Mr. Rodrigo Barbosa reports
AURA ANNOUNCES Q2 2023 FINANCIAL AND OPERATIONAL RESULTS AND GUIDANCE UPDATE
Aura Minerals Inc. has filed its unaudited consolidated financial statements, and management's discussion and analysis (together, its financial and operational results) for the period ended June 30, 2023 (Q2 2023), which also contains the annual guidance update (2023 new guidance) and maintenance of the 2025 production target (2025 production target). The full version of the financial and operational results can be viewed on the company's website or on SEDAR+. All amounts are in United States dollars unless stated otherwise.
Rodrigo Barbosa, president and chief executive officer of Aura, commented: "During the quarter, we experienced a temporary dip in production, primarily attributed to lower grades in EPP. However, we are optimistic for the year, and our guidance for EPP remains unchanged, as we anticipate reaching higher grades in Q3 and Q4. As the initial part of the year also posed some challenges for San Andres, we re-evaluated our guidance and now we aim to produce between 245,000 and 273,000 ounces for the year, representing a slight 5-per-cent reduction around the midpoint of the range. Despite these challenges, the upcoming quarters are expected to witness a substantial increase in production, driven by improved grades in EPP, continued production growth in San Andres and the commencement of commercial production in Almas, while Aranzazu should continue to have a stable production. Finally, despite experiencing lower production, we are pleased to report a robust operating cash flow during the semester. This strength in cash flow enabled us to fulfill our commitment to our shareholders by paying out $10-million (U.S.) in dividends.
"On the cost side, we have pro-actively implemented cost-reduction measures in San Andres, which have partially offset the impact of lower production on cash costs. Consequently, cost adjustments on guidance were kept minimal, with only a 3-per-cent revision when using the same exchange rate. On a positive note, the devaluation of the U.S. dollar against the Mexican peso and Brazilian real has been balanced by the appreciating prices of metals, particularly gold and copper. This favourable market movement has more than offset the higher costs incurred in U.S. dollar terms per GEO [gold equivalent ounce]."
Mr. Barbosa continued: "Looking ahead, we are excited about our continued growth, particularly as we advance the Borborema project towards the completion of the feasibility study and commencement of production. With long-lead-time items now ordered, including the mill, we anticipate production to commence in early 2025, while remaining on track to meet our 450,000 GEO annualized production by 2025. We look forward to providing further updates on our progress on Almas, Borborema and Matupa. Our focus continues to be on growing production, expanding exploration efforts, all while ensuring that dividends are paid, and we are proud to be moving forward on all our strategic goals."
Q2 2023 financial and operational highlights:
Total production in GEO decreased by 13 per cent in Q2 2023 compared with Q2 2022, mainly due to mine sequencing at EPP mines:
- At Aranzazu, production was 25,192 GEO, in line with the company's expectations. Production was 4 per cent lower compared with Q2 2022, due to metal prices. When calculated based on constant prices, production in GEO increased by 7 per cent in Q2 2023 compared with Q2 2022.
- At EPP, production was 6,917 GEO, 45 per cent lower in Q2 2023 than in Q2 2022, due to mine sequencing in areas with lower grade and higher strip ratios. With sequencing expected to move to higher-grade areas, the company anticipates production to increase in the second semester, mainly in the last quarter of the year, which also occurred in the previous year. Aura remains on schedule to meet its production guidance of between 56,000 GEO and 64,000 GEO for EPP in 2023.
- At San Andres, production was 16,413 GEO, remaining steady relative to Q2 2022, with a decrease of 2 per cent. Production in GEO increased by 16 per cent when compared with Q1 2023, confirming the company's expectation of gradual improvement quarter-over-quarter.
Revenues were approximately $84.95-million in the second quarter of 2023, a decrease of 9 per cent compared with the same period of 2022:
- Average gold sale prices had an increase of 4 per cent compared with Q2 2022, increasing for gold, which reached an average of $1,966/ounce (oz) (also plus 4 per cent versus Q1 2023).
- Sales volumes were 11 per cent lower than Q1 2023, mainly due to mine sequencing, for the reasons discussed herein.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was approximately $26,596,000 in Q2 2023, compared with approximately $36,505,000 in Q1 2023, as a result of lower production and sales volume.
- AISC (all-in sustaining costs) during Q2 2023 were $1,385/GEO, representing an increase of $229/GEO when compared with Q1 2023 ($1,156/GEO), mainly due mine sequencing at EPP and higher costs at San Andres. Unfavourable exchange rates also impacted costs at Aranzazu and EPP. The company expects AISC to decrease in H2 2023 as EPP reaches higher production volumes and operational performance at San Andres continues to improve.
- As of the end of Q2 2023, the company's net debt position was $113,532,000, an expected increase compared with $88,854,000 recorded at the end of Q1 2023, primarily due to the expansion capex of about $22,566,000 during the quarter. The capex was mainly related to investments in the final phase of Almas project construction and ramp-up. Additionally, the company paid approximately $10.1-million of dividends in June.
Almas is currently in its final ramp-up phase and is expected to reach commercial production by Q3 2023.
- The company is producing a National Instrument 43-101 feasibility study (the Borborema technical report), which is expected to be released by Q3 2023. Aura also expects to announce a construction decision on Borborema shortly.
Two thousand twenty-three guidance update
The company's updated gold equivalent production, AISC and cash operating cost per GEO sold, and capex guidance for 2023 is detailed herein.
The table entitled "Gold equivalent thousand ounces production -- 2023" details the company's updated GEO production guidance for 2023 by business unit, and a comparison with the previous guidance.
Factors that contributed to the change in the company's guidance include:
Aranzazu: Production remains stable and in line with previous guidance.
- EPP mines: The company maintains its production guidance for EPP for 2023 to between 56,000 GEO and 64,000 GEO as it transitions to higher-grade areas, and a significant production increase is forecasted for the second half of 2023, primarily in Q4, similar to the previous year's pattern.
- San Andres: The operation has been showing improvements compared with the first half of 2022, mainly in terms of stacking, better grades and recoveries. Production volumes increased constantly from 12,171 oz in Q4 2022 to 14,116 oz in Q1 2023, and now 16,413 oz in Q2 2023. Production is expected to continue to increase during the second half of 2023, reaching an average of 15,700 oz to 19,200 oz per quarter between Q3 and Q4 2023, however, at a lower pace than previously expected. As a consequence, the production guidance has been reduced to 62,000 oz to 69,000 oz in 2023, to reflect the new expectations for the rest of the year.
- Almas: Completed on schedule and budget, has processed, at the plant, around 46,000 tons of ore in June and 106,000 tons in July during its ramp-up phase, out of an installed capacity of 114,000 tons per month. This considerable increase indicates readiness for the start of commercial production in Q3 2023, as initially planned. Production guidance remains in line with previous guidance, with reduction of 2,000 GEO expected for this year as a consequence of increased precision in the mine and plant feed plan for the year.
Over all, production of 245,000 GEO to 273,000 GEO, at current prices in 2023, presents an increase of 3,000 GEO to 31,000 GEO (plus 1 per cent to plus 13 per cent) when compared with 2022, mainly due to Almas reaching full production from Q3 2023, and a decrease when compared with the previous 2023 guidance, due to San Andres, despite the constant improvement of performance of this mine.
Long-term production guidance update
Aura is maintaining its annualized 2025 production guidance of 450,000 GEO, and it is withdrawing the full-year 2024 guidance. The company previously expected the commencement of operations at the Borborema project to start by the end of 2024, however, due to longer than expected lead times for delivery of the ball mill delivery, the start-up operations are now expected to commence by early 2025. The company already initiated the earth moving and the down payment of the ball mill was already made.
The table entitled "Cash cost per equivalent ounce of gold sold -- 2023" shows the company's updated guidance for 2023 cash operating costs per GEO sold by business unit, and a comparison with the previous guidance.
Factors that contributed to the change in the company's guidance include:
Aranzazu: The revision in cash cost guidance at Aranzazu is a result of lower copper prices during the first half of 2023, affecting the cash cost in $2-million ($21/GEO), and also the appreciation of the Mexican peso against the U.S. dollar during the same period, affecting the cash cost in $6-million ($52/GEO). Both factors influenced cost dynamics. At constant metal and foreign exchange prices, the changes in Aranzazu's cash cost are minimal.
- EPP mines: Increase in cash costs at EPP is almost entirely attributable to the appreciation of the Brazilian real against the U.S. dollar during Q1 and Q2 2023, which affected the cash cost and the 2023 projection in about $41/ GEO.
- San Andres: Cash cost guidance at San Andres has been revised upward due to lower production than initially anticipated. As the operation continues to navigate a period of adjustments and improvements, the company aimed at enhancing productivity and operational efficiency. As such, a strategic narrowing of the guidance compared with the previous one has been implemented to better reflect the current state of operations at San Andres.
- Almas: Cash costs included in the table entitled "Cash cost per equivalent ounce of gold sold -- 2023" are considered for only the period after Almas enters commercial production. The changes in the cash cost projections are entirely attributable to the appreciation of the Brazilian real against the U.S. dollar, affecting the cash cost in about $43/GEO. Considering constant foreign exchange rates, Almas's cash cost remains nearly stable.
All-in sustaining costs
The table entitled "AISC per equivalent ounce of gold sold -- 2023" shows the company's updated 2023 guidance for all-in sustaining costs per GEO sold by business unit, and a comparison with the previous guidance.
Factors that contributed to the change in the company's guidance include:
Aranzazu: The increase in the AISC guidance for Aranzazu are for the same reasons that caused the increase in the cash costs (foreign exchange and metal price fluctuations). At constant metal and foreign exchange prices, Aranzazu's AISC remains in line with previous guidance.
- EPP mines: The increase in EPP's AISC for 2023 is mainly due to the Brazilian real appreciation against the U.S. dollar in the first half of the year. At constant foreign exchange rates, there is a slight reduction in the AISC, due to lower expected sustaining capex.
- San Andres: The change in San Andres AISC guidance is due to lower production than previously expected, despite the constant and gradual performance improvement. Compared with 2022 AISC, which was $1,342/GEO, this year's AISC is expected to be 8 per cent (considering the low range of the guidance) to 1 per cent (considering the high range of the guidance) lower in 2023 than last year, already reflecting cost savings obtained between 2022 and 2023.
- Almas: AISC included in the table entitled "AISC per equivalent ounce of gold sold -- 2023" are considered for only the period after Almas enters commercial production. The changes in the AISC projections are attributable to the appreciation of the Brazilian real against the U.S. dollar and higher sustaining capex, mainly due to foreign exchange rates.
At constant prices and foreign exchange, Aura's consolidated AISC guidance for the year would have been $68/GEO lower than the new guidance at current prices and foreign exchange rates. Although the recent foreign exchange fluctuations have put pressure on Aura's 2023 AISC guidance, the expectation for increases in metal prices of $185/GEO more than compensates it, which results in an expected rise in the margin per GEO. This scenario, partially attributable to a weaker U.S. dollar, provides a net positive impact for Aura, showcasing Aura's resilience and adaptability during market variations.
The table entitled "Capex -- 2023" shows the company's updated breakdown of estimated capital expenditures by type of investment, and a comparison with the previous guidance.
New projects and expansions:
- The increase reflects mainly the capitalization of prestripping and ramp-up of the Almas project, capacity increases at San Andres through new conveyor belts, and foreign exchange impacts.
- The company is not including the development in its 2023 expansion capex of Borborema, which is under the final phase of its feasibility study, with the start of construction to be announced shortly.
Exploration: Aura believes its properties have strong geological potential and management's objective is to expand LOM (life of mine) across its business units. Therefore, in 2023, Aura plans to invest another total of $24-million to $28-million, which includes:
- $12-million to $14-million in exploration capex (included in the associated table) in areas where the company has proven and probable mineral reserves, around existing mine infrastructure.
- $12-million to $14-million in exploration expenses (not included in the associated table), not capitalized, in areas where the company does not yet have proven and probable mineral reserves, which includes regional targets for potential new discoveries.
- Main investments in exploration in 2023 (either capex or opex) include resource conversion at EPP, mineralization testing and potential deposit drilling at Aranzazu, regional target advancement at Matupa, initial exploration at Aura Carajas, and a feasibility study at Borborema.
Sustaining: The revision in the sustaining capex guidance is primarily attributed to improvements for operational efficiencies and strategic resource allocation at EPP and San Andres, and also due to investments made for plant improvements, aimed at enhancing performance in Almas.
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 U.S. 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 further information, please see company's annual information form for year the ended Dec. 31, 2022, available on SEDAR+ and the company's website.
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), and production and processing costs (impacted by production levels, prices, usage of key consumables, labour, inflation and exchange rates), among other factors.
Tiaozito V. Cardoso, FAusIMM, technical services director for the company, the qualified person as defined in National Instrument 43-101 -- Standards of Disclosure for Mineral Projects, has reviewed and approved the scientific and technical information contained within this news release.
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, its shareholders, its employees, and the countries and communities it serves. The company 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 gold projects: Almas, which is under final phase of construction; Borborema and Matupa, which are in development; and Sao Francisco, which is on care and maintenance. The company also owns the Serra da Estrela copper project in Brazil, Carajas region, which is at the exploration stage.
We seek Safe Harbor.
© 2023 Canjex Publishing Ltd. All rights reserved.