Aris Mining: Plans in Motion to Go From 200,000 to 500,000 Ounces in Two Years

• Aris Mining is a Canadian gold mining company undergoing transformational growth to double production within 2 years in a fully funded and permitted plan. 
• New management team led by Neil Woodyer took over in 2022 after the merger of Gran Colombia and Aris Gold, streamlining operations and refocusing on organic growth.
• Near-term growth catalysts include expanding the Segovia mine processing plant to 3,000 tpd by Q1 2025 and developing the lower mine at Marmato.
• Long-term, Aris aims to grow to 500,000 oz/yr production by developing the high-grade Soto Norte project in Colombia (8.5Moz resource at 5.5 g/t).
• Balance sheet is solid with $266M cash, $233M net debt and expected EBITDA growth to $300M+ in 2025 enabling rapid deleveraging.

Aris Mining is a growing mid-tier gold producer with a portfolio of high-quality assets in the Americas. The company is in the midst of a transformational growth phase that will see production double over the next two years in a fully funded and permitted plan. A refreshed management team and board are executing on a focused strategy to deliver exceptional organic growth and re-rate the stock to peer multiples as it scales up to a 500,000 ounce per year producer.

Background

Aris Mining was formed in September 2022 through the merger of Gran Colombia Gold and Aris Gold, streamlining the corporate structure and putting in place a new leadership team led by CEO Neil Woodyer. Woodyer is a proven company-builder, having grown Endeavour Mining from a small explorer into a multi-billion dollar producer. Under his leadership, Aris has pivoted its strategy to focus on near-term, high-return organic growth while putting longer-dated projects on the back burner. 

The portfolio centers on two cornerstone assets in Colombia - the Segovia mine and the Marmato mine. Segovia is the world's highest-grade underground gold mine with reserve grade of 10.8 g/t Au. It generates significant free cash flow, with an EBITDA margin of $144 million on an LTM basis. Marmato is being expanded from a small-scale upper mine to a larger, more efficient operation accessing newly defined lower porphyry mineralization.

Interview with SVP Oliver Dachsel

Near-Term Growth Catalysts

The most important near-term catalyst is the Segovia Expansion project which will see throughput increase 50% from 2,000 tpd to 3,000 tpd. For a modest $15 million capital investment, Aris will add 100,000 ounces per year of low-cost production. Construction is over 50% complete and expected to be finished in Q1 2025, enabling a ramp up to the expanded production rate in 2H 2025. At full capacity in 2026, Segovia will produce 300,000 oz per year, up from 190,000 oz in the last quarter. As explained by SVP Capital Markets Oliver Dachsel,

Segovia, the de-bottle necking of the processing plant is going to be finished by the end of the first quarter next year. At that point, the processing plant will have a throughput capacity of 3,000 tons per day. We're going to ramp it up over a six to nine month time frame, meaning we should be producing at the 3,000 ton per day level in the second half of 2025.

In parallel, Aris is investing in building a new lower mine at Marmato that will transform it into a large-scale, modern operation producing 162,000 oz per year over a 20-year mine life at AISCof ~$1,200/oz. The lower mine will utilize bulk underground mining methods to efficiently extract a large porphyry ore body, complementing the existing small-scale and higher cost upper mine. 

Long-Term Upside

Looking further out, Aris has a pipeline of development projects to drive production over 500,000 oz/yr. The most significant is the Soto Norte project in Colombia, one of the largest and highest grade undeveloped gold projects in the Americas. Aris owns 51% of the asset which hosts 8.5 million ounces at 5.5 g/t Au, or 4.3 million ounces attributable to Aris.

While prior owners envisioned an enormous 7,200 tpd operation producing 450,000 oz/yr, Aris is taking a more measured approach to optimize the design at a more manageable scale that can be permitted. An updated feasibility study outlining the revised scope is on track for Q2 2025. Soto Norte does face some challenges - the government has proposed a two-year moratorium on permitting in the area. However, Aris has strong support from local communities and believes it will ultimately secure the approvals to advance this world-class deposit.

Financial Position

Aris has a solid balance sheet to fund its growth initiatives. The company recently completed a transformative refinancing, issuing $450 million of 5-year senior notes at an attractive 8% coupon. This pushed out maturities to 2027, avoiding any near-term funding risk. Pro forma the financing, Aris has $266 million of cash and $233 million of net debt. This is very manageable at 1.6x LTM EBITDA of $147 million. 

More importantly, leverage is set to fall rapidly as the Segovia Expansion and Marmato Lower Mine come online. Analyst consensus forecasts EBITDA rising to over $300 million in 2025 and over $500 million in 2026 as the growth projects are completed. At those levels, Aris would be generating significant free cash flow and approaching a net cash position.

The balance sheet structure is very solid, low leverage, significant liquidity... If we were to hit those numbers that third parties project [for EBITDA], you see how rapidly the de-levering could occur.

Valuation & Re-Rating Potential

Aris shares currently trade at a deep discount to fair value and mid-tier producer peers. At a US$630 million market cap, the company is being valued at just 4x consensus 2025 EBITDA and 2x consensus 2026 EBITDA. This compares to mid-tier peers at 8-12x EBITDA.

As the company delivers on its catalysts and scales up production and cash flow, there is potential for a significant re-rating to peer multiples. 

The Investment Thesis for Aris Mining:

• Fully funded and permitted to double gold production to 500,000 oz/yr within 2 years
• Two cornerstone assets (Segovia & Marmato) . The latter with +20 year mine lives generating significant cash flow
• Exploring high-return, low-risk brownfield expansion leveraging existing infrastructure 
• Best-in-class management team led by proven company-builder Neil Woodyer
• Clean balance sheet with falling leverage and approaching net cash position
• Long-term growth pipeline anchored by world-class Soto Norte project

Macro Thematic Analysis:

The gold macro thematic remains constructive for miners like Aris. Persistently high inflation, geopolitical risk, and the threat of a US recession are all supportive of gold prices at or above current levels in the $ 2500/oz range. Central banks continue to accumulate gold as a hedge against fiat currency debasement, while safe haven demand from investors is robust. 

Aris Mining is well positioned to capitalize on the gold macro backdrop. With AISC in the lowest quartile of the industry cost curve at ~$1,200/oz for Marmato projected once the lower mine comes online, the company will see significant margin expansion if gold prices remain at current levels. 

Summarizing the opportunity, Oliver Dachsel commented:

It's an exciting time considering that there are so many near term catalysts...delivering the expansion of Segovia, then delivering the technical report for Soto Norte, that's going to be Q1 and Q2 next year. Plus delivering on the construction of the lower mine at Marmato... there's transformative growth linked to near-term catalysts.