Aura Minerals Inc

Good morning, ladies and gentlemen. Welcome to second quarter 2024 earnings call. This conference is being recorded and the replay will be available at the company's website at auraminerals.com slash investidores slash. The presentation will also be available for download. This call is also available in Portuguese. To access, you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, select Mute Original Audio. Para acessar nossa conferência em português, clique no ícone do globo ao lado inferior direito da sua tela zoom e selecione a opção Portuguese Room. Ao acessar a nova sala, certifique-se de mutar o áudio original. We would like to inform that all attendees will only be listening the conference during the presentation, and then we will start the question and answer session when further instructions will be provided. 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's 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 their respective forward-looking statements. Present at this conference we have Rodrigo Barbosa, President and CEO, and Kleber Cardoso, the CFO. Now, I will turn the conference over to Rodrigo Barbosa. You may begin your conference.

Thank you all and good morning. Thank you for also being here with us. I am glad to be here to present again the second quarter of 2024. I will, as usual, present an overview about the operations and how we're progressing with our growth projects. And then Kleber will go more details on the results. The second quarter, again, we did a very strong quarter in terms of results and cash generation while we continue to advance in Port Varema. Although, as we were projecting during the demand sequencing, this Q2 is the weakest compared to the other quarters of the year. And we had a change in contractor enumers, which I will explain further in order to reduce costs. That has already completed, so we are now well positioned to have a very strong Q3 and also very strong Q4. We project to have a stronger second semester compared to the first semester, together with the lower cost and higher gold price, which give us a chance to continue to improve our results along the year and have a very strong year in 2024. So in terms of production, as we were projecting a weaker quarter compared to Q1 and also Q2 and Q3, Together with the changing contractor in Almas, we reached a production of 64.3 gold equivalent houses coming from 68 last quarter. And now we are projecting to be above 70,000 per quarter during the second semester. The 64.3 is already a 33% increase. When you compare to last year, we will see the results of the inflection in terms of production the last 12 months that happened last year, and then we continue to move upwards during this year, and then also next year when Borborema starts the production. In terms of EBITDA, although we had a lower production compared to Q1, higher gold prices allowed us to reach $56 million on EBITDA, and there's a strong EBITDA again. And I would highlight that if you add Q1 EBITDA and Q2 EBITDA, we are reaching close to $110 million on EBITDA during this first semester, which is weaker than projected in terms of production than second semester. This 110 with a gold price of $2,173, And now we are going to stronger production to Q2 while gold continues to be traded at closer to 2,400 or above 2,300 for the second semester, which will position us to have, again, very strong Q3, stronger than Q1, Q2, and also Q4 for the year. In terms of all in-sustaining cash costs, we had a slight increase of $41 compared to the first part of 2024. That comes mostly from lower grades that we reached in Apuena with the highest reparation and also the change in contractor in Almas. For the second, for the third quarter and fourth quarter, Almas is already, we already changed the contractor. We are already producing close to 45 to 5,000 ounces, 4,500 to 5,000 ounces of gold per month. While in Apuena, we will reach a higher rate. So we should see also or always sustaining cash costs, improving or decreasing in value for the next quarters. With that, Evida, Kleber, we're gonna also share with you, we had a non-recurring accounting events that affected our net income. That comes from good news, while gold price continues to increase we have to market to market our options. So that also is a non-recurring and accounting losses that goes to net income together with an exchange rate that changed reals coming from five to 5.5, 5.6 during the quarter. With the strong cashflow that come from the first semester, we also pay dividends close to $25 million dividends plus $4 million of share buybacks. So that also continue, we continue to give cash back to our shareholders while we are investing and growing. If you add the dividends we paid along the last 12 months that together with the share buyback is reaching 8.8% of yield to our shareholders, which is put us, continue to put us among the highest dividend yield in the world for the gold sector. During the quarter, We also acquired two important prospection projects, Pezon and Pequente, and we now have an option to do a drilling program that will compound together with the Matupá project so that we can add more resources and reserves into the Matupá and extend the life of mine. Although Matupá, we already have enough to do the payback and seek good returns, it's still 300,000 ounces of reserves and we expect with Pequete, Pezon, and then together with Bananal to significantly increase our resources and reserves in the project. And we'll do the drilling program during the second semester, and then we'll update the market accordingly as we have the results. We also published, or I would invite all the investors to take a look on our sustainability report that we have recently published. This is the second report that we published. and that we should continue to do so along the next years, giving up full transparency of the already 360 concept, where we also look in the impacts over the communities and the environment, and also within our employees and everything that we do. In terms of safety, as we always share with you, we broke our internal record last quarter in Q1, that one year in all the operations without any lost time incidents. Unfortunately, in Apuena, we had an incident, but we continue to do a very strong incident reports where we have 21 months in Arenza Azul, 20 months in Minas, and 24 months in Almas without any lost time incidents. And also the construction of Borborema, we don't have any lost time incidents. We continue to monitor on a monthly basis with independent consultant to check our structures, geotechnical structures, and all our structures are in compliance and comply with the current legislations. So on the left side on this chart, on the line on the left chart, This is the last 12-month production. As you can see, since Q2 last year, where we reached due to challenges in lower grade, challenges in Honduras in lower grades, in Apoena, we reached the lowest level, 228 gold equivalent ounces produced. Every quarter after that, on the last 12 months, we've been increasing, and that increase comes from the production challenges in Honduras has been already addressed, and we are producing a running rate, as we can see on the right side, 19,000 ounces per quarter. Then we also have higher grades. We had higher grades in the second semester and the first quarter of this year in Arruena, and almost started commercial production during Q3 last year. So on every quarter now, we are having a stronger production compared to last year. That put us on the last 12 months, an increase. So from 1,228,000 on Q2 2023, now at 266 on the last 12 month. And again, as we will have second semester stronger than the first semester of this year, we should continue to see improvement on the last 12 month production, Q3 and Q4. When it should be stabilized, but then I would also invite the shareholders to take a look on the board body of my project, which I will highlight on the next slide. that should start the ramp up by Q1 next year, and that we also continue to add ounces into our last 12 months. Our hours should continue to increase production while, as we will see, we are meeting the guidance in costs of in-sustaining cash costs. Actually, the second semester should be stronger, better than the first semester. And then next year, Borborema enters with a lower of in-sustaining cash costs compared to our average. So, auto will continue to grow, decrease costs, while gold prices continue to be strong. Again, we had a first semester realized close to $2,170 per ounce, and now gold price has been traded at close to $2,400 per ounce. So, that combination of more production, lower cost, and stronger gold price will continue. boost or continue to boost or EBITDA for Q3 and also Q4. On the right side of this slide, on the bars, as you can see, Aranza Azul are very stable compared to Q1. Apoena, where we reached lower grades, that was already projected during the mine sequencing, we're transitioning from Ernesto to Nasdaq, so that transition reduced our grades, increased the strip ratio, but we should be also now entering higher grades with more productivity in Apuena so that we will be able to meet the guidance. Minossa, again, very stable, continue to be strong. We fixed all the challenges from last year. And then it's been the third, fourth quarter that we have strong production between 18,000 to 20,000 ounces per quarter. And we should continue to see those kind of productions for Q3 and Q4. ALMAs were differently that we were projecting. We did not project the change in contractors. So that's where we had a lower production compared to our internal, but due to the change in contractor, ALMAs should be running between 4,500 to 5,000 gold production, ounces of production per month. We had in April, It was close to 2,200, May 3,500, and now June reaching 4,800, which is the running rate that we should expect for the upcoming month in ALMA, so that we are very confident that we'll be delivering into the guidance. So next slide. In terms of all-in-sustaining cash costs, as you can see, it's been very stable since Q4 last year, hovering around the $1,300 on all-in-sustaining cash costs. Last quarter, we had a last Q2, we had an increase that came from mostly lower grades in Napoena, which we don't expect to have that lower grades in Q3 and Q4, and also higher costs due to the transition in contractors in Almas. Just to give an idea, we We are now coming from running rate during the first quarter and a little bit on the second of 17 reals per ton on the contractor. Now we have reduced to 13.5 reals per ton with the tons moved with the contractor. So that's a significant more than 20% decrease and putting us in a very strong position to have a higher production with a lower cost so that we also boost our results during the second semester. As already mentioned, we are, during the first semester, the production reached 133 gold equivalent houses. This is very much within the middle of the guidance for the year. However, as I mentioned, second semester will be stronger than first semester, which put us on the direction to be on the stronger health in terms of production. And that the reflection of this will also happen in sustaining cash costs. WHERE WE ARE ALREADY CLOSE TO THE LOW OF THE GUIDANCE, WE SHOULD CONTINUE TO IMPROVE OUR WIN IN SUSTAINING CASH COSTS. WE SHOULD BE DURING THE SECOND SEMESTER AT THE LOW OF THE GUIDANCE IN TERMS OF OUR WIN AS A REFLECTION OF NO CHANGE OF CONTRACTOR IN ALMAS AND ALSO HIGHER GRADES IN APOENA. IN THE CAPEX, ON THE RIGHT SIDE OF THE SLIDE, AS YOU CAN SEE, WE ARE very much in line on the CAPEX for exploration and also maintenance and project expansion. We are on the first semester below the half of the guidance, but that's because most of the expenses and the investments and the cash disbursement for Borborema happens on the second semester, so we continue to maintain our guidance for the year. And actually, Borborema, as we will see in the next slide, is being very much in line in terms of schedule and budget. So as I was mentioning, Borborema, we are already 40% complete, which is very much within our schedule and within our budget. Again, highlighting the numbers of this project that is not being priced in our shares. This project, we did a feasibility study with 812,000 ounces of reserves and the gold price at close to 1,700, and that was giving us a NPV of $182 million. Only adjusting the gold prices to $2,300, this NPV is already at $440 million at the $2,300 gold price, and gold price has already been traded above the $2,300. But also, and more importantly also, we are considering this feasibility study, 812,000 ounces of reserves, and we already have closer to 2 million ounces of resources that mostly of this can also be converted into reserves as we have the permits to move close to five kilometers of one road that's already in progress. And then we expect within less than one year to have the permits. And then from that another one or two years in terms of our construction. So this project can have more than double the reserves with that permit. that will significantly boost our NPV and returns in this project. And Borborema, as we did with Almas, we are applying all the fast track going to production. It's easy to build, easy to operate. We are mounting the plant while we are, we did all the basements and we built a lot of the parts aside from the plant so that when mount, we are mounting all together in a fast track process during Q3 and Q4 and ramp up each schedule to have to start on the first quarter next year. So with that, I will pass to Kleber to go into the results and then I'll come back with the questions and answers and then to wrap up all the projects.

Thanks Rodrigo, good morning everyone. Okay, so this quarter, despite the fact that Rodrigo was mentioning that we saw a slight decrease in our production compared to the last quarter, and that being the lowest expected production for our quarter for the year, we saw an increase in both net revenues and EBITDA on this quarter compared to the last quarter. So in terms of net revenues, we reach $134 million now on Q2, bringing the last 12 months to exceed half a billion dollars at the end of Q2, which is a record high in the history of ORA. We have never reported last 12 months revenues above $500 million. Adjusted EBITDA, we're going the same direction. We see also an improvement compared to the last quarter, now achieving $56 million on this quarter, coming from 53%. If we compare it to the same period of last year, we more than doubled the EBITDA on this partner. And then now accumulated for the last six months, we have $180 million EBITDA accumulated, which already is significantly higher than the EBITDA that we reported last year, which was 134. So keeping our expectation to meet our production guidance, cash cost guidance, and considering current cycle of the prices, we should be continuously seeing the next quarters, both the quarterly EBITDA and also the accumulated last 12 months EBITDA increasing going forward. When we come to the net income, we were reporting a $26 million loss on this quarter that is entirely explained by either no cash or no recurring losses. Most of that, as Rodrigo anticipated, is cash. First, as a result of a continuing increase in gold prices, the gold prices increased by over $100 between the end of the first and second quarter. We generated no cash losses related to our global derivatives. It also affects the impact because of the Brazilian real depreciated 11% this quarter. Both factors are very positive, actually, from a business side. Of course, good prices, high good prices is positive because we export metals from Brazil. It's good if the way out evaluates. But then we see on these occasions these known cash losses in the net income. I'm going to go specifically slide more in detail about that. Then finally, in terms of cash and net debt, our net debt achieved $142 million at the end of the quarter. increasing from the previous quarter as expected, as we continue to invest to build the Borgo Rema project. And also in the quarter, we paid $29 million between dividends and share buybacks. With this net debt at the end of the quarter, our net debt over EBITDA achieved 0.8 times at the end of the quarter, so we're still very comfortable. in our cash position is still comfortable above $290 million at the end of the quarter. Okay, here now we bring the details for explaining the change in the cash position throughout the second quarter. So here on the far left side of the page, we see we started the quarter with $214 million. Then as a reminder on this left side here on the page is what we call what just a free cash flow to firm, which is the cash flow generated by the four mines in production, not including how much we're investing to grow the business in either expansion reserves or resource. We see was a first from the quarter, we generated $37 million in cash. If we exclude changes in working capital, which we had $8 million, no recurring temporary consumption, the cash flow would have been close to $45 million. So it was a strong quarter, again, as Rodrigo mentioned, and a quarter which book prices were close to $2,300 million. In the middle here of the chart is in the investment for growth. So we invest another $5 million in the quarter in exploration. And $17 million is mainly the Borborema construction. And then to the right side is what we call the financial items. The biggest one was the return of capital to just shareholders, dividends and share buybacks. And I'd like to highlight here also other two items. One is We see effects impacting cash and equivalents of $11 million. This is not a cash consumption. The reason we see this negative $11 million is because Borgorema holds most of its cash in Brazilian reais, in Brazil, because most of the capex expected to complete the project will be incurred in Brazilian reais. because the Brazilian real went from 5 to 555, so 11% depreciation in the quarter, when we converted that cash in reals to dollars, it seems to have less dollars. But again, we don't expect that to translate in a free cash flow loss because the capex is going to be incurred in reals. And the second item I'd like to show here is the derivatives and others. We have a $2 million cash loss here. which was how much in cash the net payment we paid to the banks to remove the credit support agreements, which are the agreements that allow the banks to call margins against power. So in the second quarter, we did an negotiation, and then we ended up paying a net amount of $2 million in cash, which we're going to see when we see the net income. There was a 13.4 impact in our P&L. but the net cash impact was just the $2 million this year. In the quarter, so in the semester now, it's the same analysis for the semester. We see the free cash flow to firm of $53 million. Investing $54 million of significant amounts to grow the operations, $34 million mainly the per-vorema, significant amounts also in exploration, $10 million in the first six months. In the financial items, the main items are the ones that I explained before. And then here on this page, we bring a bridge explaining the items between the adjusted EBITDA that we saw before and the net income. This quarter, we bring a little bit more details because of the items that impact and then come this quarter. So we see, as we saw before, EBITDA, we start with the $56 million adjusted EBITDA. When we look at that by business units, Aranza Azul was once again the strongest results with $23 million. Minoza came close, a very good quarter, $19 million in EBITDA in Minoza. Apoena, despite being the most difficult quarter in terms of lower production and higher cash costs, also 7.5% at this EBITDA. And Almas also, it's a positive highlight with $11 million EBITDA, despite being the quarter where we changed the contractor and had some impacts also in production and cash costs. Amortization and depletion at $15 million came according to our expectations. And then the ones when we detail a little bit more of the financial items. We were reporting $45 million in financial expenses as part of. Again, it's most of that didn't translate or we don't expect to translate in cash losses. Out of those 45, the main items are $12 million, the market-to-market accounting losses because of increasing gold prices for the Borborema Alva's gold derivatives, as we saw in the last two quarters. We see here the $11 million FX cash loss, which is related to the Borborema cash held in reais. And the 13.4, which was the fee that we agreed to pay to the bank to remove the ability for the banks to have margin calls against the company. We agreed to pay the banks about $13 million, but we had also, as part of the negotiation we did last year with the banks, we expect to receive $11 million as part of it. So the net amount that we paid in the end was just the $2 million that I presented before. The income tax expenses, a portion of that is similar. When there is a big depreciation of currency, especially the Brazilian reais, we have deferred tax liabilities. You create those provisions that were not expected to become tax payments in the future. That was $7 million in this quarter. Then these items explain the $26 million net income loss. And from this part, as I mentioned, we are starting communicating and reporting a new KPI, just in Eddington, in which we bring back the gain or losses with derivatives and gain or losses with effects. We believe going forward, it's going to be easier to communicate because of the volatility of gold and foreign exchange. Excluding those two items, our just the loss would have been only $3 million, of which if we excluded it one time, you know, so no cash loss related to the derivative thresholds of $13 million. And the deferred tax liabilities, actually, our net income would be positive $17 million, which is more close to what we see in terms of operational results, more consistent. And with this, we end the presentation and open to questions now. Thank you.