Aura Minerals Inc.’s (TSX:ORA) third-quarter earnings per share surged 248% year over year
SmallCapPower | November 20, 2019: Aura Minerals Inc. (TSX:ORA) is a mid-tier gold and copper producer focused on the LATAM region, (Brazil, Mexico, Honduras). The Company is guiding for between 107,000 oz/Au to 128,000 oz/Au and 20.0M to 23.0M lbs Cu in 2019E at cash costs of US$869 to US$965/oz Au and US$1.78 to 1.90/lb Cu, respectively.
Figure 1: Aura Minerals Production and Development Properties
Source: Company Reports, Ubika
Investment Thesis
Revenue Growth Driven by a Rising Gold Price and Production Increases. During Q3 2019, Aura Minerals reported a 111% year-over-year increase in total sales, its highest revenue level since the third quarter of 2014, driven by a combination of revenues from copper concentrate produced by Aranzazu, increased production and revenues at San Andres, and increased production and revenues in Brazil.
Surging Earnings. ORA’s third-quarter net income climbed to $0.87 per share from $0.25 per share during the same period last year.
Continued Cost Reduction. Aura Minerals is implementing savings strategies that include but are not limited to: obtaining in-country debt in the areas in which it operates to reduce cost and gain efficiencies; focusing on continual improvement and; ensuring that each operating entity is self-funded and not reliant on any other entity.
Overview of Mining Operations
Figure 2: Location of San Andres
Source: Google Maps, Ubika
San Andres Gold Mine
The San Andres Gold Mine is located in La Union, Honduras, which is ~360 km from Honduras’ capital of Tegucigalpa in the western highlands of the country. Exploration and artisanal mining have been conducted in the area since the 1930s, with modernization beginning in 1983. Aura Minerals acquired the property and infrastructure in 2009 and currently operates the open-pit, heap-leach complex.
In Q3/19, San Andres produced 20,746 oz/Au, at an average cash cost/oz of US$844/oz (was 13,844 oz/Au at cash cost of $1,062/oz during Q3/18). The most relevant effect of cash cost reduction within the quarter (-23%) was better grades and higher recoveries in comparison to same period in 2018 (+34%), leading to higher production (+50%) with lower total tonnes moved (-1%).
Figure 3: Aranzazu Mine Location
Source: Google Maps, Ubika
Aranzazu Mine
The Aranzazu Mine is 100% owned by Aura Minerals and is an underground gold, silver and copper mine located in Zacatecas, Mexico, approximately 800 km from Mexico City. Documented evidence of mining in the area dates back almost 500 years. The current mine has been in operation since 1962, with Aura assuming ownership in 2010. In 2014, Aura Minerals closed the mine in order to reengineer and redevelop mine entries and production zones. The mine reopened in 2018 attaining commercial production in December.
Commercial production at the Aranzazu mine began on December 10, 2018. During the third quarter of 2019, the copper grade was 7% above the previous quarter (at 1.39%) and the gold grade was 13% better than previous quarter (at 0.79 g/t) both due to the Glory Hole contribution.
Figure 4: Location of Ernesto/Pau-a-Pique Mine
Source: Google Maps, Ubika
Ernesto/Pau-a-Pique Project (EPP Project)
Located in Mato Grosso, Brazil, approximately 450 km west of Cuiabá, the state capital, and 12 km from the town of Pontes e Lacerda. The EPP project consists of the following mines: the Lavrinha Open-pit Mine; the Pau-a-Pique underground mine and; the Japones open-pit mine. The complex consists of a processing plant fed by the Lavrinha open pit and the Ernesto underground deposit. Other significant resources, such as Japones and Rio Alegre deposits, are located nearby for future exploitation.
During Q3/19, EPP saw a 8.9% decrease in gold production due to lower grade feed as a result of lower mine grade in open-pit mines; a 5.9% increase in sales as a result of inventory decrease during the quarter and; a 30.4% higher average cash cost due to the higher strip ratio in the open-pit mines as well as a result of the decrease in the ore grade produced.
Shares of Aura Minerals have climbed about 27% during the past three months to its current price of $21.35.
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