Aura Minerals Inc

TSX:ORA

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Aura Mineral's Full Year 2017 Financial and Operating Results Conference Call. [Operator Instructions]Before proceeding further, I've been asked to remind everyone that this conference call contains forward-looking statements that involve a number of risks and uncertainties concerning the business, operations and financial performance condition of Aura Minerals. Forward-looking statements include, but are not limited to, statements with respect to the timing and amount of future estimated production, costs of that production, capital expenditures, future metal prices and the cost and timing of the development of projects.For a discussion of the risks, uncertainties and factors which may lead to the actual financial results and performance being different from the estimates contained in forward-looking statements, please refer to the full news release announcing the full year 2017 results and the financial statements and management discussion and analysis for the year ended December 31, 2017.Accordingly, you should not place undue reliance on forward-looking statements.I will now turn the call over to Mr. Rodrigo Barbosa, President and Chief Executive Officer of the Aura Minerals. Please go ahead, Mr. Barbosa.

[Rodrigo Cardoso Barbosa, Chief Executive Officer, President and Director]

Thank you, Ian. In addition to the formal cautionary notes, please note that I'll be -- I'll also be using non-GAAP measures such as operating cash flows and cash costs, both of which are defined in the full year release.I would like to thank you, everyone, for joining today. It has been a very busy 2017 and '18, with a number of transactions being completed.We are confident that we are creating long-term shareholder value.I would like to begin with noting that 2017 results include Serrote, which were completed as sale of March 22, for gross proceeds of $40 million consisting of $30 million in cash, received last week, and $10 million in a promissory note.The results however, do not include the assets or liabilities acquired in the merger with Rio Novo, which was completed March 2. However, the G&A does include certain aspects of the transaction.As a result of the sale of Serrote, the company recorded a reversal of impairment charge made in December 31, 2015. The -- this reversal resulted in an increase of the property value by $9.6 million. After the impairment reversal, the book value of the Serrote project was at $24.5 million, and is reflected as an asset held for sale in the balance sheet as of December 31, 2017.I will now summarize our 2017 operational highlights. Then I'll give a review of selections of the financial highlights, and concluding with our outlook for 2018.In 2017, we were ramping up EPP with Lavrinha declaring commercial production on January 1, and Pau-a-Pique on August 1. The initial move were very challenging with negative operating cash flows stabilized during the second quarter, after our continuous improvement on the project at EPP.During that time, we also revealed a midterm improvement on Ernesto.In Brazil, we also initiated a fines recovery project from the tailings in Sao Francisco. We had a very positive result in the first 2 months. However, we could not maintain a minimum production to a number of reasons, and the -- so we decided to cease the project during the second semester, with limited loss.We are currently conducting an exploration program at Sao Francisco, and are analyzing the possibility or probability for a restart.And we continue to invest in Care & Maintenance for our projects including Rio Alegre. Which are now -- which we are now analyzing samples and I'll lightly detail its potential.At San Andres, we had a very good production in the first semester, with a lower production during the second semester due to: one, excess of rain in July and August; two, lower recovery due to a mix up in sulfates' gold; and three, community slowdowns to enter in new areas due to the [ election ] very acute in Q4. During 2017 and continuing into '18, we have analyzed the Aranzazu project and the company is now finalized -- it's ready to become NI 43-101 report of the Aranzazu mine, covering key areas of the project such as geological and resource estimates, mine plan and reserves, profit engineering, metallurgy, OpEx, CapEx, as well as the associated financial modeling for a potential restart.The company is now in the process of finalizing the report for a final determination of the project's restart as well as hiring experiencing and highly qualified personnel of the necessary positions.As noted in the company's press release dated March 8, after a very competitive bid process, we entered into a $20 million loan facility and off-take agreement with Louis Dreyfus Company Metals. No amount has been drawn down as of today, and the company will provide an update in the due course.Aura had revenues of $157.7 million 2018. This is an 8% increase from '16, and this was despite the ramp-up of Lavrinha and PPQ and does not include commercial production Lavrinha.With respect of our production of 136,000 ounces in '17. This was an increase of 11% over '16, that we sold 131,500 ounces.Our cash cost in Brazil was $908 per ounce, 2.3% decrease versus '16. And $126 per ounce in Honduras, which is 2.8% increase primarily due to the reasons just spoken about.Earnings before interest, depreciation, amortization, EBITDA, was $29.1 million versus $24.2 million in '16, a 20.4% increase.Our net income decreased from $19 million in '16 to a $10.2 million in '17.We had an increase in general and administrative expenses from '16 to '17, which is related to the number of one-off items, including termination benefits, the sale of Serrote, the merger with Rio Novo and the work with Aranzazu. We do not expect the G&A to maintain at this level during the year of '18.That concludes my operation and financial highlights, and I would like to conclude my comments with a note about our strategy and our guidance.The company's strategy is: one, to reduce our cash costs, which is still high compared to the industry by a continued performance improvement in all operation matters; two, to unlock the value from project, the Care & Maintenance assets; and three, to explore value-added growth of derivatives.In this direction, the company has taken a number of steps to follow through on our strategy, include but not limited, one, obtaining an in-country depth in the areas that we operate to reduce cost and gain efficiency; two, focus on a continued improvement, including adding a VP of people and management process position.Three, ensuring that each operation and entity is self-funded and not relying on other entity in Aura, other than with respect to our restart up of pre-commercial production phase, when corporate needs to support.And finally, exploring value-added growth alternatives, such as the one that came with Rio Novo.For 2018 guidance, our expected -- expects to achieve the following growth guidance of 130,000 to 160,000 ounces in the year and with a cash cost average between $760 to $950 per ounce.We are very excited about Aranzazu and I will provide a separate update shortly.That concludes my comments of the conference call. Once again, thank you, for joining us today. And as I've noted, if you have any questions, please, e-mail them to [e-mail]. Thank you.

[Operator]

This concludes today's conference call. You may now disconnect.