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Turnaround specialist Rodrigo Barbosa was brought into the firm as president and CEO from outside the mining sector in 2017, and tasked with fixing its operations and balance sheet. To do so he decentralised management so that decision-making was at the asset level rather than corporate level, a process that Mark Bristow has implemented at Barrick Gold and Peter Marrone at Yamana Gold.
Barbosa also adjusted the asset portfolio to projects which were financially manageable for the company, divesting large capex projects which would overly stress its balance sheet, focusing on more modest projects which could yield high returns. In this vein, in December 2017 it sold the Serrote da Laje copper-gold project for US$40 million to Appian Capital Advisory.
"Serrote is a great project but would require $350 million to put into production, which meant it was dragging cash from our healthy operations in Brazil, which were under-invested," Barbosa told Mining Journal.
Since then Aura has ramped up operations at Aranzazu in Zacatecas, Mexico, Ernesto Pau-a-Pique (EPP) in Brazil, San Andres mine in Honduras. It also merged with Rio Novo Gold in December 2017 to bring in development projects in Brazil and Colombia.
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Aura Minerals' Aranzazu mine in Zacatecas, Mexico
A focus on local management also extended to finance. By building up relationships with local banks in the county it operated and borrowing at the asset level rather than the corporate level, the company was able to slash what it paid for debt.
"When we tried to raise $15 million in Canada we were too small for the banks, but while we could do this in other countries we had to pay 12% interest. By pushing the debt down from the corporate to the operations this reduced to 6% and should be able to go lower because of the low interest rate environment," said Barbosa.
The approach also paved the way for the company to relaunch on the Brazilian Stock Market, where it saw the greatest appetite for a gold stock.
"Brazil has huge capital invested in fixed income and with lower interest rates it was trying to find alternatives on stock exchange and to have exposure to gold. We spent 2020 developing awareness of Aura with institutions in Brazil and raised $200 million in our IPO. Our marketcap has increased dramatically from about $170 million to close to US$750 million," said Barbosa.
From production of 120,000oz in 2017, Aura aims to add 20-40% more this year, having given guidance of 260,000-290,000oz for 2021, with another mine build in 2022, plus expansions in Brazil and a mine in Arizona, USA. "We have the ability to more than double our size by 2024 to 400,000-480,000oz, without depending on external factors," said Barbosa.
And Barbosa is looking for more, with internal projects as well as the possibility of opportunistic M&A. "We have ambitious management and shareholders that want to go forward, although not like mainstream companies. The IRR of projects we can develop inside Aura is close to 100% at current gold prices, which means they are highly accretive, simple to develop openpit projects and not large capex projects," he said.
Aura believes it has found a profitable niche under where many of its competitors aim, which it feels means less competition for the kind of assets it may be interested in. The company acquired the Gold Road project in Arizona, USA, in February 2020 from Para Resources with initial production looking like 30,000oz/y, and expansion possibilities to 60,000-70,000oz/y.
"We are looking at assets in the 60,000-100,000oz/y range, which is too small for many who look for 100,000-150,000oz/y, which we feel is overcrowded. It is a distraction for many companies to have smaller mines, however, we feel decentralising decision-making at mines at 100,000oz makes sense for us," said Barbosa.
With cash flowing handsomely, the company aims to invest $100 million this year in sustaining capex, exploration and construction of Almas, with a similar amount pencilled in for 2022 as it aims to start building Matupa. Exploration expenditure is now ramping-up following the company's difficult financial years, reaching $10-12 million in 2020 from a standing start in 2018, and budgeted at $24-28 million this year.
The company is even in the position of having surplus cash.
"We will have excess of cash on top of doubling our size, which is why in 2020 we approved a dividend policy," said Barbosa.
Shares in Aura Minerals are trading at C$14.20, valuing the company at C$1 billion.
