Aura Minerals Inc

TSX:ORA

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen. Welcome to First Quarter 2024 Earnings Call. [Operator Instructions] 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 the respective forward-looking statements. Present at this conference, we have Rodrigo Barbosa, President and CEO; and Kleber Cardoso, CFO. Now I will turn the conference over to Rodrigo Barbosa. You may begin your conference.

[Rodrigo Barbosa, executive]

Well, good morning, all. We are very proud to be here. Thank you for being here with us to launch the first quarter result of 2024. We are very proud to release the results that we did yesterday for a few main reasons and then we'll go to the presentation. Number one, this is the fifth quarter in the role without no lost time injuries in our operations, saying that we are among the best companies to work related to accidents. And that's -- it's interesting to see that normally by investors to see accidents and safety comes together with good production and good cost efficiency and good results.Number two, this quarter, we also increased compared to the first quarter of last year, 28% in production. We increased 45% in terms of EBITDA and yet not fully including the recent run for the gold prices and copper prices comparing to the first quarter last year, a gold price is closer of 9.8%, and upper price actually has decreased by 6%. So if you include fully priced of gold and copper, you would have imagined that our results would have been even higher compared to the first quarter of last year. So that if we now go to the first slide, as always, do the summary of the results, some main milestones achieved during the quarter and then clever is going to step in and go more specifics on the results. So again, very proud to have another partner without any lost time injury. And that's I think all the team and all the leadership within our operations that comes from a hardwood work for a long-time being years that we've been working hating our safety standards and the results that we have are now at 15 mall without lost time incidents.In terms of production so we increased production by 28%, reaching 68,000 gold equivalent ounces, very similar to last part of last year, significantly higher compared to first part of last year. That may come from higher end recovered production in Minosa that's now becoming stable. And also Almos that was not in production for Cement last year now at a full production producing 12,000 ounces from gold during the quarter. So we also continue to pursue a cost efficiency in our operations, the gain of productivity in Minosa together with also gaining recovers that comes from hard work from the team as well to up reduce our cash cost on average. Although for ores, example, we still have some room to continue to decrease. And then of all in sustaining cash costs. The result of this cost efficiency and gain of productivity, we could bring the all-in sustaining cash cost to 1,287 million, which is below the guidance. Although we believe that we'll be within the guidance for the year. So strong production. Slightly increase in gold prices, which will come more brand or will be more efficient during the second quarter and low cash cost, so a significant increase on our EBITDA. And we should expect this EBITDA to continue to increase as gold and copper price has significantly increased since we finished the last quarter.Another very important milestone, which is Borborema project as the built almost on time on budget, Borborema is headed towards the same milestones, achieving production on the cap that we believe, which is first quarter next year within our bed. We are now 25% advanced in the project. All the land work has already been done. We are not doing -- starting the works and also getting some of the parts to start building the parts within the plan. We also entered the process to move the road in Gabor, understanding that the current feasibility study and the results NPV a tenet of return that we published are limited only to 84,000 ounces of gold and reserves, but we can more than double that once we move the road in the process of moving the road has already been started, and we expect this to be granted the license within 1 year. And then you will take another 2 years to do all the construction process. So we believe that we can start increasing our resource our reserves within this year, but then adding in production on in 3 and 4 years. We also, during the quarter, updated our mineral sources and mineral reserves added 2.4 million ounces of gold equivalent ounces and have indicated and 0.9 in improvement in product, which is a major milestone and a result of the exploration investment that we are doing within our operations that we're now starting to harvest the approximate loans. I would remind that, for example, very important milestones that we'll be sharing with the market on where we had and we still have a shorter life of mine compared to the other operations. We've ramped up this mine in 2016, 3 years only life of mine, we already operated 6 years, and now we increased to 5 years the life of mine. So we are building the life of mining operations as we move forward in the future. And as a subsequent event, 2 things. One we have the buyback program in place approved by the board and also by the regulator, which we could not start within the blackout period, so we should start with this process after the blackout period finish, which is right up the results will be 2 days after. And we also, and Kleber will give a little bit more information, as gold price has brushed above our expectations. So we have hedging progress put and calls that we now will now clear all the need for margin poles in this program, relating all the cash within our operations to benefit from the upside in the gold price, which we will believe that can continue to appreciate in the near future.Next slide. So again, I already mentioned, very proud on safety standards that we are achieving. A very important milestone and precedent milestone for Aura, which is 45 quarters with that and was timing. And two, as we do on monthly monitoring by independent consultants with using the highest procedures and technologies all our structures, technical structures are with me the standards and very statistical level. So we continue to monitor needs and continue to enhance all this focus are needed. Next slide. So all for attention for the investors and the analysts on the slide on the left side, on the bars, you have the quarter production on the line above the bars, you have the last 12 months of production. So as we mentioned after Q2 and during Q3, we faced last year. We inflected the curve after almost started production and also addressing the loss of productivity in Minas, we could start increasing the production of the last 12 months, and we will continue to do that for the next quarter as well. You can see we already have 3 quarters of 60,000 to 70,000 ounces of production and the last one is comes from 49%.So the next quarter, you can easily think that if we manage to do the same production of Q1 2024, we will have additional 20,000 ounces on the last 12 months of production, which will put us on the running rate at 270,000 ounces of gold equivalent ounces of production. So that's very important because that will come together with the combination of higher gold prices, higher copper prices and stability on our cash costs. So when you move them to the right side of the slide from the 2 bars on the partly production per unit, we see a slight decrease in Aranzazu. This comes very much in line with our mine sequencing. As I mentioned already is talked to investors, same analysts that the nature is not homogeneous. It varies relates and very characteristics of the ore body. So we knew that this quarter, we would have a slightly lower production in Aranzazu, which continue to be significantly stable operation for us.Two, Apoena also as projected, not a significant part of Ernesto high-grade fees anymore. So now we see the production decrease of 15,000 to 12,000. And Minosa, that's also -- we continue as a fifth consecutive quarter that we're increasing production in Minosa, starting last year with 12,000, 14,000, 16,000, 18,000 and 19,000 now achieving a very stable reduction in Minosa, perhaps we'll continue to -- but we continue to explore opportunities to also gain efficiency and reduce the cost. And Almas, we produce so we had had a below expectation production in the last part of last year due to the low productivity from the contractor. We sold that productivity, but we sold with a higher cost, but now we achieved the 12,000 ounces of gold in the quarter. We are now focused on decreasing the cash cost of that profession. I think we are already in place in many initiatives, including making the contractor -- change in contractor with a more efficient leverage so that we can now reduce the cost while maintaining the production in ours.Next slide. So in terms of our sustaining cash cost, this is the second quarter that we are reducing all the incentive cash cost that comes from a combination of internal initiatives to reduce cost but also gaining efficiency mostly in Minosa. This is -- we understand that we will continue to work on reducing our in sustaining cash costs, but I believe that we are now in a more reasonable levels. And that shows Aura can control its cost and can gain efficiency in operations, and we are very much focused on that and the problems we had in the past because we are very focused on reducing our cash cost. We changed the contractors, boost relos efficiency, then we work and we gain efficiency, and then we can recover or gain in cash cost. So while inflation is going up, and we've been able to reduce our cash cost. Next slide. In terms of comparing to the guidance, we reiterate guidance for the year. We had a good result in the first quarter, 68,000 ounces. We maintain our guidance of $244 million and $292 million, of course, with this fine results if we continue to have a strong result of in the year, we should be more to the top level of the guidance in terms of product. Even on cash cost, we are much within the guidance, slightly above the lower part of the guidance and all-in sustaining cash cost even below the lowest part of the all-in sustaining cash cost, although for the year we expect to be within the guidance in sustaining cash flows. Of course, if we move our production to the top level of the guidance, then all in sustaining cash cost could be on the bottom level of the guidance. In terms of CapEx, although the charts might indicate that we will not achieve the guidance of CapEx for the year, but that's not considering that most of the expenses of Borborema comes during the second semester where we'll be mounting the parts and finishing the construction of the project. Again, that I think I would highlight the importance of this project of Borborema. On the left side, you'll see pictures that we already did all the land work started preparing all the ground for Cigars actually delta-based side and build and very much in line with our expectation, 25% achieved. 80% of the CapEx has already either been disbursed or negotiated, and we don't expect any surprise in terms of CapEx for the project, neither achieving the schedule that and the promise to the market, which is to start ramping up the production by the first quarter of next year. And second next slide very, very -- I would highlight to investors that this is a major project for AR. It's important, it's big and it has a very interesting margins. very interesting returns even without considering more than doubling the reserves, which is absolutely feasible after we achieved the licensing and moving the loan. So we started the -- we published in the big study last year before initiating the construction of this point 312,000 ounces of reserves only $182 million of NPV, 22-40% of leverage internal rate of return. And that was with the gold price at 1712. If you use the same study that we closed last year and applied the current gold price that can go even higher and the 2300, we are talking about increasing NPV by 143% growing quarter and $440 million in this project. leverage the return for the whole life of mine of 74% per year in U.S. dollars and then leverage a payback of 2.4 years. And again, I'm considering only 81,000 ounces of reserves in all that study, if we move the road, we can more than double the result of the Board is already there has already been measured, has already have been studied and is very similar to the continuation of the door volume. There's no secret. The mine plan has already been designed. It's just me of licensing and then accessing this one. I would invite everybody to take what can happen with the NPV of these projects if we have more than double of the reserves into the cash flows.Next slide. So very proud of these results. Now I'll turn the floor to Kepler that will talk more about the results specifically in details, and then we come back for the Q&A.

[João Cardoso, executive]

Thank you. Good morning, everyone. So I'm going to go over the main financials for the quarter. As we can see on the page, the main financial KPIs for this quarter reflects especially on the net revenues and on the EBITDA of what Widrig was representing on the operational side of the business. If you see our net revenues will also increase by the third quarter in our rollout. We are reporting $132 million in net revenues on this quarter. And now we are already exceeding $450 million in the last 12 months in our net revenues. When it comes to adjusted EBITDA, also the third increase in a row on this quarter, we were quoting $53 million EBITDA, which comes from a combination of keeping production levels at the same that we reported last quarter, more favorable gold prices and lower cash costs, as Rodrigo presented. It is important to highlight again that gold prices on the first quarter, the average gold metal prices in general, they're significantly lower compared to where they are today. Gold prices were the average during the first quarter at $270 in copper prices at only $3.86. Now copper prices up $4.40 per pound. When we look into the net income, this promise difference, which is mostly explained by noncash losses related to the needed for me accounted rules to do our market-to-market of the outstanding both derivatives in our books. This is the same we saw in the previous quarter. So in the fourth quarter, you might remember, we incurred a $20 million noncash losses because gold prices came from below 1,900 by the end of Q3 to above 2,000 by the end of Q4. Now during the first quarter, gold prices moved as well. We ended the quarter at 200. So we recognized another $20 million in no cash losses, which combined in the last 2 quarters accumulated $40 million, which, again, is important to understand that this is not expected to become cash losses in the future. Out of this $40 million considering current metal prices, we would expect those 2018 only about $2 million to $3 million cash allowances in the next few years. And then when we come to the cash and net debt, we see that we ended the quarter again with a strong cash position, $214 million at the end of the quarter. But there was a slight increase in our net debt in the quarter to $105 million. $105 million we issued as was expected, mainly because of the investments in the Borborema projects and also nonrecurring working capital consumption during the quarter, which I'm going to explain in the next few days, yes.Now on this page, we show the many items that explained what's between the adjusted EBITDA and net income for the quarter, starting with the EBITDA. What I highlight is out of those $53 million that we reported. We see a good balance among the 4 business units. Aranzazu once again was the main contributor to the quarter with reporting EBITDA of $18.5 million. What Minosa Almas then reported EBITDA above $10 million each in the quarter. So we see it was a balanced quarter and it was a strong quarter not only for care as a whole, but also for the incorporating business ads. Looking at the depreciation and amortization, we have required an expense of $16 million in this quarter. Until last year, we used to have between $12 million and $30 million in amortization expenses that required. From this year on, we should see that number increasing. It should be more of the were part in this quarter, basically because now we have a main production, and we are starting to depreciate fixed assets. The financial expenses is mainly $34 million is mostly explained by what the previous pages is related to the cash losses related to the imports. We also had recorded $3 million FX expenses in the quarter due to the appreciation of the Brazilian real. Income tax expenses at $11 million came pretty much as expected, considering the strong results by all business units. And then some small other expenses bringing our to net loss of $9 million, which again would have been positive, would have been $12 million positive. If we exploded the noncash losses related to the move derivatives in expense. Next page, and then here, we bring -- as always, we'll bring a detailed analysis explaining the change in the cash and pressure given during the quarter. In the far left side of the page, we see our starting cash position at $237 million at the beginning of the year. In this left side of the page is what we call adjusted free cash flow form, which is the free cash flow generated by now by the 4 mines in production. -- not including how much the amount we're investing to grow the company. That side of the business generates strong cash, $19 million in the quarter despite first nonrecurring increase in working capital, we consumed $13 million in the quarter. Part of that is explained, for example, due to the Easter holiday and good Friday in Mexico, where we couldn't ship over concentrates. So all of those $13 million in report, we expect to recover in the next quarters this year. And also, the first quarter is a partner we pay most of the taxes. We paid $9 million in cash and taxes, of which had was related to special mining duties in Mexico where we pay disciplines in year. So going forward on one side, we would expect to see the cash flow increasing with more favorable metal prices, but we have some went off cash consumption in the first quarter that should not repeat in the next few quarters.Investment for growth this is the cash to increase reserves and resources and plan to expand our business. We invested $23 million in the quarter. Most of it the investments for the writing approach $70 million. That trend shows continuing for the rest of the year, even increasing the amount we're putting work on projects for the next few quarters. And then on the right side of the page, we see the financial items. The main item here is the interest paid on debt, which consumed $11 million of our cash in this quarter, which was above our recurring interest payments, basically because every month of January, we pay interest for the Almas inventories in Brazil. So in Q2, the number should move over then according to more what we've seen in the last few quarters. And with that, we ended the quarter with $214 million in cash and equivalents.And finally, we reported also to the sequence as we anticipated. We negotiated the month of April with the banks that hold our gold hedging programs. The elimination of what's called the credit support agreement, which is mainly the ability for the banks to co margins. So for us, the banks agreed to exclude that portion of that remains and regardless where the prices go in the future. There will be no margin calls against Aura that's also we highlighted parking accomplishments and shows how our gets strong in terms of credit with the main financial institutions. With this, we will end our presentation. We're open to questions, thank you.

[Operator]

[Operator Instructions] Our first question comes from Edgar with Itau BBA.

[Daniel Sasson, analyst]

Congrats for the consistent results. So my first question would be regarding Borborema. It seems that conversations for the road reallocation advancing. So I would like to understand how long -- how should we think about CapEx for this expansion after you move the road, how long it would take to move the road then after you move, how can we think about the CapEx of this expansion compared with the Greenfields that you are doing now? And how long do you think it will take until you start producing in the expansion, this would be great. And then my second question maybe regarding your growth projects, if you could bring any news regarding the investment in Matupa, if you are advancing with the financing of the project? And when do you expect to start up the construction if it is on track and on budget and also on your other growth projects, if you have any news on this covers in Sahadetrela for example, it would be great.

[Rodrigo Barbosa, executive]

So first, Borborema, we exactly already entered the first conversations to get the lines to move enrollment. We expect to have the license within, I would say, 1 year after you have the license that you still have to do the final volumes engineering, by the landlord is appropriate and then the other road, I think that would take additional 2 years to inherit finished. Once we get the licensing of the move, we already can consider measure-indicated reserves. Of course, then you need to draw and understand what -- how many outer going to be out of the best then we will publish -- we have published an update on the feasibility study, including that ounces. The CapEx to move the road, we don't have the final numbers yet at Galata will not be relevant compared to the CapEx as we have today will not be a meaningful compared to the cash that we generate after that. What we will have to invest then is we are building the plant for 2 million tons per year, flexible as we EBIT to increase capacity by 50% or more as we move the road. So the plant is already being flexible and designed to support the high production. But once you get the license, then you need to invest more to increase production because we don't want only to increase the life of mine of Borborema once you have this increase in reserves. So we want to increase production and to increase production, we'll have to invent. But we can start doing that after the licensing for everything that we believe that we can increase production on the 3 or 4 ahead of as we are today. Then your question about Matupa. Matupa, we are now in the final process of licensing, all the conditions has already been met. We already delivered to the environmental agency. We expect the preliminary license to be issued by June, July. This is where we would write up to start and make a decision to start the construction of the project. We're still going very much in line with expected. We continue in the meanwhile, we do exploration in Series, do exploration with X1 and do exploration actually very near mine X1 that we should believe can potentially add the new results and reserves. But yet, we have not disclosed. We have consolidated some information so that we can disclose them. We're also looking on tensive, that the vessel remind either Almas and Matupa smaller plants, but deposits that many deposits that can feed to the plant. So we are actually looking at Beachie increase new deposits to one that came out so in guarantee and line, longer life of micromaterials risk from there. So we are looking on tenancies also to bring more goals from other deposits, very close to the mine. And then you asked also about the new project to continue to grow. We continue to actively look M&A. We have a list. We do know we have targets that we are working. We know what we want. Of course, we also have to combine what you were to what is available, but that a lot of efforts within our company is to look for new opportunities to continue to grow and better way for us to be above the 500,000 ounces of gold equivalent production within the next 2 or 3 years.

[Daniel Sasson, analyst]

Just a follow-up on my first question. Do you have any idea of how much CapEx efficiency we will have given that it is a brownfield project compared if you would build a new plant with 1.5-million-ton capacity, for example, in Borborema? I mean, how much of cost efficient, CapEx efficiency, could we think that you will have, given that it's just a plant expansion and not a new project?

[Rodrigo Barbosa, executive]

It's not a new project, Borborema. It's just a brownfield expansion. The base will be there, all infrastructure will be there. Power lines, water, also some of the buildings is going to be rebuilt. So it will be -- it's not an insignificant CapEx. It will be meaningful, but not compared to what we are doing now to troubling. We should expect to be significantly lower $588 million. There's a lot of efficiency doing just as this increase in the point plant capacity instead of just building a new plant. It's not going to be the CapEx of the new one for going to be just about expansion of the current plan.

[Operator]

Next question from Guilherme Nippes with Chesapeake.

[Guilherme Nippes, analyst]

Congratulations on the results. So I have 2 questions here for EPP. Costs were the main highlight in our view, and you already started production at the ladies and SoCs. So could you give us any update on the production and costs that you're already seeing in these 2 new pits? And my second question is on Alma's operations. So when do you expect the cost reductions to normalize, so the company would be on track to deliver the guidance for costs in 2024. So when we could expect the issues faced by the contractor during Q3 and Q4 to impact costs? These are my 2 questions.

[Rodrigo Barbosa, executive]

I will start with the second question, then I'll pass to Kleber to answer the first one. Now, we are -- right now, as I speak, transitioning a contractor, this month, so we will be as a transitional we do not expect any significant cost reduction during this quarter. But then for Q3 and Q4, yes, we expect this gain in productivity. We also have perhaps have some gaining rates and also gain cost efficiencies. So Q2 probably same cash cost on almost for this year. We might even have some slightly lower production because of the transitioning of yields a little bit of productivity, but then setting all the stage to very good results during Q3 and Q4. So, Kleber, if you want to talk a little bit about on. As you know, you can see prima much tower than I, so we would have to play a little bit in the cam.

[João Cardoso, executive]

So basically, our expectation in perforating and the other -- also the other businesses studies to deliver our expertise of cash costs. We know that by the end of last year, in this first quarter, we had some remaining ounces under Masstige, which is a high-grade material that usually drives to our cash costs. So it was expected to see some positive impact on this quarter. The new bigs, they don't have the same kind of material for the rest of the year. So what we should expect to see as we are is for us to be within the guidance for the cash flow.

[Operator]

[Operator Instructions] Our next question comes from Flavio Beca with Cartu.

[Unknown Analyst]

I have 2 questions by my side. First one is the increase is expected in NPV for Borborema related to gold price increase already net from color hedge loss? The second one is about taxation reform. You expected some critical changes or have you done some calculation about that. That's my both questions.

[Rodrigo Barbosa, executive]

Yes. So Borborema makes remind that the loss that we had was accounting loss, not cash cost loss. That is because we had from market-to-market, the auctions, they all that we sold to buy the ports because the calls, the strike price are 2,400 stainable -- as we did the simulation at 2,300 work, there's no lose at a the gold price up to 2,400, it's fully priced can be fully absorbed by the NPV. After that, for the first years, then we were locked on most of the production to the 200. So we still have even roto increase gold prices and benefit in terms of returns in the project at '24 as that there's no load lots, lunches or losses and all up to 2,400 gold price import whatever. Actually, if the goals beyond that, it's not that we are closing. It's just that we are not getting the benefit and most of the production of Borborema, we will get the benefit in the other productions.And then the other question was about the tech revenue. We don't have any information yet to believe that will be a significant impact on production and all taxes. There might be some, but yet not -- we don't see any meaningful changes for taxes in operation in Brazil.

[Operator]

Next question from Ricardo Monegaglia with Safra.

[Ricardo Monegaglia Neto, analyst]

I have 2 questions. The first one on production. What do you think are the main risks to reach the high end of your production guidance for 2024? And maybe if you could share with us after 1Q figures and part of the 2Q pastes, are you more confident now on reaching the high end of the guidance than you were at the beginning of the year or at the time that you released the guidance? And my second question is on shares liquidity, if you could give us some color on the latest initiatives to increase the liquidity of RS shares would be interesting.

[Rodrigo Barbosa, executive]

And if I was so made is not to achieve the guidance is always related to the stability of production that comes from a few different reasons that can come from on tractors problems we had rules of performance at the mine or silver whether beyond what we project. We already project rain seasons and moderating and are above the leverage and rating the ritual all do that. But it is a 5% scenario now faces operating and some of the operations that might also had impact and slow production and also issues with the contractors, although we already -- all the contracts are in line. And the one that we are changing in Almas is the one that we operate in Borborema. So we are -- we know very much we know how to work in actually the mines in Borborema is more complicated to operate than on. So we don't expect significant ores productivity perhaps going on well, it's likely lose with the transition and then good part as around Q3 and Q4. And you mentioned about where the start of this quarter, we expect to be within the guidance and where the guidance. The first quarter changed of what we expected. So we should put that in perspective. Yes, we believe that we'll be within the guidance but now we are moving towards the high end of the guidance in terms of production and the low-end of the guidance in terms of sustaining only cash cost.As I mentioned, if we -- if you replace the second quarter production to the production that we expect if we maintain the production of Q1 to Q2, you are adding 20,000 ounces over the last 12 months. So we are ready, if you replace the Q2 with the Q1 production of this year, we are already at 207% and above of production, which put us more to the higher level of the guidance and the lower consequently lower level of the open sustaining cash and out of cash cost.

[Ricardo Monegaglia Neto, analyst]

Just one follow-up on the first question. If you could share which operations, which mines do you think there are higher risks of reaching maybe the high end of the guidance by mine. So just to understand the risks of not reaching were very clear, but which operations do you think there is the risk of having operational issues or maybe that you still depend on some factors in like operational efficiency to improve, so you can reach the high end?

[Rodrigo Barbosa, executive]

Let's go mine by mine. Those are have been stable for many quarters in actual years, right? We ramped up this mine in 2019. We increased capacity and we operated very stable, very much in line since then. Borborema is a mine that we have ups and downs depending on where you're entering, but it's a known variation. So we desalting in perspective and of that. Almas probably where we are transitioning in contractual that I would say that has some risks because of new contractors coming in and we need to make sure they will perform according to the expectations. And on Duras, with the fifth improvement in the row in terms of partners, so very stable, reaching now a very good levels of production. That was the last mine that we implemented our is future, which is the way we make the use of the citral very a lot of connections within the employees and communication. And this team has been rebuilt since we changed the General Manager of the director operation, we also there, they are consolidated a very strong team that we believe we can keep this stability in terms of production, but they're coming on. So one operation that I would first one that would pay more will pay more attention in this transition contract enormous. In Borborema, there's always some variability change ware the other ones, so we need to make sure that we are keep a good stating that operation as well.

[Operator]

Next question from Rabi Nizami with National Bank Financial.

[Rabi Nizami, analyst]

Going to ask the team. It's nice to see a strong Q1, and I noticed that it's a significant proportion of guidance compared to the last couple of years. So my first question is basically on that. Can you give us some more thoughts on your goals to achieve a more steady, more predictable production and costs? And specifically, we be thinking about when I can give us some guidance as to how are you thinking about quarterly performance through the year at that line.

[Rodrigo Barbosa, executive]

I'm not sure you've understood the quarter. So we expect to continue to have a stability in terms of production in cost and what is our expectation for this to me the right?

[Rabi Nizami, analyst]

Yes, basically for point, it has a variable production history, and you're looking at your annual guidance and Q1 looks great. Can you tell us a bit about what factors will affect Q1 versus Q2, Q3, Q4, just the ups and downs that will balance out to reach the full year.

[Rodrigo Barbosa, executive]

Yes. Borborema, it's very much in line of the guidance that we gave initially. First quarter, we still had some high grades from MS or non-expected to happen in the second quarter. The then Q3, Q4, you waited no. So we had some balances between one another quarter, but we very much in line to what we disclosed in the beginning of the year. Overall, on a consolidated basis, we expect Q2 to be very similar, slightly below, slightly above Q1, not a significant change. And hopefully, as we've seen our win in the last 3 years, but not with that late change, but we should expect some improvements in Q3 and Q4 in terms of production. So that's why we are already running rig at the 270,000 ounces if we replace Q2 last year to Q1 of this year and then we can go to 107 above in terms of production. But yes, we are at the beginning of the year, as you mentioned, things change, weather change. So we are very conservative in maintaining the same guidance that we gave on this year.

[Rabi Nizami, analyst]

And is it -- given that Ernesto is exhausted and it looks like some of the stockpile effects have also been given us and can we expect longer-term grades to be also to reserves or rather to ask a super question. Will stockpiles continue to be a significant portion of the feed this year?

[Rodrigo Barbosa, executive]

It could be because it can be a stock by when the grades we should expect us returning to what the company was producing before the next. At the same time, also strip ratio, the net was high and now also separation returning to the levels we had 2 or 3 years ago before we started going to master. So yes, reproduction in rates, reduction in strip ratio, one thing partially offset the other. But we should see, as we get to the guidance, we already producing 60,000, 65,000 ounces of gold. We should not see that in the near term again. It goes back to the level that we projected early this year.

[Rabi Nizami, analyst]

And if I may ask another one. On the gold, the hedges and the credit support agreement that you've resolved recently, can you give us some background on was this agreement tied solely to the Borborema colors? Or was it based on overall credit thresholds for overall?

[Rodrigo Barbosa, executive]

Over 100% are -- 100% of our hedge program all does not have any more need for margin costs.

[Rabi Nizami, analyst]

I see. So this change has no implication towards future debt capacity or any other covenants. Is that fair?

[Rodrigo Barbosa, executive]

No change.

[Rabi Nizami, analyst]

Perfect. Okay. And on the hedges, could you give us a little bit of color in the next 12 months, something -- some sense of what the distribution of the hedge down uses in terms of the ceilings and the amounts that are applicable in the next 12 months.

[João Cardoso, executive]

Yes. So most of our hedges are related to either the Almas program or the Borborema program. In our financials, we split it progress. So for Almas, we should see all the colors. They are already expiring of the basis of colors should expire by the middle of 2025, by June '25. And in July '25, we start having the maturity of the Borborema gold hedges, which is going to mature between the middle of 2025 in June 2020. So it's going to be 3 years. For Borborema, we hedged 80% of the project production. Borborema have just one specie for the ceding 400. And for Almas, which is expiring is going to expire for the next 12 months. The average city prices are about 24 50 ranging from 2,300 to 2,800. But I would say most by now, by far, also of the program are for the Borborema hedges, which starts maturing by the needle of '25 and '28, and then have an exact price at 400.

[Operator]

Next question from Stephen Sanger with Arlo Investments.

[Unknown Analyst]

I'm a longtime shareholder. So a couple of questions. You've been doing a great job. First thing, it's a TSX. You're not getting much value for what the company has done. And have you thought of moving more into an international exchange, like a Chicago Board Exchange where it's more on 7 exchanges and you get more reflection of value. The TSX I find is there's some shorting this and it's very liquid and the share price doesn't reflect what value you have. So that's my first question. My second question is I'm a long-term shareholder with Rio Novo, the Almas pit at our mine is quite, quite large. And the pilot that we never could drill originally way down the bottom, the pay pick could expand my life mine, the mine of that the extension of that and significant resources for Almas. And my third question, last question, is you're becoming a mid-tier producer here. Do you think your chances are Major might buy you out?

[Rodrigo Barbosa, executive]

So your question first about the liquidity and TSX. Yes, I think we feel the pain on not having a stronger liquidity in TSX. That comes up a combination that we are a new story. Aura was not a very successful story in the past in TSX. There's still some legacy of that image. And also we've been able to raise capital in Brazil and outside Brazil, Mexico will significantly cheaper to any company that's raising capital in Canada. So we are not using Canada debt and equity capital markets because we've been able to find cheaper. Now we are raising capital at $1 plus 8, 7 for 3, 4 or 5 years long term. And while many companies or sites are above the use levels. And also in equity capital market, we don't have to use. We did IPO in Brazil of AUD 200 million, while in Canada at CSX, people were celebrating $30 million to $50 million of auto. So we've been able to find cheaper capital in other sources, and that's part of why we don't get a lot of traction also in Canadian market. Having that said, we implemented several initiatives to increase liquidity in Canada, including more -- increasing investments in Investor Relations, yet, I would say that the result is below what we expected. So we are wide yes to consider other alternatives on listing. Or it's a company that will have a very strong cash flows and growth and dividend for, right? Not many times, if any, in the sector can show the growth that we are having, while we can continue to pay dividends and be it underleveraged. And Canadian vessels in general, they are more towards the exploration and the new acquisition or a new poll that we're going to drill and increase resource of reserves. So perhaps our story fits be United States or as you already could imagine. Then you asked it about almost, right? That's why we're not doing a significant investment exploration to increase the life of mine at the current retina you are completely right. The pit is completely open. We are -- we know that as we drill more down deep on the site, we can increase reserves very easily. Although we already have 15 years life 16 years life of mine in Almas, we don't need to expand the lack of money Almas. So our effort is concentrated to an exploration in areas that we can feed -- increase the fit of the plant, right? You don't increase the fee lent increase the reserves on the downlink, but we can increase the feed to the plant if you do the exploration satellite deposits, which we have been doing, and we've been having a very interesting results.

[Unknown Analyst]

That makes sense. I know Versa around, there's a lot of deposits you could bring in there. Anything for the Tefrida Columbia project? Is that just on hold? Or is that just an asset we will hold long term?

[Rodrigo Barbosa, executive]

No, we're doing very basic exploration for Tefrida to see if we can expand the resources and reserves. And also, we still have some permitting license that needs to be renewed, that is been discussion with the local and federal role. So that's more that's bookout, I think it's more long shot. Now we continue to monitor. We'll continue to work there, but it's a longer shot. I think we can easily put and we'll put volume in production next year. We can easily put them up by production also start construction very soon. Our exploration in Shales that was questioned before, it's been very interesting, and we are building and putting the numbers together so that we can share with the market. So we have other focus in the company right now and paving to this licensing process to finish in Colombia so that we can then gradually start increasing investments there.

[Operator]

Our next question comes from Roman --

[Rodrigo Barbosa, executive]

The time so we might have room for 1 or 2 questions, more.

[Operator]

Perfect. We have a couple of questions from Roman. The first one is you've mentioned lower cost at Almas, thanks to some initiatives. Could you give us some color on what initiatives and in this cost reduction will be sustained over time?

[Rodrigo Barbosa, executive]

On Almas, the main initiatives is to change the contractor because we could this contract did not perform according to expectations during last quarter last year when we reached the Hardrock for that we lose productivity. We could fix the production by putting more equipment and investing more to -- so that they to offset their inefficiency. So now we're changing the contractors so that we don't need to put all these new reprimand investing in potential to be efficient. If you apply the efficiency they have in Borborema, Thomas even easier to operate. And we can understand that we can bring that car and cash cost now significantly more towards the Q3 and Q4 of this year. There was a second question.

[Operator]

Yes. There is. We have three other questions. The second is increase in OpEx in Aranzazu beyond the appreciation in the Mexican peso and lower copper prices. Is there any other factor that pushed costs higher? The third question is for mill and gold recovery are slightly behind the technical report in Almas. What are you expecting going forward? And the fourth question --

[Rodrigo Barbosa, executive]

So the first one was Aranzazu. Now, I'll pass towards Kebler.

[João Cardoso, executive]

So Aranzazu, also, we did expect some increase in cash cost and all in this year compared to last year. That has been reflected in our guidance and our expectation is to deliver the guidance. There is 2 macroeconomic factors on the first one is that Roman indicated, the FX. But also when we were looking to equivalents, there is a conversion of gold prices faster into on the copper. Then when you do the conversion, it seems the cash cost was higher, but it's just a matter of aversion then IDD is better to do the comparison on metal prices. And it's important to remember that in our answer this year. And as alto, we expect owing to increase compared to last year, basically because there are some important remains that we are renegotiating this year that didn't had holding the inflation impact in the last 2, 3 years because there were long-term agreements with fixed prices is natural when we renew, we do see some impact. So that's going on most to be explained together with stronger Mexican pesos in the metal prices, this increase in cash cost garants year compared to the result.

[Operator]

Our third question is core mill and gold recovery are slightly behind the technical report in Almas. What are you expecting going forward?

[Rodrigo Barbosa, executive]

We expect production and recovery to be very much in line to the feasibility study. This change comes more from mine sequencing that we lost productivity from end of last year. And so we expect the grades in auto recovery should be very much in line and don't have a major deviation from the feasibility study is more related to the mine sequencing.

[Operator]

Fourth and last question. Looking at your CapEx guidance, it seems you have accelerated in the coming quarters. What expansion CapEx are you expecting in the coming quarters?

[Rodrigo Barbosa, executive]

We expect CapEx to be very much in line within the guidance. As I mentioned, we are now ramping up the speed in Borborema, first to do the land work, which is the local. So now we should see a gradual increase in more market increase in Q3 and Q4 this year in terms of CapEx. So most of the CapEx for Borborema is important embedded during the second semester of this year.

[Operator]

Okay. 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.

[Rodrigo Barbosa, executive]

So thank you all for being here with us that Q1 was a very strong result. But I will invited their analysts and invite the investors to look ahead to see what is going to be this company with a combination of putting Amazon for production for the whole year, putting a lower cash cost and higher gold price, like the first quarter is just assign what we can do during the year. And in the first quarter, again, we did perform a gold price of 2,270. We are now running at 23 dunnage continue to grow with this gold price. And in next year, we will continue to grow. That doesn't stop this year. This year, really increased 28% in the production. The year is already moving to 100 27,000 ounces of production above as we couple it together here. And next year, a mother project that's meaningful for all. It's close to 90,000 ounces of yearly gold production in the first 4 years that will start ramping up Q1 next year in a mine that is not only big but also has a lower cash cost compared to Arsen. So we should continue to grow Duran this year, high gold prices, pot control and next year, putting online a project that has 90,000 ounces of production and lower cash cost compared to where right now. So next year, you can expect at least if you compare 90,000 ounces to 270 on average that we might be doing this year is an additional 30% increase in terms of production, combined with the higher gold prices and lower cash cost. And we will do a lot of that, again, when we will continue, and we maintain our guidance in terms of dividends on policy, 20% of minor recurring CapEx, and we can continue to pay dividend attainable leverage and build the products. So thank you all, and we'll see you on the next part.

[Operator]

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