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

[Audio Gap] The presentation, I'm going to talk a little bit about the past and the future of Aura. But basically, what we have done and we intend to do in terms of creating shareholder value, deliver value by growing the company consistently, consistently paying significant dividends doing both without stressing our balance sheet, keeping our net debt over EBITDA at very, very reasonable levels and improving our valuation multiples. So you'll see that has been our focus in the last 5 years and is what we expect in the years to come. Just as a way by introduction, we are focused on the Latin America. So the entire management of the company is from the region. We are coming from 3 mines in production 3 years ago to 6 mines in production now. So we have 4 gold mines in production in Brazil, one gold mine in Honduras and one copper mine in Mexico. Our growth has been through either acquiring greenfield projects, building them on time on burgers, in production or by acquiring assets that became noncore to larger gold producers and then finding opportunities turning them around finding opportunities that maybe the larger companies, they don't focus for because it was not a priority. So this year, we expect to be producing 340,000 to 390,000 ounces of gold equivalents, other than those 6 mines in production. We have other 2 projects that are going to help us to increase the company and exceeded the 600,000 ounces in the medium term. Our gold project that is currently in production, underground mine in Guatemala and another 1 called atopy in Brazil that is ready to build it. We built 2 mines in the last couple of years in Brazil, both from time on budget, our management construction team now with in Guatemala and then we tend to go to the next projects in the future. Look at our performance in the last couple of years. Since 2018, our production has increased more than 170% by delivering this strategy. You see there is a more detail like production profile from 2023 onwards. You see our production increase has been not like substantial or not doubling year after year, but has been consistent by going, building, acquiring projects, building, putting production going to the MAX we're delivering a growth year after year. 2026 is going to be a new increase in production. In terms of all-in sustaining cash costs, we have been historically very competitive. 2025, we closed with following at 18 we're in the first quartile of the AISC for the gold sector. PAUSE This year, we see an increase. That's mainly because we made on acquisitions, 1 of the new projects, it's called MSG Minera San range was part of logo sent portfolio. We closed that acquisition in December -- is a mining that is requiring a turnaround. This year, it's operating above $3,000, but we already expect to see coming close to $2,000 already from 2027. Excluding that impact, we will do we are still very competitive, let's say, 1,600 range in terms of holding -- and then as a combination of increasing production, more favorable gold prices in cost is under control. You see significant improvement in revenues. Our EBITDA coming from $134 million in '23 to over $800 million in the last 12 months and we have had a good conversion of EBITDA into free cash flow, which has allowed us to invest in what I said at the very beginning, increase our company pay dividends without stressing our balance sheet. This snapshot look in the past as well, bringing numbers, this message. So in terms of investments, we invested almost $700 million in expansion through acquisitions and mainly building new projects and also allocating capital extra capital in geology. We have been accelerating since 2022, how much we're putting in geology and exploration to increase our reserves and resources and our reserves at a faster pace than we're depleting -- we see that's working. We are seeing increasing in reserves and resources of the company also year after year despite the increase in production. So that's also generating value. And at the same time, paying dividends and making buybacks. We -- the last 4 years, distributed more than $440 million in dividends and buybacks. And you can see our dividend yield has been consistently high, has ranged between 4%, a minimum 9% at a minimum, but every year has been close to 5%, 6%. And then at the same time, then we're growing our production. We are growing our reserves and resources. We are paying dividends and doing buyback and not stressing our balance sheet, our net debt remain pretty much under control over all the periods over this period never exceeding 0.7x. Now at 0.2x.. Now looking to some cases stats on how we have been able then to do this? No. So what's the magic then to allocate capital to grow to pay dividends and not stress balance sheets. This is pretty much our investment mindset. So first, every time that we're going to make new investments we look for projects not necessarily big. Actually, if you look into both our projects and our mining and operations, they are even consider small for our sector, have a producing 60,000 on 75,000 to 80,000, 90,000 ounces. But usually, they deliver a very good return internal rate of return and short payback -- so if you're looking in Alma, Almas is a project that we built in Brazil between '23 and 2023 was a very low, very limited CapEx, only $7 million, $6 million -- now this project has an NPV of close to $1.2 billion, even when the timing -- when we announced these projects, the expected internal rate of return was over 50%. So it was already expected to be very high returns. But the time was small to produce 50,000 ounces per year. So what we do is we like to minimize the CapEx, optimize the returns, minimize the payback and once it goes in production, then we invested the cash flows to look for the upside in almost, for example, we started with 1.3 million tons capacity in Saudi plants. Now this year, we're going to finish with 3 million tons. And then -- and we're building only 60 malls. Borborema similar story was second project we built in Brazil. You see it was CapEx below $200 million NPV now close to $1.7 billion. When we announced construction, we had less than 800,000 ounces in proven and probable reserves. Now that number results 2 mines. So we're investing to unlock value as well, very similar to Almas. And then when we will take these 2 examples, it helps to understand why we can keep increasing and paying dividends and not stress the balance sheet because the CapEx usually limited are small. The payback is very short. It allows us when we're going to the next investment or able to collect the payback. And now we're going and building our 30 projects called eradorade Gatemala. Also, it's bigger in terms of CapEx, but it's going to be a little bit bigger in terms of production, although not huge, $38 million CapEx for NPV considering all the prices of 200 million of $1.3 billion. So that's also a very good returns expected for road -- so then going forward, as I mentioned, so this -- we look at a little bit what we did in the last 5 years and then going forward, how we expect to keep delivering shareholder value, the same increase in our production with the new projects that we have keep increasing our reserves and resources. We have almost 600,000 of mineral rights pretty much underexplored. We -- geologically speaking, we know roughly 10% to 15%. So there is a long way to go and also keep increasing the market multiples. We know that companies, as they grow, the size matters in terms of multiples and all major larger companies, they have better multiples they need mid-year or general companies. So we keep growing, we have inside our portfolio projects that are going to take us to produce at least 600,000 ounces and we keep looking for acquisition opportunities to take us -- to produce -- to be a 1 million producer in the medium term. This is a plan that we announced last year, how to get to the 600,000. This was disclosed to the market by around 2025. We are producing 267,000 by 2024. The first 2 steps are already delivered. We were building Borborema now -- we reached commercial production, finalized the ramp-up. It's full in production in 2026. MSG, we hadn't closed acquisition. The acquisition has been closed. -- eradorada now is under construction -- then once that's finalized, we have a project late project in Brazil called Matapal, -- it's ready to build, but we don't like to build the 2 projects at the same time in parallel. So when we are in different stage of Erado, we can go to at -- and we have internal expansion opportunities in those assets that were showing like Borborema, like Almas, we keep it growing. And then -- so it's pretty much in-house to get to the 600,000 in the next couple of years. The first step -- the next step on that. It's, like I said, at Eradorada in terms of -- we saw robust economics. It's going to add more than 110,000 ounces of production per year is in construction. We have more than 350 people working on the site. Construction is expected to finalize by end of '27, so it should come early 2028. And besides being an important milestone for us in our growth plan, we consider Eradorada is going to become 1 case study in the benchmark in terms of, first, 100% of the energy is going to be clean energy. We have a geothermal project that's going to supply energy. And also in terms of water, in 2025, we spent almost 1,000 hours talking to the communities and analyzing the environment. We saw that there was 1 being concerned and 1 big issue was the quality of the water. So we have proved that as part of our CapEx and OpEx in our feasibility study solution in which by the end of the process, we are going to deliver clean potable and drinkable water to the population. So it's going to be the first municipalities, especially the first municipality in Guatemala with that level of clean water. So not only we're not going to pollute the water, but we're going to clean the water to a level that they don't have today. So we're very proud and become -- and expected to become a ESG benchmark. So then just in terms of conclusion, then a growing company assets, good assets generating strong cash flows with interesting projects and growth ahead of us paying dividends with still opportunity to we still discounted opportunity to close our valuation gap. We have been -- our market cap close to $7 billion our cash now it's -- that was the end of Q2. We just raised $200 million to fund -- to have fund our expansion plan. So we're fully funded for our expansion. And our main shareholders, we have a controlling shareholder has 47% of the company and all the then very well-known global names like Capital, BlackRock, Fidelity and other reputable investors. Yes, with this end of the presentation, open to questions.

Thank you. Kleber. Any questions from the audience? Not -- just there's a question over here. Comment on the situation in Guatemala regarding support from mining.

Situation at the...

Attitude towards mining in Machala.

Yes. So after prior, we acquired a company called Bluestone, many,there were some challenge in that project. One of the main challenge that we learned even during the due diligence was the mining method. So there was a strong position to open pit mine. So after speaking a lot in country, we decide okay, open pit, there will be a strong position. Let's switch to underground that reduce lots of resistance. Second thing, also, we understood that we tried to understand concerts like Water was 1 of them. So we try to -- okay, what can we do that is not just following the regulation, how we can add value and be preceded that is adding something to the communities. And then after too much discussion, we decide, okay, it hurts a little bit of actual our economics because our CapEx is going up and our OpEx is going up, but has a lot of fair value and add value perceived as well. In a lot of conversations. Like I said, we spent in 2025. We didn't move anything. We spent 1,000 hours talking to communities -- as many of you know, it's not a traditional money country. So there was a lot of investment in education, what we do. Invitations, some accepted some not to visit some of our operations, open invitation to go to our site bearing Guatemala to an out or anyone in the community. So I think he had a lot of dialogue and try to address things that can be addressed. We are not there. We know we're not there to replace the government and to the public service. That's not our role. But if you can add some value and be perceived that you are adding some value, that helps a lot.