Aura Minerals Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2024

There are 6 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to Second Quarter 2024 Earnings Call. This conference is being recorded and a replay will be available at the company's website at auraminerals.com/engvestidores 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.

Operator

After that, select mute original audio. We would like to inform that all attendees will only be listening to 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.

Operator

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.

Speaker 1

Thank you all and good morning. Thank you for also being here with us. I am glad to be here to present, again, the Q2 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.

Speaker 1

The second quarter, again, we did a very strong quarter in terms of results and cash generation, while we continue to advance in Porque Arena. Although, as we were projecting during the mine sequencing, this future is the weakest compared to the other quarters of the year. And we had a change in contractor enormous, 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 1st 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.

Speaker 1

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 next during the second semester. The $64,300,000 is already a 33% increase. When you compare to last year, we will see the results of the inflection in terms of production in 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 $56,000,000 of EBITDA and there's a strong EBITDA again.

Speaker 1

And I want to highlight that if you add Q1 EBITDA and Q2 EBITDA, we are reaching close to $110,000,000 on EBITDA during this 1st semester, which is weaker than projected in terms of production than second semester is $110 with a gold price of $2,173 And now we are going to stronger production to Q2, while gold continues to be traded closer to $2,400 or above 2,300 for the 2nd 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 Q1 of 2024. That comes mostly from lower grades that we reached in Apoena with the highest preparation and also the change in contractor in ALMA. For the second for the Q3 and Q4, ALMA is already we already changed the contractor. We are already producing close to 45,000 to 5000 ounces 4,500 to 5,000 ounces of gold per month.

Speaker 1

While we are going to we will reach a higher rate. So we should see also our all in sustaining cash costs improving or decreasing in value for the next quarters. Within that EBITDA, Trevor was going to also share with you, we had a non recurring accounting events that affected our net income. That comes from good news while gold price continue to increase. We have to market to market to our options.

Speaker 1

So that also is a nonrecurring and accounting losses that's close to net income together with exchange rates that change real income from BRL5 to BRL5.5, BRL5.6 during the quarter. With the strong cash flow that come from the 1st semester, we also paid dividends close to $25,000,000 in dividends plus $4,000,000 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 has put us continue to put us among the highest dividend yield in the world for the gold sector.

Speaker 1

During the quarter, we also acquired 2 important prospection projects, Paison and Paquinche And we now have option to do a drilling program that will compound together with the Matupa project, so that we can add more resources and reserving to the Matupa and extend the life of mine. Although Matupa, we already have enough to do the payback and seek good returns. It's still 300,000 ounces of reserves and we expect with Paquete, peso and then together with Bananhao to significantly increase our resources and reserves in the project and we will do the drilling program during the 2nd semester and we will 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 had recently published. This is the second report that we published and that we should continue to do so along the next years, giving our full transparency of the OR360 concept where we also looking at impacts over the communities and the environment and also within our employees and everything that we do.

Speaker 1

In terms of safety, as we always share with you, we broke our internal record last quarter in Q1 that 1 year in all the operations without any lost time incidents. Unfortunately, in Apoena, we had an incident, but we continue to do a very strong incident report where we have 21 month in Arens Azul, 20 month immunosuppressant, 24 month in almonds without any lost time incident. And also the construction of Borborena, we don't have any lost time incident. All the tailings dam, we continue to monitor on a monthly basis with independent consultant to check our structures, our technical structure and all our structures are in compliance and comply with the current legislations. So on the left side on this chart, I would on the line on the left chart, this is the last 12 months production.

Speaker 1

As you can see, since Q2 last year, where we reached do the challenges and lower grade challenging orders and lower grades. In APO and now 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 challenge 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 than the 2nd semester in the Q4 of this year in Acoea and almost started commercial production during Q3 last year.

Speaker 1

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 1228,000 on Q2 2023 now at $266,000 on the last 12 months. And again, as we will have 2nd semester stronger than the 1st semester of this year, we should continue to see improvement on the last 12 month production Q3 and Q4, why when it should be stabilized. But then I would also invite the shareholders to take a look on the board Borama project, which I will highlight in the next slide. That should start the ramp up by Q1 next year.

Speaker 1

And then we also continue to add ounces into our last 12 months. So Alda should continue to increase production while as we will see, we can we are meeting the guidance in costs of in sustaining cash costs. Actually, the 2nd semester should be strong, better than the 1st semester. And then next year, Gordmorema enters with a lower all in sustaining cash costs compared to our average. So auto will continue to grow, decrease costs, while gold prices continue to be strong.

Speaker 1

Again, we had our 1st semester realized close to $2,170 per ounce and our 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 boost our EBIT continue to boost our EBITDA for Q3 and also Q4. On the right side of this slide, on the bars, as you can see, and as I said, are very stable compared to Q1. Apoena, where we reached at lower grades that was already projected during the mine sequencing, we're transitioning from Manesto to NASDAQ. So that transition reduced our grades, increased strip ratio, but we should be also now entering higher grades with more productivity in Apoena that will so that we will be able to meet the guidance.

Speaker 1

Minosa, again, very stable, continue to be strong. We fixed all the challenges from last year. And then it's been on the 3rd, 4th quarter that we had strong production between 18,000 to 20,000 ounces per quarter. And then we should continue to see those kind of productions for Q3 and Q4. Almas were differently that we were projecting.

Speaker 1

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, almost should be running between 4,500 to 5,000 per 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 rates that we should expect for that coming month in ARMAX so that we are very confident that we'll be delivering into the guidance. So next slide.

Speaker 1

In terms of all in sustaining cash costs, as you can see, it's been very stable since Q4 last year, moving around the $13,000,000 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 contractor in Almas. Just to give an idea, we are now coming from running rate during the Q1 and a little bit on the second of R17 per tonne on the contractor. Now we have reduced to R13.5 per tonne 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.

Speaker 1

So that will also boost our results during the second semester. As already mentioned, we are doing the 1st semester and the production reached 133 gold equivalent ounces. This is very much within the middle of the guidance for the year. However, as I mentioned, 2nd semester will be stronger than 1st 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 our in sustaining cash costs where we are already close to the low of the guidance.

Speaker 1

So we should continue to improve our in sustaining cash cost. So we should be during the 2nd semester at the low of the guidance in terms of how we in terms as a reflection of no change of contract enamas and also higher grades in ArcoArena. In the CapEx on the right side of this 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 1st semester below the half of the guidance, but that's because most of the expenses and the investments and the cash reimbursement for Bolborema happens on the 2nd semester. So we continue to maintain our guidance for the year.

Speaker 1

And actually, Bulborema, as we will see in the next slide, has been 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 that we did a feasibility study with 812,000 ounces of reserves and the gold price at 17 close to 1700 and that was giving us a NPV of $182,000,000 Only adjusting the gold prices to $2,300 this NPV is already at $440,000,000 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 that we already have close to 2,000,000 ounces of resources that mostly of this can also be converted into reserves as we have the permits to move close to 5 kilometers of 1 road. That's already in progress. And then we expect within less than 1 year to have the permits and then from that another 1 or 2 years in terms of our construction.

Speaker 1

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 plants so that when mounting all together in the fast track process during Q3 and Q4 and ramp up is scheduled to start on the Q1 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.

Speaker 2

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 Q3 for the year. We saw an increase in both net revenues and EBITDA on this quarter compared to the last quarter.

Speaker 2

So in terms of net revenues, we reached $134,000,000 now on Q2, bringing the last 12 months to exceed $500,000,000 at the end of Q2, which is a record high in the history of Florida. We have never had reported last 12 months most revenues above $500,000,000 Adjusted EBITDA, we're going in the same direction. We see also an improvement compared to the last quarter, now achieving $56,000,000 on this quarter coming from $53,000,000 If we compare it to the same period of last year, we more than doubled the EBITDA on this quarter. And we're now accumulated for the last 6 months, we have $180,000,000 EBITDA accumulated, which, our end, is significantly higher than the EBITDA that we reported last year, which was 134 dollars So keeping our expectation to meet our production guidance, cash cost guidance and considering current side gold prices, we should be continuing seeing the next quarters both the partly EBITDA and also the accumulated plus 12 months EBITDA increase going forward. When we come to the net income and we were reporting a $26,000,000 loss on this quarter that is entirely explained by either non cash or non recurring losses.

Speaker 2

Most of that as Rodrigo anticipated is first as a result of continuing increasing gold prices. The gold prices increased by over $100 between the end of the first and second quarter. We generated non cash losses related to our global derivatives and also FX 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.

Speaker 2

It's good if the way it evaluates. But then we see on these occasions these non cash flow losses and the net income. I'm going to go into specifically slightly more detail about that. Then finally, in terms of cash and net debt, our net debt achieved $142,000,000 at the end of the quarter, increasing from the previous quarter as expected as we continue to invest to deal with the Borgo Reimas project. And also in the quarter, we paid $29,000,000 between dividends and share buybacks.

Speaker 2

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. It's still comfortable above $290,000,000 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.

Speaker 2

So here on the first left side of the page, we see we started the quarter with $214,000,000 Then as a reminder on this left side here of the page is what we call adjusted free cash flow to FIRM, which is the cash flow generated by the 4 mines in production, not including how much we're investing to grow the business in either expansion of reserves and resource. We see was a reversal from the quarter. We generated $37,000,000 in cash. If we exclude changes in working capital, which we had $8,000,000 no recurring temporary consumption. The cash flow would have been close to $45,000,000 So it was a strong quarter.

Speaker 2

Again, as Rodrigo mentioned, in a quarter which book prices were close to $2,300. In the middle here of the chart is in the investment for growth. So we invest another $5,000,000 in the quarter in exploration and $17,000,000 is mainly the Gorgorema construction. And then to the right side is what we call the financial items. The biggest one was the return of capital to shareholders, dividends and share buybacks.

Speaker 2

And I'd like to highlight here also other 2 items. 1 is we see FX impacting cash and equivalents of $11,000,000 This is not a cash consumption. The reason we see this negative $11,000,000 is because Porvodemas 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 5.55% to 11% depreciation in the quarter. When we migrated that cash in reals to dollars, It seems to have less dollars. But again, we don't expect that to translate in free cash flow loss because the CapEx is going to be incurred in reals.

Speaker 2

And the second item I'd like to show here is the derivatives and others. We have a $2,000,000 loss cash loss here, which was how much in cash the net payments we paid to the banks to remove the credit support agreements, which are the agreements that allow the banks to call margins against Spora. So in the Q2, we did a negotiation and then we end up paying a net amount of $2,000,000 in cash, which we're going to see when we see the net income. There was a $13,400,000 impact in our P and L, but the net cash impact was just the $2,000,000 this year. In the quarter, so in the semester now is the same analysis for the semester, we see the free cash flow to form of $53,000,000 Investing $54,000,000 so significant amounts to grow the operations, dollars 34,000,000 mainly the Berborema, significant amounts also in exploration, dollars 10,000,000 in the 1st 6 months.

Speaker 2

In the financial items, the main items are the ones that I explained before. And then here in 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 the net income this quarter. So we see, as we saw before, EBITDA, we start with the $56,000,000 adjusted EBITDA. When we look at that by business units, Arunza Zu once again the strongest results with $23,000,000 Minoza came close, a very good quarter, dollars 19,000,000 in EBITDA in Minoza.

Speaker 2

Apoena, despite being the most difficult quarter in terms of lower production and higher cash costs also 7.5 positive highlight with $11,000,000 EBITDA despite in the quarter where we changed the contractor and had some impact also in production and cash costs. Amortization and depletion of at $15,000,000 came according to our expectations. And then the ones when we detail a little bit more of the financial items, we were reporting $45,000,000 in financial expenses this quarter. Again, it's most of that didn't translate or we don't expect to translate in cash losses. Out of those $45,000,000 the main items are $12,000,000 the market to market accounting losses for because of increasing gold prices for the Berberian Malvaux gold derivatives as we saw in the last two quarters.

Speaker 2

We see here the $11,000,000 FX cash loss, which is related to the pro Borrema cash held in reais and the CAD 13.4 million which was the fee that we agreed to the bank to remove the ability for the bank to have margin falls against the company. We agreed to pay the banks about $13,000,000 but we had also as part of the negotiation we did last year with the banks, we expect to receive $11,000,000 this quarter. So the net amount that we paid in the end was just the $2,000,000 that I presented before. The income tax expenses, a portion of that is similar. There was a when there was a big depreciation of currency, especially the Brazilian reals.

Speaker 2

We have deferred tax liabilities. We have we created those provisions that were not expected become tax payments in the future that was $7,000,000 in this quarter. Then these items explain the 26 $1,000,000 net income loss. And from this quarter, as I mentioned, we are starting communicating, reporting a new KPI just in adding time in which we bring it back the gain or losses with derivatives and gain and losses with FX. We believe going forward it's going to be easier to communicate because of the volatility of gold and foreign exchange.

Speaker 2

Excluding those two items, our adjusted loss would have been only $3,000,000 of which if we excluded a onetime and also no cash loss related to the derivative thresholds of $13,000,000 in the deferred tax liabilities, actually our net income would be positive $17,000,000 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.

Operator

We are going to start the question and answer session for investors and analysts. Our first question comes from Ricardo Monengaglia with Safra. You can open your microphone.

Speaker 3

Hello, everyone. Rodrigo, Clem and Natasha, solid results in the quarter, especially in Minoza and Aranzazu. So my first question is, could we expect the maintenance of such strong operating rates in those operations Minoza and Ananzazu? Maybe Q3, not necessarily 3rd Q4 would be interesting to understand. But on the other hand, it seems some specific conditions created some sort of perfect storm in Apoema and Almas during the quarter.

Speaker 3

And you mentioned during your presentation that you expect better figures for Q3. So could you give us more details on the drivers of this better operating performance, maybe a range for grades and strip ratio in Apoena and a new cash cost level in almost as operating rates normalize with the new contractor? Thank you for the opportunity. [SPEAKER CARLOS GOMES DA SILVA:] Thank you.

Speaker 1

Yes, and I think for Arras Azul, I mean, as we should continue to have strong production, understanding that some volatility quarter to quarter. But producing 17, 18, 19,000 ounces per quarter in Honduras is something that is reasonable. And I think for Radaza Azul, 2nd semester seems much equal or much likely the same of the 1st semester with some minor deterioration either for less or for more. Then almost, as I mentioned, we lost some 3,000 to 3,500 ounces during the change of contractor. And now so we should expect to have close to 4,500 ounces of production per month under a lower cost.

Speaker 1

So we're very comfortable reaching the levels of the guidance during the 2nd semester. And ALMA is actually we are already reaching this in June, right? Alma, then Apoena, as you mentioned, we had and that was projected to have a lower grades during the Q2 and higher strip ratio. So we are comfortable that during Q3 and Q4, we should start having a higher grades and lower strip duration, which will put us achieving at least in the middle of the guidance that we gave to the market in Apoena. So we're very comfortable with the projections.

Speaker 1

We're very comfortable with the guidance. And we're very comfortable to share with you that we will have the 2nd semester stronger production overall compared to the 1st semester.

Operator

Our next question comes from Edgardo Sosa with Itau BBA. You can open your microphone.

Speaker 4

Hello, everyone. Rodrigo, Kleibernate. So thanks for the question. Congrats for the consistency of the results. This is also the company moving with the projects.

Speaker 4

So my first question would be regarding gold prices. If you, Rodrigo, can comment a little bit on your expectations for gold prices for the next few years and also for the long term, given this higher gold prices that we have been seeing, if you think that we should factor in above historical levels for gold prices in the long term, this would be very helpful. And also my second question would be regarding Matupa. We know that Matupa has a solid NPV, but you are also moving with M and As, some exploration developments in the region. So my question would be when do you think we can expect the approval of Matupa by the board?

Speaker 4

And if you think that there is a chance that we could see another project maybe coming from an M and A or any changes into Matupas project before the start of the construction? And lastly, a very quick one. You had those issues with the contractor at ALMAS. What have you been doing to prevent this in Borborema? Have you already started conversations for the contractor in Borborema?

Speaker 4

What we can expect in these fronts? Thank you.

Speaker 1

Thank you, Edgar. I'm quite sure to be very straight to the point. On gold prices, if we understand what drove gold prices up, I think then we can project if that should continue or not. So when we look to the last 6 months or so last year, we had a unique situation where gold price increased while real interest rates also increased. That never happened in the past.

Speaker 1

And the reason for that comes from probably the consequences of the wars, particularly in Ukraine, where the world froze all the U. S. Dollars that Russia had all over the world. So that triggered many other central banks to start buying diversifying from U. S.

Speaker 1

Dollars and buying other real assets such as gold. So that's why you also see central banks in China and other non sole friendly countries to the United States diversifying. Also another thing that pushed the gold price up is the record high level in terms of fiscal deficit either in the United States and Europe, while they have the highest debt to GDP, they have the highest fiscal deficit and the world doesn't see and continue to print money. And when you print money that lose value. So not necessarily gold prices are only appreciated, but perhaps U.

Speaker 1

S. Dollars and other field courses are devaluating because of that. So if you understand that this is the reasons and then you start projecting. Do we think that the world will start cutting expenses and being in have a fiscal discipline? Number 1.

Speaker 1

I don't think I don't see that conversation coming in, for example, in the new elections in the United States. Number 2, do we see the world becoming more stable in terms of geopolitics? We don't see that, right? So we see that things escalated in the Middle East. So it's been very unstable in the last it's actually deteriorating in the last couple of weeks.

Speaker 1

And then there is another factor that gold price increased while interest rates increased. That ever happened. Normally, gold price increases when interest rates decrease. So if you put them on the top that we are now projecting interest rates to decrease, you can also maybe project that the gold price might continue to increase. So I don't see today variables that would drop the prices in gold.

Speaker 1

Of course, there's always going to be volatility in the short term, but we believe and many other reports and analysts believe that gold should continue to appreciate. Then second question, you asked about Matupa. We are in the final process of getting the license to start construction. We did those acquisitions. We are drilling also in Vana now.

Speaker 1

Yes, we will analyze how they will compound together with the project. But yet we have no decision. Yet our decision is to start construction as soon as we get the final license. However, those conversations are going to happen in the upcoming weeks when we will decide the right timing for us to start the construction of Matopah. In parallel, we continue to monitor and have the variables initiatives on M and As.

Speaker 1

We cannot control when it is going to happen. There's no negotiation in place right now. But there are many projects that we're taking a careful look. Other firms are taking careful look so that we can have a new M and A in the next 1 or 2 years. Then your final question was about the contractor in Alma's.

Speaker 1

That happened because we hired one significant lower price when we did the bid process during over a year ago to start in almost. We knew that he didn't have a lot of experience, but we took the risk and then we believe that we could work together with him in order to transfer know how and then for them to be able to perform at efficient level. Unfortunately, that did not happen. We could not achieve the productivity that we expected with the trucks and then the equipments that were not capable of doing so. So we had to hire additional, which increased our price and now we transfer to a new one.

Speaker 1

Then we ask to Borborema. Yes, there are a lot of lessons learned in Borborema, either on the construction of ALMA and also in the operations that's been applied. And then we are actually now already did all the bid process in order to hire a contractor in Borborema. And we are putting in we could combine at this time a good price best price with a very strong company that has a very good know how in terms of operation for Bolivorema.

Speaker 4

Volvo AMR.

Operator

Our next question comes from Guillermo Nippis with XP.

Speaker 5

Congratulations on the results. So, Glenn Niks from XP. I have two questions here on our side. So my first question is for Apoena. Production costs were affected by the higher strip ratio and lower grades, mostly given the transition from Ernesto to Norde.

Speaker 5

So my question is, when do you expect production and costs to normalize in this operation? And my second question is, if you could give us any updates on the other projects, including Cerro del Estrella, Altamira, And if you could also share your thoughts on potential new M and As? These are my questions. Thank you.

Speaker 1

So in Apoena, we should see a stronger Q3 compared to Q2 and then even stronger in Q4. If you'll see for coincidence, Poena has been able to achieve a stronger Q3 and Q4 over the last 3 to 4 years. So we should see that improvement also during Q3 and Q4 understanding that we will not reach such a higher grade that we reached in Ernesto a couple of years ago, but we will see improvement in Q3 and Q4, which give us a very comfortable position to be within the guidance. Although, if you multiply the first half production by 2, you'll see that we won't be at the we will not be reaching the low level of the guidance. But as Q3 and Q3 will be stronger, we will be now within the guidance on our plan.

Speaker 1

So we're very comfortable that we'll reach either on the production, but also on the cost side. Actually now with the further devaluation of real, the cost side is improving in U. S. Dollars. Then you asked about Cerrada Estrela.

Speaker 1

We are continuing to do exploration program. We renewed the option that we had on this project. So because we had a very interesting and stronger results on the 1st year of exploration, we are consolidating information. There was a that area has a very strong rainy season that you normally cannot do drilling, which is finished in May, June and now we started again doing the drilling campaign. And we expect to be able to publish some reports by the end of this year or early next year.

Speaker 1

In terms of M and A, we are continuing to monitor the market. We like both either copper, gold in the Americas. That's our focus, something that is close to production or in production or with the reserves significantly already discovered. And so we can work on the feasibility study, build the project and then operate. That's our main focus.

Speaker 1

While we will play opportunistically as we did in Automeda, which is early stage, That's why we did a minor participation that I think will have a few years of exploration progress, which we are monitoring. And then once they consolidate better, they understand our resources and results, then we can have another discussion that if we should increase or not participation in

Speaker 2

that project.

Operator

Our next question comes from Paul Reinking with BSA Capital. How long will the negative performance on currency and gold hedging continue to impact the balance sheet if 1, the gold price holds around current levels or 2, rises another $100 per ounce?

Speaker 1

Okay. I'll let Aklebbe answer this. Just 30 seconds is hopefully, we will continue to have those kind of not cash losses. That means that gold price is increasing and most of our production are assessing those higher gold prices. But Clavier, please.

Speaker 1

Rodrigo stole my comments.

Speaker 2

But yes, so FX, yes, both impacts in terms of business is positive and higher gold prices is good for the business. It affects the valuation as well, because we reduce our cash costs. So if gold prices stay where they were at the beginning of at the end of Q2, we shouldn't see any additional market to market losses in the next quarters. So gold prices now is about $100 above where they were at the end of Q2. So if gold prices stay above and keep increasing, we should continue seeing these non cash losses, which as Rodrigo said, it's positive.

Speaker 2

Just as a reminder, about 25% of our production, 20% to 25%, depending on the quarter, is hedged with a cap of 2,400 dollars So if gold prices go above 2,400 dollars what means that is we are capped at 2,400 dollars for 1 fourth of our production. But benefits of the upside for the remaining and most of our production, while we're still incurring accounting losses. So in general, we hope it's positive. If oil prices go down, we're going to see you again. We do expect to continue seeing a loss.

Speaker 2

And to your question if oil prices stay where they were at the end of the quarter, that should have a zero impact in the next 3 quarters.

Operator

Thank you. Next question from Hapi Nizami with National Bank Financial. Can you tell us more about the organizational changes, particularly the addition of corporate level technical roles?

Speaker 1

Yes. Thank you, Ravi, for being here with us. As we are continue to increase production and complexity, we in 2018, we had 2 operations. Then 'nineteen, we restarted that as well actually 'eighteen restarted as well, 3 operations. Now we built Almas, 4 operations, building for Borrema 5th and then we have Matopa, Serra da Estela and hopefully a few other.

Speaker 1

So that becoming more and more important on corporate to have a very strong technical team in order to keep the stability of our operations. So that's why we are bringing Enhiki, which is the General Manager, the Director of Adders Azzur that has been stable for the last 4 years into corporate so that he can together with Galbert and add the team and help us on the technical side to maintain or even improve our stability of operations and also think about the construction and new M and As that should be coming in as I mentioned in the upcoming years. So that's a part of the strategy of enhancing our technical abilities to have a very stable operations, understanding that we will continue to have a clean structure, a very thin corporate in order to be very productive linearity, they continue to have the freedom to make a decision under the culture of our 360 concept.

Operator

Thank you. The question and answer section is over. We would like to hand the floor back to Mr. Rodrigo Barbosa for the company's final remarks.

Speaker 1

So thank you all. Again, just wrapping up, strong quarter, although a weaker production compared to Q1, very now much in line to meet the guidance. Actually, we should be on the top range of the guidance, as I mentioned, on the first half of the guidance for the with the production on the 2nd semester, lower we should lower also our always sustaining cash during the 2nd semester, while gold price continue to be strong. So that will significantly continue to boost our EBITDA cash flows and results for Q3 and Q4 and continue to build the board board, which should start ramping up next year. So the production of Aura reached the bottom, as I mentioned, by Q2 last year.

Speaker 1

And now every quarter we are improving in terms of our last 12 months. We will see that on Q3. We will see that in Q4. And then we will have next year Then we continue to see that improvement in terms of production, cash cost and gold price we don't control. But as I mentioned here with the Eddygard's question, we believe we will continue to be stronger if not stronger.

Speaker 1

So that will boost our results for the year and we'll be back positioned very well positioned also to have a strong 2025. So I thank you all and we'll continue to update the market on exploration and in production as we move along the next quarter.

Operator

Auris conference is now closed. We thank you for your participation and wish you a nice day.

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Earnings Conference Call
Aura Minerals Q2 2024
00:00 / 00:00