Aura Minerals is a mid-tier gold and copper production company focused on the operation, development, and exploration of gold and copper projects in the Americas.
Could you tell us a bit about yourself and what led you to Aura Minerals?
I was born and raised in Brazil and initially pursued mechanical engineering. After graduation, I worked in an investment bank, which led me to explore my business capabilities further. I then completed an MBA in California and returned to Brazil, where I worked in various sectors, including cement, real estate, and energy concessions, within a major Brazilian conglomerate. My career involved participating in the formation of significant infrastructure players like CCR and CPFL, which achieved substantial market values.
In 2013, I led the turnaround of Santista Textile, a company struggling with margins and high debt. We successfully improved its performance across multiple countries, earning an award for the turnaround. When Aura's new shareholder sought someone outside the mining sector for a turnaround, I joined as a CEO early 2017 to lead the project. My background in governance, finance, strategy, and partnerships was crucial for this role.
Can you tell us about Aura's current projects and their stage of development?
Aura Minerals has four operations in production. The first is a copper-gold underground mine in Mexico called Aranzazu, producing 95,000 to 108,000 gold equivalent ounces annually. In Honduras, we operate an open-pit, low-grade heap leach mine, producing 60,000 to 75,000 ounces of gold per year. Our operations in Brazil include two open-pit CIL mines, Apoena, producing 46,000 to 55,000 ounces annually and Almas producing around 50,000 ounces annually.
We are also developing two projects in Brazil: Borborema which is currently in construction and expected to produce over 83,000 ounces annually, and Matupá, which will start construction in the second semester. Besides these well-defined projects, we have an early-stage copper project, Serra da Estrela, in the Carajás region of Brazil, which we anticipate will take three to four years to mature.
Can you elaborate on your strategy to expand, including by referring to recent acquisitions?
Our growth strategy focuses on three clear paths. First, we aim to execute projects within our portfolio, increasing our production from 200,000 ounces in 2020 to 450,000 ounces annualized by the end of 2025. This involves developing and building projects like Almas, Borborema, and Matupá. Second, we are committed to increasing resources and reserves through significant investments in exploration since 2019, enhancing our knowledge of the gold around our operations. For example, we increased our Measured and Indicated Gold Equivalent Ounces from 1.5M in 2018 to 6.3M now, while Proven and Probable from 1.7M to 3.5M GEO now.
Third, we plan to grow through M&A. While our projects can take us to 450,000 ounces of production, we aim to go beyond this by acquiring new projects. We have already demonstrated a strong track record of growth through M&A as we acquired Almas and Matupa in 2018, Borborema in 2022 and should continue to expand our exposure in the Americas.
Aura Minerals promotes a "thinking differently about mining" approach. Can you explain what this entials?
Our different thinking encompasses several aspects. Traditionally, the mining industry has centralized decision-making, with corporate offices making most decisions due to the remote and challenging locations of mines. We have challenged this model by decentralizing decision-making to the local managers at our sites, supported by significant investments in building capable teams.
We have fostered a transparent and communicative environment, breaking down barriers between different managerial areas and implementing open-concept offices. This approach ensures that local managers are empowered to make informed decisions while adhering to core values of ethical conduct, environmental impact, community relations, and employee well-being. This decentralized yet value-driven model promotes accountability, innovation, and sustainable growth within the company.
We began this gradual transformation when I joined the company in 2017. A successful turnaround generally takes three to five years, if not more. Initially, we implemented meritocratic decision-making processes, conducted 360-degree reviews, and assessed our employees to improve team quality. We had an opportunity with our Aranzazu mine in Mexico, which was under care and maintenance in 2017 and early 2018. As we restarted the mine, we introduced the Aura 360 culture there first, aiming to consolidate it by 2020-2021 before rolling it out to our other operations in Brazil and Honduras. We are now implementing it in Almas and Borborema, and although not fully accomplished, we are about 80% there, and seeing the positive impacts.
How would you assess the feedback you have received concerning this new operating culture?
The feedback has been overwhelmingly positive. Our success stems from strategic decisions combined with the high-quality team and culture we have built. For instance, Aranzazu operates at half the cost it did a decade ago, thanks to a motivated and efficient team. Another example is Almas, which we constructed in 15 months during the pandemic, managing supply interruptions and significant inflation. The project was completed on time and within budget, setting new benchmarks in the mining industry. In addition, our team all across the operations are fighting against inflation vigorously and that brought us from third to second quartile in the industry by all in cash cost comparison. These achievements underscores the effectiveness of our strategy and the strength of our team.
In recent years, many traditional investors have stopped financing mining due to ESG considerations. How has this impacted the industry?
We have seen a significant shift in the last six to eight years, where key investors and banks, including important European Banks, have ceased or significantly reduced its financing for mining operations. This has led to severe consequences. Banks with high ESG standards for mining projects, ensure maintenance of tailings dams and proper social practices. With their withdrawal, new investors who may not uphold these high standards are stepping in, which could lead to a decline in industry practices.
The situation worsens when equity investors also pull out due to ESG agendas, leading to the replacement of responsible capital with less stringent financiers. Countries like France and England, which have stringent environmental and social standards, are pushing mining operations to regions with laxer regulations, such as some African countries. This shift can result in poor environmental controls and even child labor, ultimately degrading industry standards globally.
More concretely, who has replaced traditional investors? What is Aura Minerals and the industry doing to address this issue?
Traditional investors have been replaced by various new investors, often not large, well-known banks with high ESG standards. For example, BNP Paribas, known for its stringent sustainability standards, reduced financing in mining, leading to a rise in investors who do not require the same level of accountability. We have observed a significant influx of smaller and nontraditional investors in regions like Africa and Latin America, where ESG standards may differ.
We have questioned these traditional investors, but the stringent rules and conditions they face make it challenging for them to continue in this sector. However, we believe this trend will eventually reverse. The global demand for minerals is undeniable, underpinning everything from cars to computers. The critical question is not whether mining is needed but how it is conducted. High standards should be implemented universally, not just in developed countries but also in underdeveloped ones.
What are the key priorities for Aura over the next couple of years?
Our first priority is to execute the projects we are building and those planned. We aim to increase production from 235,000 ounces to 450,000 ounces, driven by developing three greenfield projects. Almas is already built, Borborema is under construction, and Matupá will follow. Timely and budget-efficient execution is crucial.
Secondly, we will continue exploration efforts to increase our resources and reserves. We have significantly increased our measured and indicated resources and proven and probable reserves, and we will keep investing in expanding these assets. This includes advancing the early-stage Serra da Estrela copper deposit project in Carajás, which will require three to four years of exploration.
Thirdly, we aim to grow through M&A. We have been diligently seeking opportunities to benefit our shareholders, aiming to break the half-million-ounce production mark and move toward one million ounces, thus becoming a significant global player. Throughout this growth, we maintain a policy of paying dividends, balancing cash flow assets with greenfield projects for a fast payback. Since 2020, we paid one the highest dividend yields in the industry in the world, built a greenfield project, acquired and started the construction of Borborema, increased the Resources and Reserves at our mines and maintained low leverage demonstrating our commitment to rewarding shareholders while investing in growth, paying dividends and maintaining strong financial health.
