Aura Minerals’ CEO Rodrigo Barbosa sat down with Mark Bunting, Host, Red Cloud Financial Services to…
Tag: Aura Minerals Inc.
Aura released its Q1/22 financial and full operational results (ended Mar 31/21) which beat our revenue, EBITDA and EPS estimates. The beat was driven by FX gains and higher revenue on the back of more ounces sold in the quarter than produced. The company also maintained its 2022 guidance for total AuEq production of 260-290k oz AuEq at cash costs of $771-845/oz AuEq (RCS est. 265.2k oz AuEq at ~$790/oz AuEq). Overall, we view Q1/22 as being a very stable quarter for Aura despite lower production and we remind investors that Aura is generating free cash flow, has net cash of $29.3M and pays a competitive dividend. Given that production should be backend loaded in 2022, we anticipate steady results as Aura works to grow its production profile in the coming years by developing Almas and its other pipeline projects.
Aura announced that it plans to acquire a 100% interest in Big River Gold (ASX:BRV, Not Rated) and form a 80%/20% JV with Dundee Resources, a subsidiary of Dundee Corp. (TSX:DC.A, Not Rated). Dundee holds 19.3% of all issued Big River shares and has entered into an agreement with Aura, whereby Dundee would ultimately retain a 20% indirect interest in Big River. Overall, we view this acquisition positively as it adds another development stage asset to Aura’s portfolio and could help grow its production profile in the near future. Additionally, we note that the Borborema project is located in Brazil, a favorable jurisdiction for mining and one that Aura already has a strong presence in with its EPP mine complex, and its Almas and Matupa development projects.
Aura Minerals released preliminary Q1/22 production results that missed our estimates, primarily due to lower grades mined at its San Andres and EPP mines. The company produced a total of 61,041 oz AuEq across its operations in Q1/22 (-21% QoQ, -2% YoY), which was 11% below our estimate of 68.8k oz AuEq. Overall, while production missed our estimates, we are encouraged to see Aranzazu continue to perform well following its capacity increase completed in 2021. We expect production to be largely backend loaded for 2022 given the company’s strategy to sequence EPP and San Andres to mine higher-grade ore in H2/22.
Yesterday, Red Cloud hosted the second of its three-day 2022 Very Pre-PDAC Mining Showcase, which featured 32 presenting companies and a fireside chat with Ross Beaty, Chairman of Equinox Gold Corp. Over 1,750 participants have registered for the event. With this note, we want to provide a quick recap of the highlights from the conference for those who were unable to attend the live event (see our Day One recap here). If you would like to attend Day Three of Red Cloud’s 2022 Very Pre-PDAC Conference, register here. Replays are available on the Red Cloud website.
Aura acknowledged a press release issued by the Honduran Ministry of Energy, Natural Resources, Environment and Mines (the Ministry) that stated the government would cancel environmental permits for metal and non-metal mining and that it would prohibit open-pit mining. However, the Ministry did not clarify whether the permit cancellations would only effect new projects or if they would apply to existing ones. Aura currently operates the San Andres gold mine in Honduras and could potentially be impacted should the objectives stipulated in the press release eventually be enacted. Based on our discussions with management we would emphasize that this press release is not a Presidential decree nor is it written in official legal language. According to management, the revocation of permits by decree for an operating mine would be unconstitutional in Honduras and could not be achieved without the Ministry putting it to a vote in congress. We also point out that the scope of the measures in the press release are extremely broad as they would also apply to the extraction of aggregates, which are essential for construction. Overall, we believe this press release requires additional clarification by the Ministry and would likely be challenged by the impacted sectors and companies
Aura released its Q4/21 financial and full operational results (ended Dec 31/21) which missed our revenue, EBITDA and EPS expectations largely due to a difference between AuEq ounces sold versus produced. The company also released 2022 production guidance that is similar to 2022, albeit at slightly higher cash costs. We believe Aura had a positive end to 2021 with total annual production of 267.4k oz AuEq at cash costs of $812/oz AuEq. In our view, 2022 should offer a stable year of production as it builds Almas and begins construction on Matupá going into 2023. We slightly reduce our target to C$22.00/sh (was C$23.00/sh) after updating our model for Q4/21 financial results and 2022 guidance as well as incorporating a DCF valuation for Matupá (was on an in-situ basis).
We are seeing precious metals rise in the shadow of the Ukraine invasion. Gold is trading around US$1923.80/oz, down a couple percent on short term profit taking since reaching a high of US$1,975/oz overnight. Kitco News notes that the next resistance levels could be between US$2,022/oz and US$2,089/oz. Some such as Frank Holmes of US Global Investors is suggesting that 20% volatility in gold is a non-event, and that gold could go to US$2,800/oz. Other commodities are also moving.