Aura Minerals' Strong Operational Performance Continues Despite Lower Q2 Production

• Q2 gold production was 48,500 ounces, lower than Q1 due to lower grades at EPP mine as expected. Guidance maintained for EPP.
• Q2 revenue was $85 million and net income was $11 million. Strong cash position of $110 million after dividends and investments.
• Almost mine ramp-up proceeding well, operating above nameplate capacity. Expect to declare commercial production soon.
• Borborema feasibility study nearing completion, should start construction soon. Ordered mill with production starting in early 2025.
• Matupa environmental licensing progressing, preliminary license expected in Q1 2023. On track for 2025 production target.

Aura Minerals reported its financial and operational results for the second quarter of 2023 in an earnings call on October 3rd, 2023. The company saw lower gold production of 48,500 ounces compared to 53,000 ounces in Q1, driven by anticipated lower grades at its EPP mine in Brazil. However, Aura maintained its full-year production guidance for EPP, highlighting the inherent variability in mining grades. Despite the lower production, Aura generated revenue of $85 million and a net income of $11 million, maintaining a healthy cash position. The company also continued investing in growth, paying shareholder dividends, and reducing debt.

Overall, Aura’s results indicate that its operations remain strong and on track to meet its long-term growth plans. The company’s management emphasized its strategy of growing production, increasing reserves, and providing shareholder returns. With several expansion projects progressing well, Aura appears well-positioned for continued success.

Lower Q2 Production Reflects Natural Variability in Mining Grades

Aura’s CEO Rodrigo Barbosa explained that Q2 gold production of 48,500 ounces was lower than Q1 mainly due to lower grades at the EPP mine in Brazil, as the company had projected. He noted that in gold mining, grades often naturally vary between higher and lower levels across different periods. The lower Q2 grades at EPP led production to decrease to 7,000 ounces, compared to 13,000 ounces in Q1. However, Barbosa said grades are expected to improve significantly in Q3 and Q4, likely reaching 20,000-25,000 ounces per quarter at EPP. Despite the weak Q2, Aura maintained its full-year EPP production guidance.

Revenue Declines With Production But Profitability Remains Strong

The lower Q2 production drove a corresponding decrease in revenue to $85 million from $92 million in Q1. However, the company still generated positive net income of $11 million. CFO Clever Cardoso said Aura maintained a strong cash position of $110 million at quarter-end after paying dividends and investing for growth. He emphasized Aura’s robust cash flow generation and noted the company expects its leverage ratio to improve with the upcoming commercial production from the Almas mine.

Projects Progressing Towards 2025 Production Target

Aura Minerals remains focused on its target of achieving consolidated annual production of 450,000 gold-equivalent ounces by the end of 2025. The company provided updates on several key growth projects:

• Almas Mine Ramp-Up Exceeding Expectations - The Almas mine in Brazil achieved commercial production in Q1 2023 on time and on budget after beginning operations in April 2022. Barbosa said the ramp-up has surpassed expectations, already operating above nameplate capacity with gold recoveries over 90%. He expects to declare commercial production in August, ahead of the Q3 target.
• Borborema Construction Expected Soon - Aura is finalizing a feasibility study for its Borborema project in Brazil and expects to start construction soon. The company has ordered the mill, with production starting in early 2025. It is also working to secure project financing.
• Matupa Permitting On Track - Aura continues to progress permitting for its Matupa project in Brazil, with the preliminary license expected in Q1 2023. This keeps the project on schedule to begin production in 2025.

The Advancement of these projects demonstrates Aura’s ability to successfully build and ramp up mines while maintaining strong operational performance. With its growth initiatives tracking well, the company appears positioned to meet its 2025 production goal.

Maintaining Financial Strength Through Investments and Dividends

Despite lower Q2 production, Cardoso explained that Aura generated $15 million in free cash flow during the quarter. The company continued investing in growth by spending $7 million on exploration to extend mine life and $21 million on expansion capital expenditures. Aura also paid $10 million in dividends to shareholders in June.

Cardoso noted the company expects its cash position to improve further with Almas reaching commercial production. Aura is also focused on managing its debt maturity profile, having completed $30 million in liability management in Q2 to extend timelines.

Aura’s ability to fund expansion projects, pay dividends, manage debt, and maintain a strong cash balance demonstrates the financial health of the business. The company remains committed to enhancing shareholder value through these capital allocation decisions.

Long-Term Growth Strategy On Track

In his closing remarks, Barbosa reiterated Aura’s strategic focus on growing production, increasing reserves, and providing shareholder returns. With the successful ramp-up of Almas and continued progress on Borborema and Matupa, the company’s pipeline of expansion projects remains on schedule.

Despite the anticipated production variability in Q2, Barbosa reaffirmed Aura’s long-term guidance. He expressed confidence the company will achieve its target of consolidated annual gold-equivalent production of 450,000 ounces by the end of 2025.

With its operating performance largely on plan and financial strength intact, Aura Minerals appears positioned to continue executing its growth strategy. The Q2 results reinforce the investment case for Aura based on its portfolio of assets, disciplined capital allocation, and demonstrated ability to successfully expand production. As its development projects begin contributing over the next few years, the company has the potential to drive significant returns for shareholders.

The Investment Thesis for Aura Minerals

• Growing, diversified portfolio of producing mines and development projects focused on the Americas
• Clear growth trajectory, with a consolidated production target of 450,000 gold-equivalent ounces by 2025
• Strong track record of project execution – built and ramped up Almas mine on time, on budget
• Disciplined capital allocation focused on funding growth, managing debt, dividends
• Significant exploration upside beyond current development projects
• Proven management team with experience operating and expanding mines
• Attractive valuation relative to gold mining peers