIONAL RESULTS AND 2023 GUIDANCE
Aura Minerals Inc. has filed its audited consolidated financial statements and management's discussion and analysis for the year ended Dec. 31, 2022, which also contains the annual guidance. The full version of the financial and operational results can be viewed on the company's or on SEDAR. All amounts are in U.S. dollars unless stated otherwise.
Rodrigo Barbosa, president and chief executive officer of Aura, commented: "Two thousand twenty-two was marked by significant milestones and stable production, which have laid a solid foundation for future growth and enabled us to pay dividends while expanding. In Q4 of 2022, we achieved our second-highest production in a single quarter, demonstrating our ability to perform and deliver. Despite inflationary pressures impacting our sector, we also made significant progress with the construction of Almas, which is now nearing completion on time and on budget. Both achievements are a testament to our team's ability to execute and I thank them for their efforts."
Mr. Barbosa continued: "Looking ahead to 2023, we anticipate further value creation with the expected ramp-up of Almas initiating in April and the commencement of construction at Borborema in Q2. Together with our Matupa project, we are confident in our ability to achieve our targeted production of 450,000 annualized GEO by 2025. Our focus remains on sustainable growth through the development of easy-to-build and operate mines that generate strong returns and ramping up our exploration across our portfolio to ensure longer-term growth."
Q4 2022 financial and operational highlights:
Total production reached 67,663 gold equivalent ounces (1) during Q4 2022, Aura's second-highest production achieved in a single quarter, behind only its Q4 2021 production:
At Aranzazu, production in gold equivalent ounces increased by 9 per cent relative to Q3 2022, due to high tonnage processed (approximately 100,000 tonnes (t) per month), and increase in gold and copper grades related to mine sequencing.
At EPP, production in gold equivalent ounces increased by 50 per cent compared with Q3 2022 and 56 per cent compared with Q4 2021, the highest quarterly production achieved to date. This was due to mining moving into phase II of the Ernesto pit, resulting in higher grades.
At San Andres production in gold equivalent ounces was 13 per cent lower relative to Q3 2022 due to a longer-than-expected leaching cycle during the quarter; however, material mined increased by 44 per cent compared with Q3 2022.
- Revenues reached a robust increase of 30 per cent when compared with the Q3 2022. In Q4 2022, revenues of $105.85-million represented a slight decrease of 7 per cent compared with the same period of 2021 (when Aura achieved record high revenues).
- Metal prices in gold equivalent ounces sold moved favourably when compared with Q3 2022, with appreciation for both gold, reaching an average selling price of $1,729 per ounce (oz) (plus 1 per cent versus Q3 2022), and copper, with an average selling price of $3.68 per pound (lb) (plus 6 per cent versus Q3 2022).
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) recovered in Q4 2022 and reached $36,584, an increase of 120 per cent compared with Q3 2022.
- Cash costs during Q4 2022 were $826 per gold equivalent ounce, representing an increase of 22 per cent when compared with Q4 2021 ($676 per gold equivalent ounce), but a significant decrease of 15 per cent when compared with Q3 2022 ($971 per gold equivalent ounce), despite continued operational challenges at San Andres.
- The company is pleased to publish, for the first time, all-in sustaining costs (AISC), widely adopted within the mining industry. Consolidated AISC in Q4 2022 reached $1,005 per gold equivalent ounce.
- At the end of Q4 2022, the company's net debt position improved to $77,422,000, driven by strong cash flows from operating activities, despite the payment of dividends of about $10-million in December and another $30-million invested in the growth of the company. This is in line with the company's strategy to continue paying dividends while growing and generating positive cash flows.
2022 financial and operational highlights:
Production reached 242,524 gold equivalent ounces, a 6-per-cent decrease compared with 2021 (excluding Gold Road) and only a 4-per-cent reduction at constant metal prices.
- Net revenues of $392,699,000 represented a decrease of 7 per cent compared with 2021, mainly due to lower metal prices.
- Net income achieved $66,496,000 in 2022, a robust 53-per-cent increase when compared with 2021, when the company achieved a net income of $43,503,000, negatively impacted by losses from discontinued operation (Gold Road).
- Gross margins of $125,693,000 represented decrease of 33 per cent compared with 2021, mainly due to lower metal prices and lower production at the San Andres mine:
- At the beginning of 2023, gold and copper were trading at significantly higher prices, with January, 2023, averages of $1,899 per oz for gold and $4.12 per lb for copper.
AISC for the year reached $1,118 per gold equivalent ounce; despite operational challenges at San Andres, the company estimates it was able to finish the year within the second quartile in the industry's AISC curves published in an external study by Metals Focus (2).
Growth projects -- 2022 brought important milestones to support growth in the next years:
Almas construction continues on budget and on schedule, with over 92 per cent of the construction completed to date. Aura was proud to appoint its first female director of operations to lead the Almas team. The ramp-up is expected to start in April and commercial production is expected to be reached in July, 2023.
- In September, 2022, Aura closed the acquisition of 80 per cent of Big River Gold Ltd. (the Borborema project) and formed a joint venture with Dundee Resources. Borborema has JORC (Joint Ore Reserve Committee) minerals resources of approximately 1.9 million oz of measured and indicated (M&I) and approximately 600,000 oz of inferred.
- In November, the company filed the report entitled, "Feasibility Study Technical Report (NI 43-101) for the Matupa Gold Project, Matupa Municipality, Mato Grosso, Brazil," which outlined strong economics (leveraged IRR (internal rate of return) of approximately 50 per cent and simple payback of approximately 2.3 years) (3). In addition, Aura advanced exploration at Serrinhas, increasing the geological potential of the target.
- Aura also recently acquired copper mineral rights and options in the state of Para, Brazil, Carajas area. The Carajas mineral province is one of the most important polymetallic districts in the world.
- Aura continued to expand its investments in exploration, with $22-million invested across all operations and projects in 2022. With this increased effort, the company expects an increase in mineral resources and mineral reserves in its next AIF (annual information form), to be published on or before March 31, 2023.
In September, Aura was awarded the No. 1 ranking on the TSX30, based on dividend-adjusted share price appreciation. This was the second consecutive year the company received this recognition and the only company to ever achieve this milestone. In October, Aura qualified to trade on the OTCQX Best Market, thereby broadening awareness and access to U.S. investors.
- In 2022, the company returned an additional $30-million to shareholders through a combination of dividends and share buybacks, resulting in a yield of approximately 6.0 per cent. This demonstrates Aura's commitment and ability to grow while prioritizing returning capital to shareholders.
Aura continued to advance its 360-degree culture and improved its mandala. The process involved input from the leadership team and interviewing over 350 employees in four countries. Aura's 360-degree culture continues to serve its foundation for growth.
The attached table details the company's guidance for 2023 by business unit (4).
Production of 254,000 to 292,000 gold equivalent ounces in 2023 represented an increase when compared with 2022. A significant contributor to the increased production will result from Almas starting ramp-up in April and reaching commercial production in July, 2023. Additional contributing factors include:
Aranzazu: anticipating another year of stable production. Exploration is expected to focus on the geological potential of new mineralized zones, such as Cabrestante, El Cobre and Limestone Bridge, with 20,000 metres (m) of drilling planned to 2023. All targets are near mine, some of which have been drilled in the past and indicated skarn mineralization but requiring follow-up drilling;
EPP: production expected to reach between 56,000 and 64,000 oz in 2023 (70,000 oz in 2022) due to the depletion of ounces from the Elephant zone, where higher grades were mined. The company is currently exploring multiple near-mine targets, including Nosde and Pombinhas, with the goal of increasing the life of mine (LOM) and, potentially, increasing production volumes into 2024. A 36,000 m drilling program is continuing. The EPP complex consists of multiple pits. In late 2022, Aura acquired a new mineral right along strike of the Japones pit, an area that had historical artisanal mining, to better understand the continuity of the mineralization toward west of Japones pit;
San Andres: anticipating a return to more stable production when compared with the challenges faced in 2022, with an expected increase in production volume with increased ore mined. Grades are expected to remain relatively stable versus 2022.
In addition to the production guidance for 2023, management's targets for production for 2024 to 2025 across its business units are presented in this news release and in line with the latest projections.
Management maintains the previous annualized production target of more than 400,000 gold equivalent ounces annualized in the year ending Dec. 31, 2024, and a target of more than 450,000 gold equivalent ounces annualized in the year ending Dec. 31, 2025.
EPP: Due to the characteristics of its new mine operations agreement and due to the IFRS (international financial reporting standards) accounting standards, EPP is expected to capitalize about $14-million of its projected 2023 mining costs (EPP capitalization of leases), which should have a positive accounting impact of $215 per oz to $245 per oz in its 2023 cash costs. Otherwise, an increase in cash costs in 2023 would be expected, mainly due to the lower grades as discussed above.
- Almas: Cash costs included in the attached table are considered for only the period after Almas enters commercial production. As anticipated, Almas is expected to have lower costs than the EPP mine (excluding EPP capitalization of leases impact), despite being in the same country, being smaller in size to apply the use of the same recovery methodology (CIL (carbon in leach)), as a result of expected much lower strip ratio. Cash costs for the first year are anticipated to be higher than the cash cost indicated in the Almas feasibility study (FS) published in early 2021 for the following reasons: (a) inflation between the date of the feasibility study (effective as of December, 2020) and first year of production; (b) lower grades in the first year due to changes in the mine sequencing (1.16 grams per tonne (g/t) expected versus 1.31 g/t for year 1 in the FS); and (c) only six months of commercial production in 2023 (versus 12 months considered for first year in the FS). On the other hand, current gold prices (above $1,800 per oz) are significantly higher than the assumption used in the study ($1,555 per oz); as result, the company expects the profitability to be achieved to remain in line with FS numbers.
- Aranzazu: The expected increase in cash costs compared with 2022 ($680 per gold equivalent ounce) is mostly attributable to copper price assumptions (assumption of $3.70 per lb in 2023 versus $4 per lb realized in 2022). At constant metal prices, Aranzazu cash costs are expected to be similar to 2022, despite inflation.
- San Andres: Significant cash cost decreases are anticipated when compared with 2022 actuals ($1,222 per gold equivalent ounce). In addition, the company expects San Andres to benefit from a full year of operations with a new mine contractor, at favourable commercial conditions, reducing mining costs.
All-in sustaining costs:
Almas: The AISC included is considered for only the period from which Almas enters in commercial production. As anticipated, Almas is expected to have a lower AISC than the company's average, contributing to Aura's consolidated AISC. AISC for Almas for the first year is expected to be higher than the AISC indicated in the FS published in early 2021 for the reasons stated above and anticipation of part of sustaining capex (initially expected for year 2) due to the rainy season.
- Aranzazu: AISC is expected to be in line when compared with 2022 ($914 per gold equivalent ounce) despite unfavourable copper assumptions for 2023 ($3.70 per lb in 2023 versus $40 per lb realized in 2022), due to lower sustaining capex as Aranzazu is able to reduce the pace of primary mine development without creating production risks.
EPP: AISC is expected increase as described above. EPP capitalization leases are included in EPP's 2023 AISC guidance.
San Andres: Significant AISC decreases are expected as noted above and sustaining capex is expected to decrease in 2023 when compared with 2022.
In 2023, the company will continue to allocate capital to new projects and expansions. This primarily includes the final phase of construction and ramp-up of the Almas project. The company is anticipating approving the development of new greenfield projects (Borborema or Matupa) within in the first half of 2023. Therefore, this expansion was not included below yet. Further updates will be provided with respect to the start of new projects once available and the company will inform the market and update its expansion capex guidance for 2023.
The attached table shows the breakdown of estimated capital expenditures by type of investment.
Aura believes its properties have strong geological potential and management's objective is to expand the LOM across its business units. Therefore in 2023, Aura plans to invest another total of $22-million to $26-million in exploration, which includes:
$11-million to $13-million in capital expenditures (included in the attached table) in areas where the company has proven and probable mineral reserves, around existing mine infrastructure;
Another $11-million to $13-million in exploration expenses, not capitalized, in areas where the company does not yet have proven and probable mineral reserves, including regional targets for potential new discoveries (not included in the attached table).
Main investments in exploration in 2023 (either capex or opex) are expected to happen at the Matupa project, Aranzazu mine, EPP mine and in the newly acquired mineral right at Carajas (Serra da Estrela project).
The company's future profitability, operating cash flows and financial position will be closely related to the prevailing prices of gold and copper. Key factors influencing the price of gold and copper include, but are not limited to, the supply of, and demand for, gold and copper, the relative strength of currencies (particularly the United States dollar), and macroeconomic factors such as current and future expectations for inflation and interest rates. Management believes that the short-to-medium-term economic environment is likely to remain relatively supportive for commodity prices but with continued volatility.
To decrease risks associated with commodity prices and currency volatility, the company will continue to evaluate and potentially implement available protection programs. For additional information on this, please refer to the AIF.
Other key factors influencing profitability and operating cash flows are production levels (impacted by grades, ore quantities, process recoveries, labour, country stability, plant and equipment availabilities), production and processing costs (impacted by production levels, prices and usage of key consumables, labour, inflation, and exchange rates), among other factors.
Non-GAAP (generally accepted accounting principles) measures
In this news release, the company has included adjusted EBITDA, cash operating costs per gold equivalent ounce sold, AISC and net debt, which are non-GAAP measures. These non-GAAP measures do not have any standardized meaning within IFRS (international financial reporting standards) and therefore may not be comparable with similar measures presented by other companies. The company believes that these measures provide investors with additional information that is useful in evaluating the company's performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Tiaozito V. Cardoso, FAusIMM, technical services director for Aura Minerals, has reviewed and confirmed the scientific and technical information contained within this news release and serves as the qualified person as defined in National Instrument 43-101, Standards of Disclosure for Mineral Projects.
About Aura Minerals Inc.
Aura is focused on mining in complete terms -- thinking holistically about how its business impacts and benefits every one of its stakeholders: the company, the company's shareholders, its employees, and the countries and communities Aura serves. Aura calls this 360-degree mining.
Aura is a mid-tier gold and copper production company focused on the development and operation of gold and base metal projects in the Americas. The company's producing assets include the San Andres gold mine in Honduras, the EPP gold mine in Brazil and the Aranzazu copper-gold-silver mine in Mexico. In addition, the company has the Tolda Fria gold project in Colombia and five projects in Brazil, of which four are: the Almas gold project, which is under final phase of construction; the Borborema and Matupa gold projects, which are in development; and the Sao Francisco gold project, which is on care and maintenance. Finally, the company owns the Serra da Estrela copper project in Brazil, Carajas region, under the exploration stage.
(1) GEO is calculated by converting the production of silver, copper and gold into gold using a ratio of the prices of these metals to that of gold. The prices used to determine the gold equivalent ounces are based on the weighted average price of gold, silver and copper realized from sales at the Aranzazu complex during the relevant period.
(2) Taking in consideration a study considering Q3 2022 results of 42 other companies that reported AISC.
(3) Available on the company's SEDAR profile dated Nov. 18, 2022.
(4) For the GEO calculation, the company used the following assumptions on metal prices: gold prices of $1,781 per oz; silver prices of $22.15 per oz; and copper prices of $3.70 per lb.
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