Aura Minerals Inc. (AUGO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Second Quarter 2026 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at auraminerals.com/investidores. The presentation will also be available for download. This call is also available in Portuguese. [Operator Instructions] [Foreign Language] Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Aura Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario, the industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference, we have Rodrigo Barbosa, President and CEO; Kleber Cardoso, CFO; and Glauber Rosa-Luvizotto, COO. Now I will turn the conference over to Rodrigo Barbosa begin conference.

Thank you very much, and welcome, everybody. Thank you for attending this call again. So, I'll be happy to go through the major milestones of the company during the quarter. And as usual, Kleber is going to go through the details of the results. Then we finally open to Q&A and where we also have here our COO, Glauber. And if you have any more technical questions, he would also be happy to answer. So overall, the quarter, we had a weaker production than the first quarter. Nevertheless, all the necessary works, all the necessary milestones on the background of the results that means we will achieve, has been achieved in order for us to have a much stronger production in Q3 and then Q4 as we happened in the past with a weaker production in the first semester and a stronger production on the second semester. Actually, this year, as we're going to go through on mine by mine, we'll see that this balance between first and second semester can be even bigger than what happened in the past. So overall, we produced on the first half of the year, 158,000 ounces. And as I mentioned to you, we are strong enough to keep the guidance for the second semester, which means that we will produce a total of 182,000 or 232,000 ounces between 182,000, 232,000 ounces during the second half, which means on average, potentially at 100 below one quarter, 100,000 ounces and the other quarter above 100,000 ounces. So that means that we are very much on track to produce a very significant improvement during the Q3 and Q4, and that is a combination of mine sequencing and also the ramp-up of MSG. As the revenues on the quarter reached $336 million, of course, lower gold price and also lower production means lower revenues. When we look on the EBITDA on the other hand, we reached close to $200 million. And I would also highlight that for 12 consecutive quarters, Aura has been increasing the EBITDA. On the last 12 months, we produced $800 million of EBITDA with the current gold price, the average gold price on the last 12 months is exactly what it is right now and with the total ounces of 313,000 ounces. Imagine if then we achieve the production that we are promising for the third and fourth quarter that EBITDA can be significantly also pushed up once we continue to have appreciation at least stable to higher gold prices while significant higher production in our mine. In terms of all-in sustaining cash costs, very much in line with what we planned. The first number that we see close to 2,000 ounces per ounces seems high, but I would invite you the investors and the analysts to understand that this number has been pushed up because of the turnaround of MSG. If you take out the turnaround of MSG, we would have been at $1,600 for gold equivalent ounces, understanding that we have a significant higher production coming in for MSG, we have a significant high production for Apoena, Borborema. So, we still have an improvement on all-in sustaining cash costs coming during the second semester due to mine sequencing and also expansion that is happening in Almas and also in Borborema. In terms of recurring cash flow, we reached $80 million. When you exclude the losses of the gold hedges, which is going to happen this year and also next year, we would have made close to $120 million of recurring cash flows before the gold losses. Out of this $120 million, we used $54 million for expansion CapEx and then additional $68 million between share buybacks and also dividends. which means that Aura continues to grow, to fund its own growth and the dividends and the buybacks with our own cash flows from operations despite, of course, that we leverage when we have expansion that Glauber can also go through a little bit more detail by the end of the presentation. In terms of net income, a record high net income, $218 million. That's the quarter that gold price has depreciated, unfortunately, but the positive impact that we have a market-to-market up on the net income that was positively by $126 million. We just announced as we are producing significant cash flow from the operations being able to fund our growth with the cash flows, we also just announced a new $60 million of dividend, which means $0.72 per share that will be paid during the third quarter related to the second quarter. Together with this dividend that we also approved, a share buyback program of $200 million. So, from now on, investors should see a split between dividend and share buyback coming in, in the next quarters, where we will continue to remunerate our shareholders significantly now through also a share buyback program. In terms of projects at Aura, mostly on time, on budget. I have a slide to give you more details and also the average daily trading volume significantly higher, meaning that we have been achieving the objective when we listed in NASDAQ to push our daily trading volume significantly higher, reminding that a year ago, we were trading $2 million, $1 million per day on the first semester. Now we are close to $100 million per day on average during the last quarter. In terms of safety, as we mentioned last quarter, unfortunately, we had one lost time incident in Borborema in March this year, lost time incident that the person is already fastly recovering and it is already fully recovered at working at site. Although there was a procedure not followed, we revised all the procedures. We revised and made the due diligence in all the operations in order to make sure that we avoid any single lost time incident. If you look at the last two years, we had only one lost time incident, but the objective is to have zero lost time incidents. That's why we are constantly monitoring our internal program to make sure that we have the highest safety standards in the industry and that we make sure that everybody that works with us return home safely. Also, on the stability of the structures, again, we do have constantly monitoring external consultants that monitor our geotechnical structures, not only the tailings, underground pits, pads and all of that is according to satisfactory level. So, in terms of quarterly production on the left side of this slide, you see our quarterly production and on the line is the last 12-month production. As we can see, since Q2 2025, we've been gradually improving quarterly production in the last 12 months. That's because the ramp-up of Borborema that continue we actually continue to increase our production. And now from now on, after the first quarter and the second quarter of weaker production in MSG, although we are planning much higher production for next year, we will see a gradual improvement on MSG on Q3 and in Q4 on the top of other mines also that will improve. So, we will continue to see this last 12 months improving from the 313, of course, then reaching our within our guidance from 340 and 390 by the end of this year. When we look on the right side, the production per quarter per mine we see the first quarter MSG 9,000 ounces. Second quarter, as I already mentioned to the market, the second quarter will be weaker than the first one due to infrastructure investments and infrastructure activities that we had to implement in MSG. Part of that was planned, part was more challenging when we faced the first and started producing in MSG. We faced a more challenging situation in terms of infrastructure and when we deviated all the equipment when we had to make a choice between put our attention equipment to production or to the turnaround to the underground development, we always choose underground development because that's what will structurally change the mine in order for us to be able to produce close to 80,000 ounces per year production and all-in sustaining cash costs nearing down close to $2,000 per ounce. All the background work in MSG has been done, and we will have here a slide also to mention that give us a strong confidence that we will not only improve on Q3 and Q4, but by the end of the year, be prepared to in 2027, be able to produce close to 80,000 ounces of gold with the all-in sustaining cash cost nearing down close to $2,000, $2,200 per ounce. In terms of Borborema, first quarter, 17,000 ounces, second quarter, 14,000 ounces. That is super planned. It's a mine sequencing grades. As we come to Q3 and Q4, we will see a combination of both. Number one, in Q3, we see higher grades coming into the plant. And in Q4, on the top of the higher grades, we are debottleneck the plant once today, the bottleneck is the filters, and we are implementing new filters that should be online by Q4 between Q3 and mostly Q4 so that we will also be able to increase production on the top of higher production. So, we should see higher production in Borborema coming in on the second semester. Almas, it's a slightly improvement in production. This mine, as I mentioned to you, we built this mine at 1.3 million tonnes. We finished the last year running at two million tons, and now we are upgrading to three million tons. So that will gradually improve capacity as we should finish the year close to three million tons per year, and that will also have an impact on the quarter production. Minosa, we had a decrease from 17,000 to 14,000 ounces. We are in an area of the of stacking pad that is more struggled. We had to pile higher than we did in the last few years. That means that the process of recovery takes more time. We have more money going to our working capital and perhaps we lose some recovery. And as we piled all of this already also during the third the second quarter, we should see Minosa with a weaker production on next two quarters and then recovering more production on Q4 for the year where we should be more towards the low end of the guidance for the year in Minosa. Apoena, despite this lower production from 7,000 to 6,000 ounces, all the background activities, all the opening the pits, all the investments on the pushback and also the mine development is being very much in line with what forecasted. So that will allow us to have confidence that we will reach higher grades during Q3 and Q4 that will support a significant higher production during the next semester. In Aranzazu, we also doing the mine sequencing now on the first semester, lower grade. And now on the second semester, we should reach higher grade, which will also provide us an ability to produce a stronger second half of the year. So overall, as you can see, as we happened in last year and this year, a combination of MSG turnaround plus Borborema, debottlenecking in higher grades and also then Apoena with the higher grades, a combination of these three mines give us confidence that we will not only be within the guidance of the year, but not close to the lower end of the guidance. Next slide. In terms of all-in sustaining cash cost, as I mentioned to you, close to $2,000 per ounce when you exclude MSG, then we will be close to $1,500, understanding that also during the second semester where we're going to have higher grades in Borborema, we're going to have higher grades in Apoena, we're going to have higher production in MSG and also higher production, not that high, but continue to slightly improve Almas as we are now upgrading the plant. So, give us a very good confidence that we also will meet the guidance for the year on the all-in sustaining cash cost. And that understanding that when we issued the guidance, the exchange rate in Brazil and also in Mexico was significantly more favorable. For example, in Brazil, close to BRL 5.50 per dollar. Now we are running at close to BRL 5 per dollar. So that's 10% of losses in exchange rent that on the top of higher oil prices and oil chemical prices, we believe that the team is working in order to be able to deliver results within the guidance that we gave to the market. As I was mentioning Era Dorada, moving very much in line with the plan. We recently approved on the third quarter, the full investments. We already spent $15 million, 60% of the close to 60% already of the groundwork has already been done, focusing a lot hiring from local communities that they don't have expertise in mining. We are still training but yet with 53% of the employees coming from Asuncion Mita region, which is where we are located and 93% from Guatemala. So that shows our commitment with the project to provide opportunities for the local labor. We also approved on the project a significant improvement on the water treatment, actually now taking a lot of the water at the potable level. Now we are in agreement with the local authority in order that this water can be once in production, can be distributed to the local communities. Once in that area has happened also in many Central America countries, there's no treatment of water, no sewage treatment and the water they have access from the rivers are somehow contaminated, which means health problems, which is the major problem that they have when we heard from them what are the concerns during 2025. Just open transparency at Era Dorada House, this means that we have a place in the city where we give full transparency and the person that can answer any questions that any people might arise. We are there to answer to show the project impact and everything that is going to happen in the region so that people can have the confidence that this project will not have negative impact, but actually, it will go beyond and have positive impact once we are treating this water at portable level and also has a geothermal project that we are now in final studies in order to have a renewable energy supplying the energy of this project. As we progress in the construction, we should expect negative news here and there. We've done a significant amount of work communicating with the local communities. We have majority of approval from COCODEs. COCODEs are the person elected by the local communities recognized by law to represent them, and they are mostly in favor of this project and supporting us to move on. So, we don't expect any hiccups in implementing this project up to commercial production, although, of course, some negative might happen. Next. For MSG, very happy to share that we are super in line with what we projected in terms of productivity underground when we acquired this project. And actually, we are above what we expected in terms of resources and reserves. Just a quick reminder, this project we acquired with 370,000 ounces of gold equivalent ounces of gold in proven and probable reserves, we already are at 753,000 in six months. We acquired this project with 1 million ounces of measure indica. We are already at 1.8 million ounces in measure indica. And we acquired this project 1.4 million ounces in inferred. We are already at close to 2 million ounces, above 2 million ounces of inferred. So, this project on the long term, despite doing exploration, so which now we are going to do more exploration in order to significantly also increase resources and reserves. Most important is this the mine development, underground speed because that's what's necessary in order to invert the mine sequencing from top down to bottom up. We are 80% to 90% on average above what this mine was performing last year. So, we are definitely being able to improve underground development. Yet we still have room to continue to improve. That give us a lot of confidence that by the end of the year, we'll be able to completely invert the mine methodology in order to 2027 be able to produce close to 80,000 ounces and push down the all-in sustaining cash cost to close to $2,000 per ounce. Of course, during this turnaround, we compromise short-term production in order to have stronger long-term production. But actually, now we are already at the highest speed in production. We should see improvements in Q3 and then Q4, another improvement, but most of the improvement in production will be on 2027. Now I'll turn the floor to Kleber so that he can present the results.

Okay. Good morning, everyone. Yes, we start with a summary of the main financial KPIs for the quarter, the last few reporting quarters and accumulated last 12 months for each reporting period. We're reporting net revenues of $336 million in the second quarter as anticipated by Rodrigo as a combination of lower production due to mine sequencing and also a lower average price in Q2 compared to Q1. However, when we look to the accumulated last 12 months net revenues, we are reporting a record high, close to $1.3 billion now. In terms of adjusted EBITDA, it's a similar story, $197 million. Then when we look at accumulated in the last 12 months, over $800 million already. As Rodrigo anticipated, we have been increasing our accumulated last 12 months EBITDA for now 12 quarters in a row. since Q2 2023. So now three years in which we are increasing our accumulated EBITDA, which shows the direction we are going in terms of when we look to our annual results. In terms of net income, we're reporting strong net income of $218 million as a combination of the results from the operations and also unrealized gains with the outstanding gold derivatives because there was a reduction between the gold prices at the beginning of the quarter and end of the quarter. We recognized the noncash gains. Excluding these noncash impacts, our adjusted net income slightly below last quarter at $97 million this quarter. And then in terms of cash equivalents and net debt, we closed our cash close to $250 million. There was an expected increase in net debt to $168 million. However, that was compensated by the increase in the accumulated net debt over EBITDA, which then translated into our leverage ratio remaining stable between the quarters at 0.2x. Now moving to understand the main items impacting between adjusted EBITDA and adjusted net income. When we look at the breakdown for the adjusted EBITDA, we had four business units that came with strong results, Superiore, Minosa and Almas and Araxa, all reporting adjusted EBITDA in the above $43 million between $43 million and $56 million range. As expected for this quarter, we expect Apoena and MSG to be the weakest quarter in Q2 and then show stronger results from the second half of the year. Amortization and depreciation, amortization of $26 million expenses. pretty much in line with our expectation. This quarter, we're reporting a financial net income of $61 million, which is mainly driven by the no gain related to the gold hedges, which I mentioned in the previous page, partially compensated by the realized losses with the gold hedges. This was a portion of gold collars that expired in the quarter, and we made the payments in which we paid $37 million. Income tax expenses of $20 million as well as expected. Other expenses, we had a gain this quarter of close to $10 million, mainly related to the completion of the sale of the San Francisco mine, which was part of the Apoena complex. We had a nonrecurring provision for contingency liabilities this quarter of $5 million, bringing the net income to $218 million, as we saw, and then excluding the noncash impacts, bringing our adjusted net income to $97 million this quarter. And now understanding the main items that changed our cash position between the beginning and the end of the quarter. We started the quarter with around $207 million. Then the six mines in production, they generated $17 million during the quarter. of which a portion of that was used to pay the hedges that were settled in the quarter. We allocated $37 million for that purpose, invested $58 million for the growth of the company, mainly the expansion CapEx. We had $53 million mostly split between Era Dorada. We announced the Board approval in April and invested already $5 million in the first quarter and also expansion of plant capacity and underground development at Almas also investments in Apoena. Then to the right side, we see the financial items, and we highlight the capital return to the shareholders through dividends and share repurchases of $68 bringing the cash to the end of the period close to 50 million. With this, we end our presentation and open to questions.

[Operator Instructions] Thank you. Our first question comes from Mr. Matheus Moreira from Banco Bradesco BBI

My first question on capital allocation. I mean we've seen overall, of course, a very volatile macro environment recently, which has weighed on gold prices. I'm wondering whether this changes your M&A appetite in any way. I mean, would you adopt a more conservative stance on M&A in the near term? And within your broader capital allocation framework, I mean, you've just announced a new buyback program of up to $200 million. How is management thinking about balancing growth CapEx and growth CapEx, buybacks and dividends? What are the main priorities here for management going forward? That's my first question, and then I'll ask the second one.

Thank you, Matt, for the questions. First, in terms of M&A appetite, we continue to have appetite independently from gold price. Actually, when gold price had spiked too high in the short-term period that it happened when reached $5,500. This is where the gap of the seller and the buyer widened. So, it's difficult to do transaction when they have those kind of volatility. And actually, now when gold price came back to $4,200, $4,300, we see a more converging expectations in terms of price from the buyer with the seller. And we are always super conservative and we don't play on gold price. We do our analysis. We put the market average projections for gold and also copper.

We don't see why we would change our M&A appetite because of this volatility, and it's a very important step for us in terms of value creation. Just a quick reminder for value creation in Aura it's very clear three avenues. Number one, the execution on greenfield projects, which we are. We just implemented Borborema. We are now doing the turnaround of MSG. We are now also implementing Era Dorada. We are finalizing studies for Matupa. So we are very much in line to deliver the first avenue of value creation in projects that have a significantly high return. Number two is to continue to increase resources and reserves. As I mentioned in MSG in six months of work with the numbers and also adjusting some cutoff grades and inverting the mine sequencing, we could increase significantly, double the reserves and significant increase indicated and also inferred. Actually, when we issued the report on resources and reserves this year, we could see that we actually doubled most of our resources and also reserves. Then the third avenue to complete the first question is they continue to grow through M&As. The sector tends to pay a better price or as you grow, companies that get next to 1 million ounces tend to have a fairer NAV multiple. Where we are today, we are significantly discounted where we feel we should be. And part of this is also that we need to deliver the growth. We know very much how to get and we are in the execution to get the 600,000 ounces in the upcoming years. But we know that the best valuation starts when you get closer to one million ounces, and that will only happen through M&As. Then you also question about the dividends and also how we want to invest the capital. If you look behind materials, take a look at what happened in '21, '22, '23, '24, '25 and now what's happening that I highlight in '26. We've been able to do though, both. This company has such a high payback, right? The payback of our project is one or two years. So the equity will be maybe sometimes less than one year. So, once we sequence those projects, we've been able to, number one, implement the greenfield projects, which we did Almas, we implemented also Borborema. Then we acquired Borborema, we acquired Era Dorada. We acquired MSG. We paid one of the highest dividend yields in the sector in the world. And yet we are 0.2x net debt to EBITDA. So we have not been challenged in order to split out, let's jeopardize growth, let's to pay dividends or the opposite. So we've been able to do a combination of both. This quarter, this semester, as Kleber was mentioned, we produced close to $120 million of recurring cash flow ex the losses of the dividend. And then this cash was enough to support the development of greenfield projects, all the cash flow from all the investment expansion and also the dividend. So -- and we continue to be leveraged. we could even finance and we should finance at least 50% of greenfield project. Aura is in a privileged position in order to have such a strong cash flow from operations that we can do this kind of combination and continue to grow and continue to pay strong dividends to our shareholders.

Great. Rodrigo, that's very clear. And then maybe if I may, a second question on MSG specifically. I mean it was good to see the significant step-up you guys had on both PMP and M&I, right, over the past few months. I mean the company, of course, continues to move forward with its turnaround of the asset. production in the second quarter was impacted by significantly lower grades, right? I'm just wondering if you could give us an update on what are the key bottlenecks you have been addressing? I mean, a bit more specific on the key bottlenecks? And what are the operational priorities at this point? And also, how do you see grades and production evolving over the next few quarters? And for MSG specifically, I understand that the guidance was reinforced for the whole company. But for MSG specifically, do you see some risks to guidance on both production and costs?

I'll start the answer, and then I'll pass to Glauber that he can go more in details. We had a first and second quarters, I would say, in terms of production, more challenging than we expected, but that doesn't mean that that means exactly that we pushed our attention to underground development and the mine preparation infrastructure in order to do the turnaround. So we chose to compromise production in order to maintain a very strong outlook for the medium and long term in this mine. That means that perhaps we might be at the lower end of the guidance. Of course, there's always a risk. We cannot ascertain. But we are very confident that all the groundwork that's been doing will take us to produce at close to 80,000 ounces and close to $2,000 per ounce. But I'll let Glauber to give a little bit more color on what has been doing in the mine and what we should and- why we had a decrease in the grades on the second quarter and why we believe that the third and fourth quarter will continue to improve and put this mine into a very high standard next year.

Yes, of course. So Rodrigo commented, so the year is much more for all the organization housekeeping and prepare the operations for sustainable achieved production around 80,000 ounces and the cost -- the all-in sustaining cost around $2,200 per ounce. But straight to the point, the bottleneck is the mine. So, the challenge is increase the production from the underground mine that we have much higher grade, even considering some contribution from the open pit. The reason for the lower grade in the second quarter is mainly because we pushed down. So, on the priority in the underground is prepare, develop the mine and release reserves for production in a stable way. We use a lot of ore from the old stockpile, lower grade stockpile on surface to keep the plant running, to keep producing and for sure, optimizing the result. Once in the mining, the focus is mining development. So, the great news is that we have been able to increase between 8% and 9% the performance in the underground development compared with the performance last year. The main reason of that is a combination of all the infrastructure that we did the upgrade during the first semester and also the upgrade in the underground fleet. So, if you remember in, when we did the acquisition, the reliability of the fleet is one constraint in that mine. So, we are using this lower production and underground to make some upgrades in the equipment as well and back to the operation in better levels. So we are getting much more higher availability. It's much more reliable equipment, higher productivity. So we are growing this path to increase production. We will see quarter-over-quarter the production grow in MSG in the Q2, in Q3, in Q4 and the Q1 2027. So we will be able to gradually increase grades and throughputs in the plant as well.

Our next question comes from Mr. Lawson Winder from Bank of America.

I just wanted to say solid capital return again, it's really great to see you guys leading the pack on that. What I wanted to ask about, though, is more on costs, which is obviously critical in your ability to maintain that strong free cash flow and support those investments. Year-to-date, at what rate would you say your cost inflation is running? And how does that compare to budget? And then as we move into the budgeting season for 2027, what makes sense to you as a good inflation rate to assume for 2027 versus 2026?

Thank you, Lawson. And I'll let Kleber he can go in more detail. The team is, as you know, we have a very strong team locally fighting back inflation and trying to renegotiate with change specifications. And they've been able to do since 2022, and we continue to do that. Most of the impact that we have today that we saw, it comes from exchange rate that some from inflation. But I'll let then Kleber to give a little bit more color on this and then perhaps give a little bit of view on 2027, although yet we don't have guidance for '27.

Yes. Yes. So, as Rodrigo commented, of course, we do feel the impact, for example, of oil prices, that limited. So if you take diesel, it's, depending on our operations, it is usually between 5% and 10% of our total cost. So, there is some impact is. There is some indirect costs, of course, that comes from inflation of increased diesel price. But we have been working in different initiatives to compensate and fight back this impact. So that's why Rodrigo mentioned this, when we look to diesel and the impact of FX, of course, we feel the impact, but we're confident that we're going to be in the guidance because of the initiatives that we're working internally. For 2027, I think it's still too early to give you any perspective. We're just starting the budget process. We see on a structural basis, some big upside and opportunities when you look into what expect the OE for the company as a whole, mainly MSG bringing the all-in sustaining cash cost from where it is now close to $2,000. As you might imagine, there will be a big positive impact for the OE of the company as a whole. In addition, the expansion of almond, for example, all of that should play positively. But if you go then raw material for raw material and impact of inflation, it's a little bit early in our process to comment on that.

Okay. Nevertheless, helpful. And then, if I could follow up on the discussion on M&A to put maybe a slightly finer point on it. I mean when you look at your portfolio, you have a number of brownfield and greenfield projects already in the portfolio. So, would it be fair to conclude that the preference might be for operating assets as opposed to greenfield projects? How do you think about that? And then playing into that as well, there's obviously just the time of your team, Rodrigo. I mean, do you guys have the capacity to take on another project if you were to acquire something along that line?

It's a good question, and we are very focused on being able to deliver in what we acquire. And if you look back the last acquisition was MSG, something that was running on the top of implementing Era Dorada. That's why we don't want to build two projects at the same time exactly because of the team is the same, right? And we want to make sure that the team can deliver on the construction of Era Dorada. On the other hand, the turnaround team is different. So that's why we felt comfortable to put in MSG and now we are doing both, one team doing the construction and then working a lot on the turnaround. And then looking ahead, I think we would continue to look at both alternatives. But for example, we would not probably buy anything that we have to start construction next year. So, in greenfield project would be something that we could take one or two years. redesigning or upgrading or downsizing what we do in order to be able to build not in parallel Era Dorada and then see what would be the sequence together with Matupa. On the other hand, there is something that is operational and the turnaround of MSG, most of the attention is the first year. So, we would consider any acquisitions as long as we then along by the end of the year or next year, we can move the turnaround into some operational assets for next year so that we don't overlap, right? So, and also, we continue to look alternatives in Americas. We're not Africa player or the West or the East side. and gold and copper, right? So that's where we play. And as I have been widely also mentioning, we've been growing a lot on gold. We like to also add more copper, but copper alternatives has been more scare and returns on gold has been higher. So that's why we've been showing gold in the last years, not because we have a preference just because the returns have been significantly higher.

Our next question comes from Mr. Henrique Marques from Goldman Sachs.

I just wanted to follow up a bit more in detail on the share buyback program you guys announced. That is on top of the dividend that you're already paying above policy. Company has done an excellent work to keep the high level of trading volume, and it caught our attention that you've opted to announce the buyback program instead of just increase further dividend payments. So, I just wanted to understand like the stock did suffer an important sell-off in recent months. Is there any key metric here that you saw that made you announce the buyback program? Is there any threshold of valuation or even what is the perfect balance between dividend and share buyback going forward? And on top of that, just changing a bit gear here, sale of the San Francisco mine, good way to monetize a mine that was under care and maintenance program. I know you guys have also Tafria, which is also under care and maintenance. So, can we expect something similar to this mine? Or I mean, is this an asset that you're also seeking to sell? Does the recent change in the Colombian government changes anything? And how do you see this asset? Anything you guys can share with us would be great.

Thank you. So as you mentioned, we just announced a share buyback. Again, we also made a significant progress on daily trading volume. We don't think the way we analyze that at this level, the share buyback would significantly impact the daily trading volume. We do not want to negatively impact the daily trading volume. So we would perform share buyback as long as it's not jeopardizing the daily trading volume, the liquidity that most of our investors appreciate. Looking ahead, we should see a combination of share buyback and dividends. We don't have exact number how we're going to play. Of course, we have our internal strategy, but it will be a balance. It will be a split, right, between share buybacks and dividends. And we've been able to pay above the guidance, above the policy and dividends. But from now on, we should see split. Don't expect dividends to be that high and then plus share buybacks. So, it will be a split, the total number will be a split of share buybacks and dividends.

Very clear. If you guys can just touch bases on the San Francisco mine question.

Okay. Yes. No, I think San Francisco, we announced, it took a while to approve and finally transfer. Tolda Fria is in Colombia. We just had a recent important change in government in Colombia. That project had been difficult to progress with the licensing. We expect now that potentially can change. So, we are now monitoring and trying to understand what would be the change in Colombia in order for us to reassess if we should push more investment and then foresee any licensing or continue to do care and maintenance or perhaps sales. So that's one thing that we will only understand after the Q3 and Q4 when we see what would be the impact of the change in government through the licensing project to mining.

Our next question comes from Mr. Lucas Lagi from XP Investment.

I have two quick follow-ups. I guess, energy and cost inflation have been like the most discussed topics with investors most recently. So just touching base on those two topics. But on MSG, I mean, you mentioned in the release that one of the reasons why the asset performed relatively weaker compared to other assets was regarding the evolution of production and sales throughout the quarter, lower sales in April and increasing production and sales throughout the quarter. So just to, as one of the most concerns that we hear from investors is still related to the pace and to the turnaround process. I mean, could you provide us an idea of how production actually evolved throughout the quarter? So maybe there will be a run rate of production in June compared to April and how you're seeing the run rate in July and August, I mean, compared to what you saw by the end of the quarter. So just to maybe provide a more comfortable idea of this evolution that you guys already were able to achieve over these past months. And on the cost inflation topic, I mean, it's a discussion we have been hearing all over, all over sectors that we cover and particularly considering the conflict between U.S. and Iran. So, I mean, Rodrigo, you mentioned like effects, chemical, brands, or any specific cost mitigating initiatives that you guys have been implementing? I mean I don't know if there are any changes in hedging policy, for example. So just trying to better understand if such impacts have been high enough to drive any like particular initiative or hedging policy that you guys are doing. So just to better understand, I mean, this production evolution throughout the quarter on MSG and any potential cost mitigating initiatives on such cost inflation topic, particularly regarding the conflict?

Yes. I'll give a quick view on MSG and then Kleber can comment in more details and then Glauber can talk a little bit about this hedging or cost inflation with, it's not significant inflation, right, that's impacting us. But yes, there's some, and we are fighting that. MSG, yet, I have not found a formula to do a turnaround and increase production at the same time. So, we need to improve maintenance. We need to improve infrastructure. We need to do all the underground development in order to improve production. That means that when you're doing maintenance, when you're doing a turnaround, you jeopardize the production in the short term. That point, right? There's no single company, no single mine that will be able to do both, increase short term and also do the turnaround. But Glauber can give a little bit more details on what's happening, that gives us confidence that Q3, Q4 and much more significant next year will be higher production, which is inline withe what he answered, but perhaps we can expand a little bit more.